04:20 PM EDT, 03/28/2025 (MT Newswires) -- The Toronto Stock Exchange fell more than 400 points or 1.5% on Friday as President Donald Trump said "things are going to work out" between Canada and the United States, even as he looks set to press ahead with a costly all-out tariff war between the two nations that is set to intensify next week.

The S&P/TSX Composite Index fell 401.91 points to 24,759.15, to complete a losing week for the index. Most sectors were lower, led by Base Metals, down 3.7%, and Info Tech, down near 3%. In contrast, Utilities were up about 0.2%.

At the end of a week that saw him impose tariff on U.S. automobile imports, including those from Canada, and also threaten coming tariffs on lumber and copper among other things, in addition to tariffs already on steel and aluminum. Still, Trump on Friday afternoon said: "I think things are going to work out very well between Canada the United States."

CTVNews noted that Trump, when speaking about the upcoming reciprocal tariffs set to be imposed on all countries with levies against the United States., claimed "many countries" are taking advantage of the country, adding with a caveat: "I'm not referring to Canada," he said, before later adding, "We're going to end up very good relationship with Canada."

But CTVNews noted Trump then, despite his encouraging tone, also said he would still "absolutely follow through" with his promise to impose further tariffs on Canadian goods.

Meanwhile, the prime minister's website published this on the talks between Carney and Trump: "The leaders agreed to begin comprehensive negotiations about a new economic and security relationship immediately following the election. In the interim, the leaders agreed that conversations between the Minister of International Trade and Intergovernmental Affairs and President of the King's Privy Council for Canada, Dominic LeBlanc, and the United States Secretary of Commerce, Howard Lutnick, will intensify to address immediate concerns."

It added: "The Prime Minister informed the President that his government will implement retaliatory tariffs to protect Canadian workers and our economy, following the announcement of additional U.S. trade actions on April 2."

Avery Shenfeld, chief economist at CIBC Capital Markets, on Friday looked at how Canada should respond to the U.S. auto tariffs. According to Shenfeld, one item on the "not to do" list would be for Canada to apply its own 25% tariff on U.S. vehicle parts for which there is no immediate capacity for a made-in-Canada substitute. "That would be essentially self-defeating, as it would magnify the cost disadvantage of a Canadian-assembled vehicle that then faced tariffs in the US."

What, Shenfeld asked himself, about a 25% tariff on fully assembled vehicles shipped from the US? Shenfeld said that didn't show up on the list of proposed measures offered by the current government, and with good reason as it would significantly add to inflation in Canada, and would favor vehicles from overseas suppliers with no Canadian content over US-built vehicles that will still have some made in Canada components for now. Moreover, a tariff on U.S. cars and trucks would pose a risk that Trump would just add to the tariff on those assembled in Canada, he added.

Canada, Shenfeld said, could offer incentives, perhaps in tax policies, aimed at encouraging manufacturers to continue to operate their vehicle or plants on this side of the border. He added: "That might make sense while we retain the hope that these US tariffs won't be permanent. Such incentives needn't cover the full hit such vehicles will bear from tariffs, given that car companies are already going to be reluctant to spend billions of dollars to reshore all of their production as long as the long term future of tariff policy is still in doubt. But there will need to be some care to fashion such incentives in a way that doesn't lead the US to call them a subsidy and respond with even higher tariffs."

More broadly, Shenfeld noted Canada will also be thinking about its response to next week's announced US 'reciprocal tariff', which if calculated fairly, might replace the previously-threatened 25% tariff on all products (10% on energy and potash) with something milder. "Here again," he said, "counter-tariffs might be effective, but also risk a retaliation to our retaliation, as we saw with the threatened surcharge on Ontario's electricity exports."

An alternative, or at least a complementary measure, would be to let Canadians apply their own penalty on U.S. exports, through the choices they are making at the supermarket, in the shopping mall, at their car dealer, and at the travel agency, Shenfeld noted.

"While it's too soon for that to show up in the data, we're getting anecdotal evidence from a broad range of clients that Canadians are taking action in their purchases and vacations, not always to buy Canadian, but to avoid the US. So far, that's only a grassroots movement without a leader and a bullhorn. But it could be ramped up through publicly-funded marketing campaigns, or even better, targeted ads by Canadian goods suppliers, retailers and tourist agencies," he wrote.

Shenfeld added, "That's not something that the Trump administration can point at finger at our government and retaliate against. Choosing not to buy something is the right of every citizen in a free society, and if joined by Mexican, European and Asian countries, could apply more pressure on the US economy, and its political leaders, than tariffs alone. Plan B for Canada entails a long and costly re-orientation of our economy to reduce its reliance on goods exports to the US. But Plan A, getting those tariffs removed or sharply reduced at the negotiating table, by creating enough hardship in US output and inflation, is still our best bet."

Of commodities, gold traded at yet another record high late afternoon on Friday as investors move to the metal's safe haven amid Trump's tariff wars, while a key U.S. inflation measure rose more than expected last month. Gold for June delivery was last seen up $24.40 to US$3,115.30 per ounce.

But West Texas Intermediate crude oil closed lower as markets were broadly weaker ahead of fresh tariffs expected next week. WTI crude oil for May delivery closed down $0.56 to settle at US$69.36 per barrel, while May Brent crude was last seen down $0.38 to US$73.65.

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