04:26 PM EDT, 03/11/2025 (MT Newswires) -- The Toronto Stock Exchange on Tuesday took two days of losses to more than 500 points even as the United States extended an "olive branch" to Canada that may yet prevent the outbreak of a full blown trade war between the nations.

The S&P/TSX Composite Index closed down 132.51 points to 24,248.2 points, joining most other North American and global bourses in extending Monday's losses on an uncertain outlook for the U.S. economy and inconsistent tariff threats from Donald Trump. Among sectors, Base Metals, up 2.05%, and Energy, up 0.7%, were higher. Health Care and Industrials were the biggest decliners, down 2.52% and 1.76% respectively.

In the latest trade war news, Ontario agreed to suspend its 25% surcharge on electricity exports to the United States following a call between Premier Doug Ford and Commerce Secretary Howard Lutnick. It is understood that President Donald Trump's threat to double tariffs on all steel and aluminum coming from Canada to 50% was at the heart of the talks between Ford and Lutnick. Trump was later cited on Canada's CBC News saying he respects Ontario's decision to suspend its surcharge on electricity exports to the States.

Following Ford's decision, President Trump will back down on a threat to place a 50% tariff on Canadian steel and aluminum tomorrow, White House Trade Advisor Peter Navarro said on CNBC

"With any negotiation that we have, there's a point that both parties are heated and the temperature needs to come down. And I thought this was the right decision. They understand how serious we are about the electricity and the tariffs, and rather than going back and forth and and having threats to each other, we have both agreed that cooler heads prevail, we need to sit down and move this forward," Ford told reporters at Queen's Park, CP24 reported.

Reflecting the volatility in trade in recent days, Bhawana Chhabra, a Macro & Market Strategist at Rosenberg Research. said drivers for equity returns have faded since the start of the year, and with that, her models continue to make defensive adjustments.

"Valuations of the S&P 500 remain stretched despite the recent drawdown, and levers for returns are fading quickly. Hence, our models continue making defensive adjustments in the equity portfolio along with a tilt towards strong earnings fundamentals. Driven by this, we downgrade Consumer Discretionary and Industrials to Underweight while increasing Consumer Staples' rating to Neutral and Real Estate to Overweight," Chhabra wrote.

According to Viktor Shvets, Head of Global Desk Strategy at Macquarie Capital, policy errors and miscalculations are contributing to U.S. economic and market volatility.

The turmoil comes a day ahead of the Bank of Canada next interest rate decision, with the central bank widely expected to deliver a 25 basis point cut to rates.

Despite the official core measures heating up, Canadian central bankers have focused more on year-over-year core inflation, excluding shelter. Whether or not that's appropriate is a different story, Desjardins noted. "So, with the current policy rate setting of 3.00% still a touch above most neutral rate estimates, there's little reason for central bankers to hold back stimulus."

Of commodities today, West Texas Intermediate crude oil rebounded from a six-month low early on Tuesday on bargain hunting, as markets turned broadly lower a day earlier on fears the United States may be poised for a recession. WTI crude oil for April delivery closed up $0.22 to settle at US$66.25 per barrel after closing on Monday at the lowest since Sept. 10. March Brent crude was last seen up $0.31 to US$69.59.

Also, gold traded higher following two losing sessions as the dollar dropped to a five-month low. Gold for April delivery was last seen up US$21.20 to US$2,920.60 per ounce.