12:12 PM EDT, 08/01/2025 (MT Newswires) -- The Toronto Stock Exchange is down 203 points at midday, with all sectors in the red after U.S. President Donald Trump increased tariffs on Canada to 35 points.

The biggest decliners are energy (-1.7%) and info tech (-1.5%).

BMO Economics in morning note, said Canada's "fentanyl" rate went up from 25% to 35%, though this still applies only to goods that are non-compliant with the USMCA. So, the increase will raise the average effective tariff rate for Canadian shipments to the U.S. only slightly (likely in the 5%-to-7% range). Most Canadian industries remain shielded from the duties, apart from autos, steel and aluminum. Still, the 35% overall duty ramps up the risk if Canada does not successfully renegotiate the USMCA, BMO said.

Adding to negative picture for Canada, Rosenberg Research noted: Canadian labor markets remain in the doldrums, with the latest industry-based data (Survey of Employment, Payrolls, and Hours; akin to the Establishment Survey in the U.S.) showing just +15k jobs created in May, little changed from the nearly +15k expansion in April. This near +30k two-month expansion comes on the heels of a -61k two-month plunge between February and March, showing how businesses are struggling with the onset of the U.S. trade war (alongside a retrenchment in consumer spending and tepid real estate markets).

Derek Holt, Vice-President & Head of Capital Markets Economics at Scotiabank, says Trump's tariff assault changes little for Canada. Holt had already factored in a 35% tariff on non-CUSMA/USMCA-compliant goods into calculations for the effective tariff rate (ETR) on Canadian exports. "Because of the exemption that the administration verified last night and because we've long argued that most exports are already CUSMA-compliant, Canada's ETR remains at 4.6% on total goods and services exports to the world and 6.3% on total goods and services exports to the US."

Furthermore, Holt added, most of the tariff hit to Canada is driven by sector specific tariffs like on metals. That's a fiscal policy matter for Canada to address in providing targeted assistance and support, not a broad monetary policy matter, he said.

"As we've explained all along, this is all unwelcome to Canada, but not debilitating. This is why the C$ is not reacting in any particularly harsh way thus far and relative to other crosses."