What U.S.-Canada trade war, new tariff walls mean for metals market

As the U.S. and Canada stare down tens of billions of dollars in dueling tariff regimes as a result of President Trump’s new trade war against the nation’s second-biggest trading partner, companies, economists, and investors are back in the game of attempting to forecast the level of volatility to expect on corporate balance sheets and in stock prices.

The U.S. government’s 50% tariffs on a wide range of Canadian goods were met with Canada’s $20 billion in retaliatory tariffs slated to go into effect on Sept. 8. They encompass more than 700 U.S. goods, meant to mirror the size of Trump’s import taxes on Canadian wine, cement, hockey sticks and more. The counter-tariffs, which range from 15% to 50%, target a wide array of U.S. imports into Canada, including dairy, seafood, appliances, wood and paper products, and clothes.

There were some real-time market winners as the new trade war dominated headlines last Monday. Consider the reaction in steel and materials stocks, including Nucor, Steel Dynamics, Cleveland-Cliffs and Century Aluminum, which all shot up on Monday after the U.S.-Canada trade talks broke down, and after many had fallen the week before on bets a new U.S-Canada deal would lower tariffs on steel and aluminum. The VanEck Steel ETF (SLX) rose 1.6% on Monday alone, while the State Street Materials Select Sector SPDR (XLB) hit an intraday all-time high — surpassing its previous all-time record price reached in February — as the metals stocks and other producers rallied.

But the new trade war rally didn’t last. XLB ended the five-day trading week in negative territory and SLX was close to flat. To be sure, these funds have already booked some hefty gains in 2026. Year-to-date, both ETFs are beating the S&P 500, with SLX up over 28% and XLB up over 18%, according to Morningstar data as of Aug. 28.

Atsi Sheth, chief credit officer at Moody’s Ratings, said uncertainty is the watchword now. “Expect much more of this uncertainty for some time to come,” Sheth said.

Which businesses win in a trade war and which lose depends on an increasingly complex supply chain. One of the most complicated is the auto sector, where parts cross back and forth over the border multiple times in the production of a vehicle.

“For the auto sector, our view is that the sector is so integrated that the tariffs just don’t impact the country you are tariffing but your own country,” Sheth said of the U.S.-Canada automobile manufacturing ecosystem.

U.S. steel companies are more likely to benefit, she said, because the U.S. market is larger.

“The auto sector, there are no winners. Steel … U.S. has a little edge,” Sheth said.

“The new tariffs create a meaningful but manageable headwind,” said Angelo…