Monday Market Minute | Feb 03, 2025

25% tariffs announced then paused — markets whipsaw on trade chaos

What Moved

The first week of February delivered the most volatile trade policy sequence in recent Canadian history. Trump announced 25% tariffs on all Canadian imports, sending the CAD to four-year lows and triggering a TSX selloff. Within 48 hours, the tariffs were paused pending negotiations. The whiplash rattled public markets, but the deeper damage was to private market confidence — PE deal committees put cross-border transactions on hold, and lenders tightened underwriting on export-dependent borrowers.

Why It Matters

Private markets cannot reprice overnight the way public equities can. The tariff on-off cycle created a uniquely difficult environment for sponsors mid-transaction. Due diligence timelines extended as firms modeled tariff scenarios. Private credit funds with manufacturing exposure began reassessing covenant structures. The episode crystallized a new normal: trade policy was no longer background noise — it was the primary risk factor for Canadian alternative investments.

Signal to Watch

Whether the pause held through February or collapsed into implementation would determine the tone for spring deal activity across every private asset class.

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