Trump Flips On Canada Trade Deal, Sending Shivers Through Wall Street

Wall Street flipped sharply Friday afternoon after President Donald Trump stunned markets by halting all trade negotiations with Canada, a reversal that chilled earlier optimism and sent investors fleeing from risk assets.

In a post on Truth Social, Trump said Canada "has just announced that they are putting a Digital Services Tax on our American Technology Companies," calling it "a direct and blatant attack on our Country."

The president declared an immediate end to trade discussions, adding, "We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven-day period."

Markets Reverse Course On Shock Announcement

The shift in tone came as a shock to Wall Street, which had rallied earlier in the day on hopes that multiple trade deals were advancing.

The S&P 500, which hit a record intraday high of 6,187, dropped sharply to 6,135 between 12:30 p.m. and 2:40 p.m. ET, wiping out gains.

Coinbase Global Inc. (NASDAQ:COIN), Enphase Energy Inc. (NASDAQ:ENPH) and Palantir Technologies Inc. (NASDAQ:PLTR) were the S&P 500’s worst performers, down 7.1%, 6.9% and 4.5% respectively.

The Dow Jones Industrial Average fell from 43,977 to 43,589, a 0.8% intraday swing, while the Nasdaq 100 declined from 22,600 to 22,400 as tech shares gave back momentum.

Earlier on Friday, markets had rallied after Trump said four to five trade agreements were in progress, and after U.S. Commerce Secretary Howard Lutwick confirmed a finalized deal with China involving reduced tariffs and safeguards for rare earths.

Currency markets reacted swiftly to the new tension. The euro-dollar exchange rate reversed sharply, falling below the 1.17 mark and turning negative for the day. The U.S. Dollar Index climbed to 97.50, on track to close higher after hitting the lowest levels since early 2022.

The Canadian dollar sharply weakened, with the USD/CAD exchange rate surging from 1.3670 to 1.3750 amid concerns that the trade fallout could hurt economic growth.

Meanwhile, the iShares MSCI Canada Index Fund (NYSE:EWC) slipped nearly 1%, falling from $45.78 to $45.39.

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