Markets took a hit after President Trump’s “Liberation Day” tariff announcements on April 2. The S&P 500 dropped more than 10% over two days, wiping out over $5 trillion in market value. This follows a tough first quarter, where the index was already down 5.6% — its worst start to the year in three years.

As of April 4, the S&P 500 had fallen 17.5% from its February highs, making this one of the fastest corrections in over a century. Investors were caught off guard, not just by the size of the tariffs, but also by the way they were applied. Rather than following typical trade rules, the U.S. targeted countries with large trade surpluses, leading to higher-than-expected tariffs in some areas. The result? Greater uncertainty, rising inflation fears, and talk of potential stagflation.

Some countries, including China, have already started to respond with their own retaliatory measures. In the days ahead, markets will be watching closely to see which countries are willing to negotiate — and which ones push back.

Canada Avoids New Tariffs (For Now)

Canada and Mexico were notably left out of the new tariffs. Trade under the USMCA agreement remains tariff-free, covering roughly 80% of Canadian exports. However, existing tariffs on steel, aluminum, and autos are still in place.

Interestingly, Canada’s stock market has been a bright spot. The TSX gained 1.5% in the first quarter, outperforming the S&P 500 by nearly 6%. With a federal election approaching, there’s growing momentum behind pro-growth policies. Longer term, Canada continues to offer structural strengths: a skilled workforce, rich natural resources, and clean, affordable energy. The TSX is also trading at a significant discount to the U.S. market, despite having similar earnings potential and multiple growth drivers ahead.

What to Watch Next

There are a few reasons for cautious optimism:

• Some U.S. senators are pushing back against Trump’s tariff authority, which could limit future actions.

• There’s a chance some tariffs could be reduced before they take effect on April 9.

• Legal challenges may emerge, as parts of the policy may not hold up in court.

• Finally, March’s employment data remains strong, suggesting the job market is holding up — for now.

When Markets Pull Back, Long-Term Investors Can Step Forward

Volatility and pullbacks can feel unsettling — but they’re often where long-term investors find their best opportunities. When market sentiment turns negative, prices can become disconnected from fundamentals. That creates moments where strong companies or sectors become available at a discount.

If you have a long-term plan and a well-diversified portfolio, downturns like this can be a time to reassess and rebalance — not to panic. Market corrections are part of the investment journey, and historically, they’ve often paved the way for future gains. In times like these, staying focused on your long-term goals is more important than ever.