TSX Gains on Trade Hopes, but Clouds Linger Over U.S.-China Uncertainty

The Toronto Stock Exchange (TSX) kicked off May 9, 2025, with a modest but notable 0.64% gain, pushing the S&P/TSX composite index to 25,415.44 points. Investors, however, are far from complacent. With high-stakes U.S.-China trade talks looming over the weekend, markets are caught in a tug-of-war between cautious optimism and lingering skepticism about the prospects for meaningful de-escalation.

The Trade Talks Crucible
The negotiations in Switzerland, featuring U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, are the focal point. While U.S. President Donald Trump has signaled openness to cutting tariffs on Chinese goods—from a punitive 145% to potentially below 60%—analysts remain wary. The

underscores the market’s divided sentiment.

Historically, U.S.-China trade talks have been fraught with setbacks, and this round is no exception. The reveal a pattern of volatility, with tariffs spiking during periods of confrontation. Even if negotiators achieve a modest breakthrough, analysts like Wendy Cutler, former U.S. trade negotiator, caution that the $300 billion trade deficit and structural disagreements over intellectual property and market access will persist.

Global Markets Mirror Mixed Sentiment
The TSX’s gains reflect a broader but uneven global picture. Asian markets split sharply: China’s Shanghai Composite dipped -0.30%, reflecting domestic caution despite strong April exports (+8.1% y/y). Meanwhile, Japan’s Nikkei 225 surged 1.56% to a six-week high, buoyed by NTT Data’s privatization plan and Ajinomoto’s buyback.

U.S. markets, too, offered mixed signals. The U.S.-U.K. trade deal—a “relatively easy” negotiation compared to China—kept tariffs at 10% but failed to quell broader concerns. Pre-market movers like The Trade Desk (+13%) and Cloudflare (+10%) highlighted tech sector resilience, while Affirm Holdings (-7%) faltered on weak guidance. Yet all eyes remain on the U.S.-China talks.

Data Points Add Nuance to the Narrative
Economic indicators complicate the outlook. U.S. jobless claims fell to 228K (below forecasts), but Q1 productivity dropped -0.8% q/q, and unit labor costs jumped +5.7% q/q—signs of persistent inflationary pressures. Italy’s industrial production missed expectations, growing just +0.1% m/m.

The Federal Reserve’s reluctance to cut rates (pricing in only a 17% chance for June) amplifies reliance on trade progress to stabilize growth. The dollar’s recent gains further complicate emerging market dynamics, as a stronger greenback could squeeze debt-laden economies reliant on Chinese trade.

The Bottom Line: Proceed with Caution
Investors face a precarious balance. The TSX’s early gains suggest hope for a tariff truce, but the path forward is littered with obstacles. A reveals a choppy trajectory, reflecting heightened volatility tied to trade news.

While a partial tariff rollback could provide short-term relief—lifting sectors like industrials and tech—the deeper structural issues between the world’s two largest economies remain unresolved. With China’s exports showing resilience despite tariffs and U.S. corporate earnings mixed, the market’s optimism may prove fragile.

In conclusion, the TSX’s May 9 gains are a flicker of hope, not a green light. Investors should prioritize defensive strategies, favoring companies with diversified revenue streams and minimal exposure to trade-sensitive sectors. As history shows, U.S.-China negotiations often yield half-measures—so expect markets to remain volatile until concrete, actionable agreements materialize. The stakes are high: a failure to reduce tensions could reignite a global trade war, while success might only be a temporary pause in a marathon conflict. Stay vigilant.