Stock market winners out of the 2026 midterm elections could be emerging north of the U.S. border. The S & P/TSX Composite index , Canada’s stock market benchmark, rose 2.3% the day after the U.S. elections, its best one-day performance since March 31. The index is also up 1.6% since the vote, while the S & P 500 has sagged 0.5% in that time. Democrats flipped eight Senate seats and more than 40 House seats to gain control of the U.S. Congress. Their newfound power on Capitol Hill is stoking confidence that the U.S. could adopt a softer stance on trade relations with Canada. Under the second Trump administration, the U.S. has banned several Canadian imports , while Canada has responded with tariffs and curbs of its own. Now, “there’s optimism that something’s going to change,” said William Alan Reinsch, Scholl Chair in International Business at the Center for Strategic and International Studies, a bipartisan policy research group. “That’s based on the election returns, but also on statements by a number of Democrats … that they intend to deal with Canadian tariffs.” .GSPTSE mountain 2026-11-03 S & P TSX vs SP500 since midterms Canada has long counted the U.S. as its largest trading partner. In 2024, Canada sent 76% of its total export goods worth $596.1 billion to the U.S., according to Canadian government data . The country’s top exports to the U.S. include raw aluminum, car parts, crude petroleum, and paper and wood pulp, per international trade data platform The Observatory of Economic Complexity. That historically warm relationship has chilled over the past two years — and it’s had critical consequences for Canada and its markets. The iShares MSCI Canada ETF (EWC) plunged 5.4% on April 4, 2025, two days after President Donald Trump unveiled sweeping tariffs against a slew of countries, including Canada, in what he called “liberation day.” And in July, Trump announced additional 50% levies on certain Canadian imports such as dairy products, alcoholic beverages and motor vehicle parts, sparking sell-offs in some stocks. “Investors have fears about global trade and global complexities, and that likely [has] led to some selling off of those stocks,” Chris White, head of research at Canada-based investment firm 5i Research, told CNBC. He noted that swaths of Canadian stocks have been battered by U.S. tariffs, even though the Toronto Stock Exchange outperformed in 2025 because it is largely composed of energy companies and gold miners that have benefited from mounting geopolitical uncertainty tied to Trump’s tenure. Democrats take on Trump’s tariffs There are signs that a more heavily Democratic Congress will tackle Trump’s tariffs next year , creating new opportunities for investors in Canadian stocks, according to Justus Parmar, founder and CEO of Fortuna Investments. “There’s going to be a real big pushback from the Democrats [on tariffs],” Parmar told CNBC. “We’re seeing some really big kinds of opportunities in Canada to start deploying money.” Democrats have already proposed a few measures to rewrite federal trade laws, which could reverse the U.S.’ tariffs against Canada and limit Trump and future presidents’ abilities to unilaterally impose new ones. In September, Sens. Kirsten Gillibrand, D-N.Y., and Peter Welch, D-Vt., put forth the Banning Antiquated Duties and Delivering Equitable American Levies Act, or BAD DEAL Act, to “repeal all tariffs levied under Section 338 of the Tariff Act ” and refund Americans for duties paid under the authority, including those brought against Canada. There is still some room for the president to negotiate those tariffs down, try and get a [reputational] win with his remaining voters. finance professor at the University at Buffalo School of Management Scott Laing U.S. Sen.-elect Abdul El-Sayed of Michigan is one of several incoming lawmakers who have also criticized Trump’s tariffs and vowed to tackle them. However, Scott Laing, finance professor at the University at Buffalo School of Management, noted Democrats won’t have enough representation in Congress to completely neutralize the president’s powers on trade. “The Democrats have the majority, but they don’t have a supermajority,” Laing added. “So, the tariffs are ultimately in the hands of the president.” Even so, Trump looks more likely than ever to change his tune on tariffs, following Republicans’ losses in the midterm elections, which were largely viewed as a referendum on his administration’s policies. “There is still some room for the president to negotiate those tariffs down, try and get a [reputational] win with his remaining voters,” Laing said. “He’s aware that they need to come down and get costs lower for consumers, so I wouldn’t be surprised if they did come down a bit … tariffs are an easy way to kind of give him an ability to lower [costs] and preserve his legacy.” How to play it There are several ways investors can position themselves in Canadian stocks to ride the tailwinds of an expected U.S. trade policy shift. White, of 5i Research, noted that Magna International and Linamar Corporation — two major automotive parts manufacturers — could see some upside from tariff relief. Both companies are reliant on business with the U.S. because the Canadian and American car industries are heavily integrated, Laing said. Other companies that rely heavily on stateside sales, such as Canada Goose and Molson Coors , are also likely to surge following any such relief, Laing said. Molson Coors has plunged more than 30% since Trump’s tariffs were first publicized, while Canada Goose has traded roughly flat. Ontario-based Algoma Steel Group , a producer of hot- and cold-rolled steel sheet and plate products, should also see considerable upside from improved U.S.-Canada trade relations, White said. “With the tariffs, their share of U.S. sales declined” from more than 50% to less than 25%, limiting Algoma’s share growth, White noted. Late last year, the company also cut 1,000 workers , citing pressures from U.S. tariffs. Shares of the steelmaker have traded roughly flat since Trump’s “liberation day.” White also noted that several Canada-based software stocks, including Descartes Systems Group , could get a boost as the Democratic gains give way to more predictable geopolitical conditions that should encourage investors to spread their dollars more widely. “In times of fear and great uncertainty, Canadian investors sometimes flee to those larger [Canada-based] banks just because they’ve been so resilient over the years,” White told CNBC. “That kind of took capital out of the software trade.” Shares of Descartes are down nearly 9% since April 2, 2025, offering a good entry point to investors, the researcher said.
How Canadian stocks could be big winners of U.S. midterms
Nov 14, 2026
