With US President Donald Trump launching a trade war against Canada, investor interest in exchange-traded funds focused on US stocks has fallen significantly. While weekly ETF flow data is volatile, as Trump unveiled tariffs on Canadian goods in March, Canadian investors began pulling money out of US stock ETFs—a significant break from the long-term trend of generally steady inflows.
This comes as US stocks have fallen sharply from recent record highs. Despite the potential for significant damage from Trump’s tariffs, the Canadian stock market outperformed US stocks during the first quarter. As that quarter ended, the Morningstar US Market Index was down more than 5%, while the Morningstar Canada Index was up 1%.
Outflows Hit US Stock ETFs
The shift in sentiment is evidenced by weekly ETF flows this year, marking a reversal from the trend seen in 2024. Last year, investors flocked to high-performing US stocks. The US Market Index surged nearly 32%, while the Canada Index gained about 22%.
After attracting C$7.8 billion in January, US equity ETF inflow fell to just C$2.3 billion in February, according to Morningstar Direct. Flows then declined further to C$2 billion through March 28, after a steep bounce-back of flows into US stock ETFs the week of March 23.
With only one trading day left in the month, the March total for US stock ETF inflows was on track to come in at just over C$2 billion—the smallest month for inflows over the last 15 months.
Prior to February, Canadian investors were steady buyers of US stock ETFs. From January 2024 through January 2025, US stock ETFs took in an average of C$4.5 billion each month, with only June 2024 showing net withdrawals, which that month totaled about C$2 billion.
While March inflows look positive, that figure masks the significant drop in money heading to US stock ETFs in February and March. The year started with C$2.9 billion going into US stock ETFs, but by the week of Feb. 9, the total had fallen below C$800 million. The trend then flipped to outflows of C$420 million the following week.
The week of March 9, investors pulled C$2 billion out of US stock ETFs. The trend reversed in the back half of the month, as traders put C$1.4 billion back into US equities in the third week and C$2.6 billion in the fourth.
By the third week, Canadian investors had cut their holdings in half compared with the first week of the year. Outflows intensified dramatically in the second week, with C$2 billion pulled from US equity ETFs. The steep retreat was led by BMO S&P 500 ETF (USD), which suffered C$409.67 million in outflows during the week. This was followed by BMO NASDAQ 100 Equity ETF which lost C$394.23 million. Vanguard S&P 500 ETF was in third place, losing investments worth C$60.796 million.
More Tariff Turbulence On the Way
Market analysts attribute the divergence between the performance of US and Canadian stocks to lower valuations in Canada and the sectoral composition of the Canadian equity market. With sweeping US tariffs set to come into force on April 2, followed by highly contentious 25% automotive levies a day later, traders may continue to steer clear of riskier assets until uncertainty subsides and economic stability is restored.
The extreme volatility in US equity ETFs reflects a growing unease among Canadian investors about the US market’s performance since Trump took office earlier this year. A lack of clarity on the size and scope of US duties, steep downturns that wiped out trillions in market capitalization, and the growing rift between the United States and its closest allies have all contributed to the waning appetite among Canadian investors for ETFs pegged to US equities.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
