(Bloomberg) -- There’s at least one area where Canada is more than holding its own as the trade spat with US President Donald Trump grows increasingly tense — the stock market.

The mounting friction is taking a toll on both nations’ stocks. But the key Canadian equities gauge, the S&P/TSX Composite Index, is down less, by 1.4% to start 2025. Meanwhile, the S&P 500 Index, stung by steep losses in megacap tech stocks, has slumped 4.5%.

It’s still early, but if the current trend holds, it would be the third straight quarter for Canada’s market to outpace its US counterpart, something that hasn’t happened since the Federal Reserve was raising interest rates aggressively in 2022.

It’s perhaps a surprising development that Canada, which sends the majority of its exports to the US, is joining the list of global equity markets delivering better returns than the US this year. Canada’s benchmark has received a lift from shares of copper and gold miners, especially the latter as that asset is seen as a haven during times of turmoil. The US gauge, meanwhile, has suffered as growth worries are hurting earnings expectations for the tech behemoths that have powered much of its strength.

“Trump’s tariff threats weigh more heavily on the US’s higher-growth, more-volatility equities than Canada’s,” Bloomberg Intelligence strategists Gillian Wolff and Gina Martin Adams wrote in a March 4 note.

Tariff Uncertainty

Given that Trump has long considered the stock market his report card, it’s telling that the shares of Canada’s biggest companies are doing better than those of the US. Six of the US’s so-called Magnificent Seven stocks are declining this year, while only three of the Canadian benchmark’s seven biggest stocks are down. Among the gainers: major banks and railways.

Of course, it remains to be seen how the trade war shapes up and what that means for various sectors. Mark Carney, who will become Canada’s next prime minister, has said he intends to keep the government’s retaliatory tariffs on US goods until “the Americans show us respect.” He has also made it clear that Canada will never be part of the US, dismissing Trump’s desire to make the country the 51st state.

The tariff uncertainty also makes it hard to predict how the rest of the year will unfold for stocks. It’s common for the Canadian benchmark to be ahead of its US counterpart by early March. That has been the case for seven out of the last 11 years, including 2025. Even so, the SPX/TSX has only bested the US benchmark for two of the past 10 full years.

Another Sign

Other indicators show that the outlook for Canadian companies may be better this year. Overall, they’re poised to grow their profits by 11% for the first quarter, compared to 7% for US companies, data compiled by Bloomberg Intelligence show.

“The trend is expected to persist into 2025, even in the face of a trade war,” Wolff and Adams wrote.

Valuations are another positive for Canadian stocks. The Canadian index is trading at about 15 times projected earnings in the next 12 months, compared with 21 times for the S&P 500. The valuation discount helps insulate Canadian stocks to a greater degree than US stocks, according to Philip Petursson, chief investment strategist at IG Wealth Management.

“I would expect even after this tariff tantrum fades, I still think that investors perhaps have woken up to the valuation that we see,” Petursson said.