Tag Archives: Trump

Trump Tariffs lead to Trade War: What investors can do now

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Image via Pixabay

By Kyle Prevost, MillionDollarJourney

Special to Financial Independence Hub 

With so many Canadians plugged into the latest Trump Tariff news, I felt that I needed to get an updated trade war column out as soon as possible!

So what I’m going to do today is update an article I wrote back when we were taking our first baby steps into Trump Tariff reality. Below you’ll see a ton of info on what tariffs are, what Canada’s situation is in regards to the big picture effect on our economy, and finally, what the impact is likely to be on your portfolio.

But first, just to bring you up to speed, here’s what the President announced in his big “Liberation Day” speech – complete with grade-five-science-fair-style cardboard visual aid.

  • A baseline tariff of 10% will be imposed on nearly all imported goods from all countries. This tariff is set to take effect on April 5, 2025
  • Canada and Mexico will not – for the moment – be part of that 10% baseline tariff.
  • Canada and Mexico trade is basically now broken up into three categories: goods that are USMCA-compliant, goods that are not UMSCA-compliant, and goods that are in sectors that Trump wants special rules for.
  • USMCA-compliant goods are actually in the best spot of any imported goods in the world right now – as they get to enter the USA tariff-free!
  • Goods that are not UMSCA compliant are still under the 25% “Fentanyl Tariff” rules.
  • We already knew about potash and fossil fuels having their own 10% tariff rules, but it appears that lumber, steel, and aluminium will continue to have their own special place on the Trump Tariff list as well.
  • Likely the biggest Canada-related news was that the 25% tariff on automobiles will be applied to Canadian-made vehicles (despite the USMCA explicitly outlining this as being illegal).

In regards to the rest of the world, the most noteworthy developments were:

  • An additional 34% tariff on China, resulting in a total tariff of 54% when combined with existing duties.
  • European Union: A 20% tariff.
  • Japan and South Korea: 25% and 24% tariff respectively.
  • India: 26% tariff.
  • Vietnam: 46% tariff.
  • Many many many other tariffs.

As we hit publish on this article, countries around the world were announcing retaliatory tariffs and US stock market futures were showing that the overall US stock market was set to lose 4% as it opened on April 3rd.

The best quote that I heard in regards to summing up this whole mess was from Flavio Volpe, president of the Automotive Parts Manufacturers’ Association who stated that the new tariff situation was “like dodging a bullet into the path of a tank.” He went on to write, “The. Auto. Tariff. Package. Will. Shut. Down. The. Auto. Sector. In. The. USA. And. In. Canada,” and then, “Don’t be distracted. 25% tariffs are 4 times the 6/7% profit margins of all the companies. Math, not art.”

It appears that the rest of the world is finally waking up to the same reality that Canada and Mexico have been experiencing for the last two months. There’s much more that could be written about the gnashing of teeth and simply incredible quotes from the President such as, “An old-fashioned term that we use, groceries. I used it on the campaign. It’s such an old-fashioned term, but a beautiful term: groceries. It sort of says a bag with different things in it.”

Oooook.

For now, take a deep breath and read what I had to say a month ago in regards to your stock portfolio. The reality was true then, and it’s true today. In my predictions column back in late December I wrote:

“One of the most pressing questions for Canadian businesses in 2025 is whether the newly elected U.S. president will follow through on his promises of large tariffs on Canadian imports.

Trump’s fixation on trade deficits could lead to a significant shake-up in the global economy. He appears intent on generating tariff income to support the legislative groundwork for corporate tax cuts. His “national security” justification may lack substance, but it could still trigger sweeping trade policies. 

I don’t actually believe that Mr. Trump understands how trade wars actually work, and he hasn’t cared to learn anything new in several decades. So the hopes better angels will talk him out of this are perhaps misplaced.

I believe even more strongly that the President-elect doesn’t understand how trade balances work, and consequently, he does not understand that in buying goods from Canada with a strong US Dollar, his constituents (US consumers) are winning! There is no “subsidization” of Canadian business going on here. 

While a blanket 25% tariff on all Canadian goods seems unlikely, a more targeted 10-15% tariff on non-energy products feels probable. If that happens, Canadian businesses would face a challenging environment, and retaliatory tariffs from Canada could escalate tensions further.

My guess is that we’ll see some major disruption in Canadian manufacturing, with supply chains snarled, and some factory commitments being delayed indefinitely as companies decide to move more operations within the USA for the next few years at the very least. I’d also be pretty worried if I was a farmer and/or worked in the dairy industry. Some of these tariffs might come off when the overall North American trade deal is finalized.”

I’d say that held up pretty well!

The key here is definitely not to panic. The Canadian stock market has actually held up pretty well so far – and as always, it’s key to remember that the vast majority of the companies in Canada’s stock market DO NOT depend on selling specific goods to the USA. It’s also worth noting that a lot of companies that weren’t previously UMSCA-compliant are likely to become so in a hurry. If that happens, there might actually be a lot of Canadian companies in an enviable position relative to the rest of their global competitors as they will have no tariff to worry about (for now) versus 10%-50%+ for other countries.

This isn’t going to be good for any of the world’s economies, but the Trump Tariffs are already proving very unpopular with US Citizens and even among Republican politicians. Read on for more detailed reasoning on why you don’t need to do anything drastic in the face of these latest Trump tariff developments, and the broader US – Canada Trade War that has now expanded to include the rest of the world.

Trump (Delayed) Tariff Details

So – what is a tariff anyway?

A tariff is a tax by a government on foreign goods coming into a country. The import company (or person) pays the tax to the US federal government. In the vast majority of cases, the company then turns around and sells the imported product for a higher price (and possibly also takes a hit to their profit margin).

Trump’s tariff summary:

  • A 25% tax on all imports – aside from oil. This happens on Tuesday, February 5th.
  • A 10% tax on oil. This is supposed to kick in on February 18th.
  • Mexico will see a 25% tax on all of its imports.
  • China will get a comparatively light 10% tariff on its imports.
  • Canada will respond with two-phases of tariffs in response. They will total $155 billion of US goods.
  • Mexico hasn’t finalized details but announced tariffs ranging from 5% to 20% on US imports including pork, cheese, fresh produce, manufactured steel and aluminum.

If you’re wondering what we send to the USA – it’s a lot (we don’t have 2024 numbers finalized yet).

top us imports canada
Source: CBC News
trade dependancy
Source: Council of Foreign Relations

The potential fallout from U.S. tariffs looms large. If the worst-case scenario unfolds and these tariffs stay on Canadian companies for more than a month or two, economists estimate it could push Canada into a three-year recession, shave three percentage points off our GDP, and wipe out 1.5 million jobs. While forecasts vary, one thing is clear – the economic risks are significant. It would likely be even worse for Mexico.

The USA isn’t going to get off the hook easily either. Predictions range between their GDP shrinking .3% to 1%. That range doesn’t give a precise picture of the fact that counter-tariffs will be heavily targeted with the goal of inflicting maximum pain to companies that are important to Republicans’ electoral chances. I wouldn’t want to be in the US alcohol or consumer goods business right now.

American consumers are going to immediately see higher prices on agricultural goods, lumber (which means more expensive houses), gasoline (especially in the midwest), and vehicles.

When it comes to cars, the idea that the tariffs will somehow shutdown Canadian factories and move them to the USA overnight is ridiculous. What will happen is that the complex supply chains involved for North American manufacturers will get much more expensive, and consequently it will make the final product more expensive. Continue Reading…

How to invest and shop during Trump idiocracy

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Theatrical release poster for the film, Idiocracy. via Wikipedia.

By Mark Seed, myownadvisor

Special to Financial Independence Hub

A few months ago I wrote:

“Yes, interesting times may call for interesting portfolio changes! Or not. :)”

Well, here we are.

Regardless about how you feel about the current U.S. Administration, I would think most people would agree that this U.S. President feels very emboldened right now. With no future term to go: this is his last shot at taking shots at pretty much anything and everyone he wants without too many consequences near-term. At least it seems that way …

Since writing this post below from December I thought I would update such a post about any recent portfolio changes and beyond that, how our shopping habits have shifted (if at all) in recent months.

How to invest and shop during Trump idiocracy

I put the term “idiocracy” in the post title since it’s very much how I feel right now.

It’s like watching the Ferris Bueller movie scene: on tariffs.

History repeats.

Now that tariffs are in place and we’re now in a (trade) war between Canadian and U.S. businesses, consumers and workers (sadly), I’m expecting these tariffs will roil stock markets for months or years to come.

I have.

This is how I intend to invest and shop during some prolonged Trump idiocracy.

Approach #1 – What investments can withstand stagflation?

New tariffs are likely, in my opinion, to trigger a sustained period of low economic growth and even higher inflation: which will impact everyone.

At the most basic level, inflation means a rise in the general level of prices of goods and/or services over a period of time. When inflation occurs, each unit of currency buys fewer goods and services. Inflation results in a loss in the value of money and purchasing power. We will all be impacted by this.

Stagflation is essentially a combination of stagnant economic growth, high unemployment, and high inflation. When you think about it …. this combination probably shouldn’t exist: prices shouldn’t go up when people have less or no money to spend. This could be a place where things are trending…

Farmland might perform well during stagflation but we don’t own any.

Instead, I own some “defensive stocks” including some in key economic sectors like consumer staples, healthcare and utilities in my low-cost ETFs that should be able to weather a prolonged disruption. I also consider a few selected stocks we own as defensive plays: waste management companies. At the time of this post, both Waste Management (WM) and Waste Connections (WCN) we own have held up very well and provided stellar returns over the last 5+ years that I’ve owned them.

  • WM is up almost 100% in the last 5-years.
  • WCN is up over 100% in the last 5-years.

We’ll see what the future brings and my low-cost ETFs are a great diversifier: regardless.

Approach #2 – Staying global while keeping cash

Beyend certain sectors, investors should always consider holding a well-diversified stock portfolio across different sectors and different economic regions to reduce the long-term reliance on industries directly affected by tariffs.

While I have enjoyed a nice tech-kicker return from owning low-cost ETF QQQ for approaching 10 years now, and I will continue to hold some QQQ in my portfolio, I could see technology stocks tanking near-term. To help offset that, I own some XAW ETF for geographical diversification beyond the U.S. stock market. Thankfully. 

Times of market stress are however times to buy stocks and equity ETFs.

Near-term and long-term investing creates buying opportunities for disciplined investors. A well-structured, diversified global mix of stocks including those beyond the U.S. could provide some decent defence against a very toxic, unpredictable economic and political agenda.

For new and established readers on this site, you might be aware I’ve mentioned that our investing approach could be considered a “hybrid approach” – a structure that was established about 15 years ago as follows:

  1. We invest in a mix of Canadian stocks in our taxable account: to deliver income and some growth, and
  2. Beyond the taxable account, we own a bunch of low-cost ETFs like QQQ and XAW inside our registered accounts: inside our RRSPs, TFSAs and my LIRA for extra diversification.

I like the hybrid approach, the process and the results to date.

At the time of this post, I just don’t see how I should be making any significant changes to our equity portfolio.

Beyond our portfolio of stocks and equity ETFs we keep cash/cash equivalents.

Cash savings remains a good hedge for a very uncertain near-term future. We have a mix of Interest Savings Accounts (ISAs) / High Interest Savings Accounts (HISAs), along with Money Market Funds (MMFs) in particular in our registered accounts. Generally, plain-vanilla savings accounts offer very low interest rates. So, if you want to earn more on your savings deposits (rather than simply using your savings account) then consider an ISA or HISA.

The greatest appeal of ISAs and HISAs for taxable savings IMO is liquidity, while earning interest, and member financial institutions of Canada Deposit Insurance Corporation (CDIC) insure savings of up to $100,000. It’s good business for banks and institutions as well since money deposited generates interest by allowing the bank to access those funds for loans to others. There are usually no fees for these accounts and while interest rates have come down in recent months, ISA and HISA interest rates are consistently north of 2% at the time of this post.

I believe some form of savings account / ISA / HISA remains the cornerstone of everyone’s personal finance portfolio since 1. your money is saved for future expenses or ready for emergencies, 2. it is safe/low risk, 3. it is liquid, and 4. you still earn returns.

Let your equities do as they wish after that.

Approach #3 – Shop local, buy local, and avoid U.S. travel

We are fortunate to live in an area in Ottawa where we can shop local and buy from local farmers. We will continue to do that.

For those that want to shop more in Canada and buy more Canadian goods visit here:

We’ve been fortunate to save up some money in our “sunshine fund” as I call it for some future travel. I/we have no near-term plans to spend our money in the U.S.

I’ve been fortunate to visit many, many U.S. States over the years but given this recent trade war initiated by this current U.S. Administration I hardly have any desire to spend my money in a country whereby that government talks about annexing us.

It’s that simple for us.

I encourage other Canadians who can and do travel, to consider the same – avoiding the U.S. – not because of its citizens but the U.S. Administration decisions. Continue Reading…

Tariff Tantrums: Protecting your Portfolio with Defence and Income

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Image via Harvest ETFs/Shutterstock

By Ambrose O’Callaghan, Harvest ETFs

(Sponsor Blog)

In his 2024 re-election campaign, U.S. President Donald Trump vowed to pursue an aggressive trade policy that aimed to reduce or altogether eliminate what he viewed as unacceptable deficits between adversaries and allies alike. Following his January inauguration, President Trump has put Canada and Mexico into his crosshairs. Tariffs continue to be one of his favourite tools, if his rhetoric is any indication.

A tariff is a tax that is imposed by a country on the goods imported from another country. It is typically collected by a country’s customs authority. Some economists have argued that this results in a larger burden being paid by consumers, as companies will pass on tariff costs to the consumer.

In this piece, we will look at how ongoing trade tensions could impact world economies and markets. After that, we will zero in on ETFs that can potentially provide protection against the current bout of volatility.

Trade policy volatility and Canada

Last month, we looked at the impact the new GOP administration could have on the industrials space. That piece explored the trade policy volatility that existed in the first Trump administration.

Baker, Bloom & Davis
US Categorical Economic Policy Uncertainty Index – Trade Policy

Source: Baker, Bloom & Davis. Bloomberg, Harvest ETFs, as of January 21, 2025.

On Monday, February 3, 2025, U.S. and global markets suffered sharp pullbacks in the morning hours. However, markets recovered after the Trump administration announced that tariffs on Mexico and Canada would be delayed for 30 days.

Canada finds itself at a crossroads as it contends with unprecedented pressure from a long-time ally, political uncertainty on the domestic front, and muted and decelerating economic data. The Bank of Canada must weigh these pressures as it determines how much it can slash interest rates to bolster economic activity..

That aside, Canada is home to many great companies with oligopolistic qualities. We detailed their strengths in a piece in October 2024. The Harvest Canadian Equity Leaders Income ETF (HLIF:TSX) invests in 30 of Canada’s most powerful and largest companies for their traits and growth potential. It overlays an active covered call strategy, which seeks to generate high monthly cash distributions.

Combat trade volatility with defence and diversification

Defensive sectors contain businesses that are stable, possess key barriers to entry, and are relatively immune to economic fluctuations.

Healthcare falls in this defensive category and is unique in its diversity. It includes companies that manufacture medical devices and equipment, as well as those that are involved in the making of diagnostic tools and lab equipment, companies involved in the ownership of doctors’ networks, as well as facilities and companies in the Managed Care segment.

The Harvest Healthcare Leaders Income ETF (HHL:TSX) is an equally weighted portfolio of 20 large-cap global healthcare companies. HHL aims to generate an attractive monthly distribution through an active covered call writing strategy. This ETF has paid out over $500 million in total monthly distributions to unit holders since its inception.

Utilities is a space that is often targeted by investors who are looking to shore up a defensive position in their portfolios. Companies in the utilities space possess enormous scale, significant barriers to entry, and dominance in their respective markets. The Harvest Equal Weight Global Utilities ETF (HUTL:TSX) offers access to a globally diversified portfolio of utilities equities. That global diversification offers benefits like reducing interest rate and natural disaster risk with exposure to different countries and regions. Continue Reading…

Tariffs Troubles? Remember this Timeless Tip: “It’s already priced in.”

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Image: Canva Custom Creation/Lowrie Financial

By Steve Lowrie, CFA

Special to Financial Independence Hub

A key concern many investors have at the moment is the impact of Trump’s tariffs on goods produced outside the U.S. on the markets. I’m hearing from those wondering if they should do something to protect their wealth; their primary question is: What should I do with my investments?

My answer (as it usually is when investors are concerned about the geopolitical impact on the markets): stick with the plan because, by the time the news is public and you become concerned, the markets have already accounted for it/priced it in, so any reaction you take is too late.

A useful historical reference on tariffs is President Trump’s first term. Starting in 2017, his administration targeted China, implementing tariffs on a broad range of products by 2018. The following years saw ongoing trade negotiations that led to an agreement, though many tariffs remained. Despite the uncertainty, both U.S. and Chinese markets outperformed the MSCI World ex USA Index over Trump’s four-year term. Have a look at the data from 2017 to 2020, as Dimensional compares China MSCI Index to US S&P 500 Index to MSCI World ex USA Index.

Markets are forward-looking, meaning that the potential economic effects of tariffs are likely already factored into current prices. As a result, when these anticipated changes materialize, their impact on markets may be limited.

Understanding how Market Pricing Works

Let’s talk about the price of stocks.

It stands to reason: To make money in the market, you need to sell your holdings for more than you paid. Of course, we’re all familiar with good old “buy low, sell high.” But despite its simplicity, many investors fall short. Instead, they end up doing just the opposite, or at least leaving returns on the table that could have been theirs to keep.

You can defend against these human foibles by understanding how stock pricing works and using that knowledge to your advantage.

Good News, Bad News, and Market Views

How do you know when a stock or stock fund is priced for buying or selling?

The short answer is, we don’t.

And yet, many investors still let current events dominate their decisions. They sell when they fear bad news means prices are going to fall. Or they buy when good news breaks. They invest in funds that do the same.

While this may seem logical, there’s a problem with it: You’re betting you or your fund manager can place winning trades before markets have already priced in the news.

To be blunt, that’s a losing bet.

You’re betting that you know more about what the price should be at any given point than what the formidable force of the market has already decided. Every so often, you might be right. But the preponderance of the evidence suggests any “wins” are more a matter of luck than skill.

Me and You against the World

Whenever you try to buy low or sell high, who is the force on the other side of the trading table?

It’s the market.

The market includes millions of individuals, institutions, banks, and brokerages trading hundreds of billions of dollars every moment of every day. It includes highly paid analysts continuously watching every move the markets make. It includes AI-driven engines seeking to get their trades in nanoseconds ahead of everyone else.

And you think you can beat that?

We believe it’s far more reasonable to assume, by the time you’ve heard the news, the collective market has too, and has already priced it in.

  • News of a recession, under way or avoided? It’s already priced in.
  • Inflation on the rise, or abating? It’s already priced in.
  • A company suffers a calamity or makes a major breakthrough? It’s already priced in.
  • The government passes critical legislation that helps or hinders global trading? It’s…

And so on. Here’s your best assumption:

If it’s public knowledge, it’s already priced in. (And if it’s insider information, it’s illegal to trade on it.)

What we don’t yet Know

As soon as an event is priced in, several things make it difficult to profitably trade on the news:

You’re Buying High, Selling Low: If you trade on news after it’s been priced in, odds are you’ll buy at a higher price (after good news) or sell at a lower price (based on bad news). Continue Reading…

A few thoughts on Trump’s victory and investing under Trump 2.0

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Deposit Photos

By now, there’s not much I can add to the ubiquitous media coverage of Donald Trump’s shocking imminent return to power.

Since our “beat” here is Financial Independence I’ll spin this that way. A few weeks back we looked at a Franklin Templeton webinar on the investment implications of either a Harris or a Trump victory. See this blog I wrote on October 23rd, headlined Don’t mix politics and investing but financial community thinks a Trump victory more positive for stocks.

You can say that again. As I write this in a daze mid Wednesday, the Dow Jones Industrial Average was up 1300 points or 3%. Bond prices, on the other hand, are going in the opposite direction.

Franklin Templeton also issued a press backgrounder conveying the view of various money managers. For obvious reasons, below I have cherrypicked the ones that address a Trump victory.

Before we get to that, I’ll point to a Globe & Mail column by Andrew Coyne published Wednesday (Nov 6th), in the aftermath of the election result. The headline tells the tale: Trump’s election is a crisis like no other, not only for the U.S. but the world. (likely under a paywall.) The world yes, but especially Canada. If you can access the column also check the hundreds of reader comments, which offer many and varied takes on the implications of Trump 2.0 on the Canadian economy and politics.

Personally, during the run-up to the election I did not tinker with our family’s portfolio to take advantage of any alleged “Trump trade” or “Kamala stocks.” Those who noted this site’s 10th anniversary the day before the election will probably feel this is a broken record, but I’ve found that a globally diversified balanced portfolio with exposure to all major asset classes is adequate preparation for whatever the investment world may have in store for us.

Asset Allocation ETFs play offence and defence

Let the money managers at places like Franklin Templeton, Vanguard Group, BMO ETFs, Blackrock or Robo advisors decide the relative proportions. Those who engage financial advisors or portfolio managers may want to check in for a portfolio update. For average DIY investors, those Asset Allocation ETFs often referred to in this site should allow investors to sleep at night no matter what horrors await us in January and beyond. In other words, the stocks component of these AA ETFs let you play offence and benefit from the rising of stocks as animal spirits take over investors. But a healthy fixed-income allocation also allows you to play defence in case things get too ebullient. As the old saying goes, you want to “Eat well and sleep well.”

Continue Reading…