Ordinarily, things are pretty quiet between us and our neighbors to the south. Even when U.S. President Donald Trump challenged the status quo with our trading agreements when renegotiating NAFTA in 2020 (which resulted in the very similar USMCA agreement), we’ve generally had good relations with them.

Unfortunately, tiffs with neighbors are bound to happen now and then, and we’ve just found ourselves in one. On 1 February, Trump levied his long-threatened 25% tariff on goods coming from Canada, effective 4 February. 1 we do quite a lot of trading with the U.S.—in 2023, we exchanged nearly $3.6 billion ($2.7 billion USD) in goods and services every day.2 A 25% tariff is, put simply, very, very difficult to digest.

 

Now, there are a couple of things to note. Trump has been threatening this for several months now, so the government has been able to discuss ways of mitigating the damage to our economy. This might include making trade between provinces easier,3 providing relief checks much like were sent out during the COVID-19 pandemic lockdown,4 and, of course, levying our own tariffs against the U.S. In fact, the government announced our own 25% tariff on $155 billion of U.S. goods on 2 February.

 

Then, some potentially good news: Late in the day on 3 February, the news broke that the U.S. would suspend their new tariffs for thirty days as we work together on new border security arrangements.5

 

Although getting into a trade war is seldom a good idea, the U.S. is about as dependent on us as we are on them—that’s part of what’s made us such great neighbors. We’re their largest trading partner, too, and the vast majority of their energy comes from Canada.6 It’s also worth noting that these blanket tariffs are wildly unpopular among Americans.7 (The markets don’t seem to like it, either, with all three of the U.S.’s major indices dipping on Friday.8) All that is to say, these tariffs are not great news—but they’re such a double-edged sword that we can hope they will be lightened, if not permanently removed altogether, before long.

 

If not, we’ll adapt. We’ll find new trading partners, establish more infrastructure and systems within Canada to reduce our need for those crucial imports, and generally become less dependent on others. Even if these tariffs go as fast as they’ve come, becoming a little more self-sufficient and/or diversifying our trading partners might be a good idea, anyway. The bottom line is that Canada has shown herself to be nothing short of resilient, and I have full confidence that we’ll weather this storm, as well.

 

Until then, the best financial advice we can give is to stay the course. Resist the urge to panic-sell. The markets are controlled by many factors, and tariffs are just one. If you’d like to see your options for diversifying your portfolio, however, particularly in looking for more opportunities to invest in Canadian companies or in other international funds, we would be happy to sit with you and discuss some possibilities.

 

As Red from the classic Red Green Show reminds us, “Remember: I’m pulling for you. We’re all in this together.”

 

Please let us know if you have any questions, or if there is anything we can do for you.

 

Sincerely,

 

The Omell Financial Group

 

1 “Trump to impose tariffs on Canada, Mexico and China on Saturday, White House says,” NBC News, 31 January 2025, https://www.nbcnews.com/politics/donald-trump/trump-impose-tariffs-canada-mexico-china-saturday-white-house-says-rcna190221

2 “Canada-United States Relations,” Government of Canada, https://www.international.gc.ca/country-pays/us-eu/relations.aspx?lang=eng

3 “One easy way to offset the damage of Trump’s tariffs,” CBC, 5 December 2024, https://www.cbc.ca/news/business/trade-tariffs-internal-trade-barriers-provinces-1.7401277

4 “Ottowa planning pandemic-level relief for workers, businesses if Trump imposes tariffs,” The Globe and Mail, 28 January 2025, https://www.theglobeandmail.com/politics/article-trump-tariffs-canada-planning-massive-relief-workers-businesses/

5 “Trump pauses tariffs on Mexico and Canada, but not China,” Reuters, https://www.reuters.com/world/us/trump-says-americans-may-feel-pain-trade-war-with-mexico-canada-china-2025-02-03/

6 “Trump’s tariffs and the case for Canada,” CBC, 22 January 2025, https://www.cbc.ca/radio/frontburner/trump-s-tariffs-and-the-case-for-canada-transcript-1.7438212

7 “U.S. tariffs on Canada: (Almost) nobody wants this, except for the guy who really does,” CBC, 31 January 2025, https://www.cbc.ca/news/canada/calgary/americans-dislike-tariffs-trump-republican-expert-consensus-1.7446585

8 “Stock Market Today: Dow, S&P 500 and Nasdaq close lower after White House says tariffs on Mexico, Canada, China to begin Saturday,” Marketwatch, 31 January 2025, https://www.marketwatch.com/livecoverage/stock-market-today-dow-s-p-and-nasdaq-set-for-early-gains-after-apple-beat

9 “Fed cuts key interest rate but signals elevated inflation is likely to persist,” https://www.nbcnews.com/business/economy/federal-reserve-interest-rate-cut-december-2024-much-economy-rcna184586

 

Original from BGM Writer Lisa Christensen

 

Sourced from Bill Good Letters Library

 

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