In the ever-evolving world of international trade, recent developments have sent ripples through the Canadian stock market. President Donald Trump’s administration has announced new tariffs – a 25% levy on goods from Canada and Mexico, and a 10% tariff on imports from China.
The announcement of these tariffs has already sent shockwaves through the markets. Major indices have experienced declines as investors grapple with the potential economic fallout. Economists warn that consumers may see price increases on a range of products, from avocados to electronics, as the cost of imports rises. Moreover, industry leaders and executives have expressed concerns about the broader economic implications. There is apprehension that prolonged tariffs could push Canada and Mexico into recession, further straining the global economy.
These measures, aimed at addressing issues like illegal drug flow and migration, are set to take effect imminently. As investors, it’s crucial to understand how these tariffs might impact Canadian companies. Today, we’ll spotlight two notable stocks: Nutrien (TSX:NTR) and Magna International (TSX:MG).
Buy: Nutrien stock
Nutrien stock, a leading provider of agricultural products and services, stands to benefit from the current trade climate. With the U.S. imposing tariffs on agricultural imports from Mexico and China, American farmers may seek alternative sources for fertilizers and related products. Nutrien, with its extensive North American presence, is well-positioned to fill this gap.
In its third-quarter report for 2024, Nutrien announced net earnings of $25 million, or $0.04 per diluted share. While this marks a decline from previous quarters, the Canadian ag company has adjusted its strategy to capitalize on shifting market dynamics. Analysts project a promising future, with profits expected to grow by 89% over the next couple of years.
Given the anticipated increase in demand from United States farmers seeking reliable fertilizer sources, Nutrien’s outlook appears robust. Investors might find this an opportune moment to consider adding NTR to their portfolios.
Avoid: Magna
On the flipside, Magna International, a major player in the auto parts manufacturing sector, faces potential headwinds due to the new tariffs. The automotive industry is deeply integrated across North America, with parts frequently crossing borders multiple times during the manufacturing process. A 25% tariff on Canadian exports could disrupt these supply chains, leading to increased costs and operational challenges.
In its fourth-quarter report for 2023, Magna reported net income of $271 million. A significant improvement from $95 million in the same quarter the previous year. However, the Canadian stock has since adjusted its annual sales forecast downward, citing expectations of lower vehicle production.
The imposition of tariffs adds another layer of complexity, potentially exacerbating the challenges Magna faces. Investors should exercise caution and closely monitor how the company navigates these turbulent times.
Foolish takeaway
In light of these developments, investors should adopt a strategic approach. Canadian stocks like Nutrien, which are poised to benefit from shifting trade dynamics, present potential opportunities. Conversely, firms such as Magna International, which may face significant challenges, warrant cautious consideration.
As always, it’s essential to conduct thorough research, stay informed about policy changes, and assess how individual companies are positioned to navigate these shifts. By staying vigilant and adaptable, investors can make informed decisions even in the face of uncertainty.
