Undoubtedly, Trump tariffs could really hurt the Canadian economy and TSX Index, ultimately propelling Canada into a fairly nasty economic recession, the likes of which we may not have witnessed in decades. While 25% (or more) tariffs on a wide range of goods are quite scary to think about, I think Canadian investors thinking about exiting stocks are going about managing such risks the wrong way. Indeed, the future is unknowable, and we should be prepared for many potential outcomes.
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The bull and bear case as tariffs loom
On the bull side, we could see a peaceful resolution that involves zero tariffs and no trade war. However, on the bear side, we could have a tit-for-tat trade war that sees escalating tariffs followed by equally horrid counter-tariffs. Indeed, such a move could deliver an upper-cut blow to both sides. And while there is a non-zero chance of this happening, I think that odds favour an outcome that’s somewhere in the middle. Perhaps lower tariffs (around 10% or so) on a specific range of goods for a rather limited period (think a few months until final details of a deal can be worked out, perhaps after a Canadian election) is also a possibility.
Either way, Canadian investors should be ready to keep on rolling with the punches, whether or not a tariff-driven recession is headed our way. Indeed, some numerous industries and sectors will be less affected by tariffs. And if worse comes to worst and Canada is sent into a recession, investors had better be ready to invest through such a recession with defensive dividends stocks en route to an inevitable and eventual recovery.
Arguably, Canada’s been in a slump for some time, with some pundits pointing to a per-capita recession. Either way, tariffs will only act as salt in the wounds of an economy that could be in better shape. Either way, the TSX Index seems comfortable with the month-long pause in tariffs. Indeed, tariffs may never happen, even as some scramble to make big moves in their portfolio to be ready for the impact.
The TSX powerhouses seem well-equipped to ride out a storm. And if tariffs are off the table, perhaps the names could be ready for an upward surge. Tariffs or not, these names seem like great bets for the long term, regardless of the fate of U.S.-Canada relations in these coming weeks and months.
Constellation Software
Constellation Software (TSX:CSU) seems well-insulated from a tariff-fuelled period of volatility. The software company undoubtedly knows where to find value in the Canadian small—and mid-cap tech scene.
And as the artificial intelligence (AI) tailwind spreads beyond the mega-cap tech titans, thanks to DeepSeek and other lower-cost innovations, I’d look for the smaller players in the AI scene to benefit greatly. Constellation will be hunting for such deals in the smaller-cap waters as it hopes to uncover overlooked, relatively unknown innovators that could level up their disruptive capacities with extra capital and a hand from a seasoned veteran in the industry.
Indeed, if you’re looking for growth and relative stability from tariffs, the software scene is worth looking into. As shares near $5,000, I’d not sleep on the growth gem if you’ve got the extra capital to put to work in a Tax-Free Savings Account or Registered Retirement Savings Plan. As a venture capital-esque play, investors seeking next-level growth shouldn’t be afraid to pay a bit of a premium on a name with ample growth drivers left in the tank.
