Donald Trump’s trade war has been the topic of the hour for a good many “hours.” It all started shortly after the U.S. president’s inauguration when he pledged to slap 25% tariffs on both Canada and Mexico. The threat wasn’t taken all that seriously at first. However, the president later signed an executive order bringing the pledged tariffs into effect. It was only after Mexican president Sheinbaum and Prime Minister Trudeau reached last-minute deals with Trump that the tariffs were cancelled (rather, delayed) for 30 days.
Trump’s trade war has inspired Canadian investors to look for stocks that are immune to possible tariffs. Canada sends about 77% of its exports to the U.S., so many Canadian companies are affected by them. However, there are other stocks that are relatively immune. Canadian companies that do not export to the U.S. or own their U.S. assets directly are safer than those whose relationship with the U.S. depends on exports. In this article, I will explore three Canadian companies that are relatively safe from Trump tariffs due to their lack of U.S. exports.
Source: Getty Images
Brookfield Infrastructure Partners
Brookfield Infrastructure Partners (TSX: BIP.UN) is a company that does plenty of business with the U.S., but through direct asset ownership rather than exports. Its sister company, Brookfield Renewable Partners, exports power to the U.S., but BIP itself does not export anything. Instead, it owns infrastructure assets that it leases out to U.S. customers. This is done through U.S. subsidiaries, so there are no exports involved in any way.
Apart from its immunity to tariffs, Brookfield Infrastructure has other characteristics that make it desirable amid Trump’s trade war.
First, it is an infrastructure developer that owns and builds many of the types of infrastructure that Donald Trump wants to build. This includes cell towers and data centres.
Second, Brookfield’s artificial intelligence (AI) data centres could benefit from Trump’s AI subsidies and grants, which are designed to push the U.S. into a decisive lead in global AI development.
Third and finally, the company has deep relationships in the U.S. business community, which may help it obtain favourable treatment from the president.
Overall, this company looks relatively immune to Trump’s trade war while still having considerable U.S. exposure.
RioCan
RioCan Real Estate Investment Trust (TSX: REI.UN) is a Canadian REIT that operates exclusively in Canada. The immunity to the Trump tariffs trade war in this case is pretty simple: RioCan does not export anything to the U.S., nor does it import much, so it’s immune to both Trump tariffs and retaliatory Canadian tariffs. Apart from that, the REIT is fairly cheap, trading at 12 times earnings and 0.75 times book value, despite having grown its revenue by 6.5% and its free cash flow by 34% in the trailing 12-month period.
Canadian Tire
Canadian Tire (TSX: CTC.A) is a Canadian retailer that specializes in construction & sporting goods, as well as clothing. It does import some products from the US, but it does not export much there, so it is better positioned for Trump’s trade war than exporters are.
Canadian Tire stock is modestly valued at the moment, trading at 13 times earnings, 0.53 times sales and 1.5 times book value. The company’s revenue declined this year, however its earnings per share increased 13.5%. The company is fairly profitable, with a 4% net margin, a 4.6% free cash flow margin, and a 12% return on equity. It isn’t my top pick in normal circumstances, but it does have characteristics that make it comparably safe amid Trump’s trade war.
