The theme for 2025—and likely the next three years under Trump—is tariffs. Specifically, a back-and-forth cycle of threats and retaliatory measures targeting major U.S. trade partners like Mexico and Canada.
Tariffs create uncertainty, and uncertainty fuels market volatility. When businesses don’t know whether they’ll face new import taxes, they delay investment decisions, leading to slower growth.
Investors, already jittery, tend to react quickly to tariff news, often selling at the first sign of trouble. This back-and-forth not only disrupts supply chains but also makes it harder to predict long-term earnings for companies that rely on cross-border trade.
Here’s what you need to know about the situation—and how to position your investments.
Source: Getty Images
What are tariffs, and why do they matter for your investments?
A tariff is a tax on imported goods, making them more expensive to buy. For example, Trump is threatening broad 25% tariffs on Canadian imports, 10% on oil, and 50% on aluminum as retaliation for trade disputes.
The idea behind tariffs is to protect domestic industries by making foreign goods less competitive, forcing companies to buy local. In theory, this helps local manufacturers. But in practice, tariffs are an outdated economic weapon that disrupts supply chains and often lead to full-blown trade wars, where countries retaliate with tariffs of their own.
If you run a restaurant or a manufacturing plant, tariffs are a nightmare. The cost of imported food, raw materials, or machinery suddenly jumps. If your restaurant relies on ingredients from Mexico or Canada, your food costs go up. If your factory needs aluminum for production, you either pay more or scramble for alternatives.
That’s how tariffs ripple through the economy—driving up costs, squeezing profits, and forcing businesses to cut corners or raise prices on consumers.
So, why is Trump so enamoured with tariffs? Partly because they look strong and decisive. Tariffs create a simple political message: “I’m protecting American jobs”—even if the economic reality is far more complicated. They also allow him to negotiate from a position of strength, using tariffs as leverage in trade talks.
For investors, tariffs matter because stocks represent ownership in businesses, and businesses hate uncertainty. If companies don’t know whether their costs will spike or whether they’ll lose access to key export markets, they delay investments, cut jobs, and struggle to plan for the future. That’s bad for earnings, bad for stock prices, and bad for your portfolio.
What you can do with your investments
I’m of the opinion that investors should diversify and stay the course. That means continuing to invest as you normally would, tuning out the noise, and avoiding knee-jerk reactions.
We saw this exact scenario play out in 2018. Trump might be more unhinged and emboldened this time, but the playbook looks the same—threats, tariffs, market panic, and eventually some kind of resolution. If you reacted back then by selling everything, you likely regretted it.
If you’re a long-term investor, the best approach is to keep calm and stick to your strategy—owning stocks from all around the world and across all 11 sectors. The key is not letting short-term noise derail your long-term plan.
If you find yourself under-diversified, consider adding something like TD Growth ETF Portfolio (TSX:TGRO), which charges just 0.17% per year.
This one ETF gives you exposure to thousands of stocks, split into 40% U.S., 30% Canada, 20% international, plus 10% Canadian bonds for stability. It’s something I’d feel comfortable holding through a trade war, knowing I’m spread across different markets and industries for the long term.
