Trump tariffs have been the talk of the town in Canada for months now, and on April 2, they’re likely to become an even bigger topic of conversation. On that date, Trump will launch his “reciprocal tariffs” on most countries worldwide, and he has hinted that Canada is in store for tariffs of up to 250% on agricultural products!
Trump’s understanding of Canada’s quota system appears to be weak, as he has threatened a 250% tariff on all Canadian dairy products in retaliation for a 250% Canadian tariff on over-quota dairy imports. One might hope that Trump will modify his planned tariffs once he is better informed after speaking with his advisors, but I wouldn’t hold my breath. Howard Lutnick, Trump’s Secretary of Commerce, is a known “yes man.”
The big picture is that Trump’s tariffs affect your money situation. If you’re a business owner, you may face lower revenue due to the tariffs. If you’re an employee at a tariff-struck business, you may face job insecurity. If you’re in neither of those categories, you may nevertheless be hit with retaliatory Canadian tariffs at the grocery store. So, it would be wise to plan financially for the impact of Trump tariffs. In this article, I’ll address the question of whether your money is safe where it is while Trump’s tariffs hang over your head.
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Your savings are fairly safe
As far as your savings go, those are not likely to be hit all that hard by Trump’s tariffs. The reason is that Trump is likely to walk many of the tariffs back. While many Canadian stocks and index funds are theoretically vulnerable to the tariffs, the tariffs probably won’t last long. We saw Trump’s tariff playbook in his first term: he tariffed many countries but ultimately walked the tariffs back. His commerce secretary, Howard Lutnick, has said he will use the same playbook this time around (conditional on tariffed countries “playing nice”). So, as scary as Trump’s tariffs seem, they probably will not last forever.
A good asset class to hold through Trump’s tariff war is Canadian financial stocks. These don’t export anything, so they aren’t tariffed. If you look at iShares S&P/TSX Capped Financials ETF (TSX: XFN), it has very little vulnerability to tariffs. It holds all the Big Six Canadian banks and a few insurers. It does no exports. Most of the banks in the ETF are oriented toward the domestic Canadian market, while the insurers are 100% domestic. Its 0.61% management expense ratio (MER) is a little high by ETF standards but not out of the realm of sanity. Overall, it could be a good bet for the era of Trump tariffs.
Employment income could be vulnerable
The less pleasant part of the story is that your employment income could be vulnerable to Trump’s tariffs. If you work in sectors like steel, aluminum or alcoholic beverages, your employer is likely to experience some strain. But remember what I wrote above about Trump’s tariff strategy: he doesn’t intend to keep tariffs in effect permanently. So, any employment impact from Trump tariffs could be short-lived.
