The TSX’s tumble during the final two sessions of last week was like a punch to the gut. Talk about U.S. “reciprocal” tariffs sparking a global trade war and potential recessions sent shivers down Canadian investors’ spines, even evoking memories of 2020 COVID-19 volatility. Yet amid uncertainty lies opportunity, particularly in domestic stocks with strong local presence, wide moats, and minimal tariff exposure.
If you’ve got $1,000 to invest during this tariff tango, you’re likely wondering which Canadian stocks can withstand the market turbulence. My strategy focuses on domestic defensive stocks – companies that typically hold their ground when economic conditions deteriorate.
When headlines scream about tariff wars, people still need banking services and food. That’s why I’d closely examine two solid players: Royal Bank of Canada (TSX: RY), or RBC, and Metro Inc. (TSX: MRU) stock.
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Why RBC stock makes sense in April’s choppy market
Royal Bank of Canada, Canada’s largest bank with $2.2 trillion in total assets, derives 63% of its annual revenue domestically while serving clients across 29 countries. This strong domestic focus with international diversification limits direct exposure to tariffs compared to companies shipping goods across borders.
RBC operates within Canada’s fortress-like banking system, with regulations that have historically helped local banks weather economic storms better than many competitors. In a tariff scenario, a well-capitalized bank like RBC with a 13.2% Common Equity Tier 1 (CET 1) ratio offers relative safety.
Encouragingly, April’s U.S. tariffs excluded Canada and Mexico. Although the United States-Mexico-Canada trade agreement faces renegotiation in 2026, the impact on domestic businesses may not be severe.
Banks will feel earnings pressure if tariffs trigger a recession. However, as the Canadian economy adjusts and grows, demand for financial services will follow. This long-term potential makes RBC stock attractive at its reasonable historical price-earnings multiple of 12.8.
Investors can earn a 3.8% dividend yield with RY stock. The bank has paid uninterrupted dividends since 1870 and raised payouts for 14 consecutive years – a well-covered stream of quarterly passive income likely to continue beyond current tariff concerns.
Metro Inc.: A domestic stock with defensive moats during a tariff war
Metro Inc., Canada’s third-largest retailer, meets families’ essential needs through grocery stores and pharmacies across Quebec and Ontario. The domestic stock represents an ultimate defensive stock to buy in April. Regardless of tariff tensions, Canadians will continue stocking pantries and filling prescriptions.
Metro’s overwhelmingly domestic business makes it less vulnerable to direct trade war impacts. Its established local presence and supply chains are significant assets during uncertain times.
MRU stock’s domestic clout and defensive moats are increasingly attractive as uncertainty rules in 2025. Shares trade at an affordable forward P/E of 19 after a double-digit rally year-to-date.
The retailer’s stock has built a solid track record of rewarding shareholders with consistent capital gains and dividend growth – precisely the steady compounding desired in long-term investment portfolios.
$1,000 investment plan for domestic stocks
With just $1,000, I’d likely invest the entire amount in one of these domestic stocks. Given the specific concerns around tariffs, I might slightly favour Metro (MRU) stock for its ultra-defensive nature. However, RBC offers broader exposure to the Canadian economy with a compelling long-term growth story.
For those with access to fractional shares or lower trading fees, splitting the investment could provide more diversification. With smaller amounts, however, focusing on one strong stock pick at a time is often more efficient.
Investor takeaway: Stay calm, think long term
The trade war situation is causing understandable anxiety, but knee-jerk reactions rarely yield good investment decisions. By focusing on strong domestic stocks, especially defensive options like Royal Bank of Canada stock and Metro Inc. stock, long-term-oriented Canadian investors can navigate current uncertainty while positioning for long-term growth.
This April, instead of panicking, let’s be strategic – investing in companies built to last while decisively building retirement nest eggs.
