After nearly seven years, the United States government has entered a shutdown after lawmakers failed to reach a funding deal. While essential government services will continue, non-essential services will likely be suspended. And investors across the globe are bracing for impact.
That goes for investors here in Canada as well, with several companies likely to be hit by the shutdown. However, while some Canadian companies could struggle due to cross-border trade, others could be beneficiaries. So let’s look at three Canadian stocks that could be affected, whether positively or negatively, by a U.S. government shutdown.
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MG
First, we have Magna International (TSX:MG), an auto parts manufacturer directly tied to many U.S. companies. Yet while the company relies on many U.S. companies, the auto supply chain exposure could make Magna a potential beneficiary of U.S. onshoring, along with electric vehicle (EV) supply chain support. And it couldn’t come at a better time.
MG’s recent earnings report shows that the Canadian company has shown incredible operational improvements and cost discipline at a time when sales have dropped. Currently, the Canadian stock continues to trade at a low forward price-to-earnings ratio, despite increasing its revenue and reducing its debt. Furthermore, investors can grab a solid 4.1% dividend yield!
For investors seeking growth and income in this case, with direct exposure to North American auto supply and the potential for upside during onshoring, Magna could be a solid position to take during this shutdown.
CAE
Another Canadian stock to watch is CAE (TSX:CAE), which holds many cross-border defence contracts. The Canadian stock sits at the intersection between civil aviation recovery and strong defence spending. The U.S. and allied defence budget increases have created a tailwind for the stock, with aviation training continuing to rise in demand. It’s therefore a stable Canadian stock to watch, especially after earnings.
The first quarter of 2026 saw growth in revenue to $1.1 billion, with operating income rising, resulting in a 12.2% profit margin. It now boasts a $19.5 billion backlog as well. The Canadian stock does trade at a premium at 31.6 times earnings, yet net income remains robust and margins healthy, making it a truly defensive stock.
CAE stock, therefore, offers a higher quality, higher multiple for exposure to defence and aviation training. It’s great for investors who want recurring revenue with defence upside. This makes it a solid core holding for long-term investors willing to wait out any potential volatility during this shutdown.
CP
Finally, we have Canadian Pacific Kansas City (TSX:CP), which facilitates trade by leveraging its cross-border rail network to access the U.S. market. It’s the only North American freight rail that extends from Canada down to Mexico, benefiting from higher domestic manufacturing, intermodal growth, energy, and bulk shipments across the U.S.
CP again has shown strength these last few quarters, with very high profitability and strong operating cash flow. Yet it trades at a reasonable 18.9 times earnings, with quarterly earnings growing 36% year-over-year. It’s therefore a high-quality cash generator and part of a duopoly in Canada among rail companies.
This shutdown could potentially harm the company in the very short term as government workers sit on the sidelines. However, in the long run this could provide value for investors wanting to get in on a solid stock long term while benefiting from dividends and buybacks.
Bottom line
Investors will need to keep an eye on this shutdown to eye up whether it looks like it’s going to last. However, remember that this is likely a short-term issue that could provide long-term gains. MG, CAE, and CP all benefit from cross-border trade. So getting in during a dip might be the best option to enjoy immense growth in the years and decades to come.
