The Canadian Stocks Worth Owning When a Trade War Hits

These TSX grocery stocks have a lower beta and could be more insulated from tariff volatility.

Key Points
  • Tariffs increase costs and uncertainty, but domestic consumer staples are more insulated due to stable demand and localized supply chains.
  • Loblaw and Metro are low-volatility grocery leaders with strong return on equity despite thin margins.
  • Metro currently offers a cheaper valuation, while Loblaw provides scale and greater geographical coverage.

If there is one strange silver lining to the ongoing U.S. and Israel conflict with Iran, now well into its sixth week, it is that tariffs have taken a back seat. Earlier in 2025, Trump’s threats of tariffs on Canada were front and centre.

For a country that depends heavily on trade, that kind of rhetoric creates real uncertainty. Railways, exporters, and manufacturers all feel it. Even if tariffs are never implemented, the uncertainty alone makes it harder for companies to plan, invest, and allocate capital.

That said, this distraction will not last forever. Eventually, Trump’s attention will shift back to trade policy. And when it does, tariffs could once again become a source of volatility for Canadian markets.

There is not much you can do to control that as an investor. Staying diversified and sticking to a long-term plan is still the best approach. But it is also worth recognizing that some businesses are naturally more insulated than others.

One area that tends to hold up better is domestic consumer staples. Here’s why, and two stocks that could be worth a look.

Warning sign with the text "Trade war" in front of container ship

Source: Getty Images

Why consumer staples hold up during trade wars

Tariffs are essentially taxes on imported goods. They raise costs for businesses that rely on foreign inputs and can disrupt supply chains. That leads to higher prices, lower margins, and a lot of uncertainty around future demand.

Consumer staples operate differently. These are businesses that sell essential goods like groceries and household items. Demand tends to be steady regardless of economic conditions. People still need to eat, and they still need basic everyday products.

For Canadian grocery chains in particular, there is another advantage. Much of their supply chain is either domestic or diversified across multiple countries. They are not as reliant on a single cross-border trade relationship. Some products are sourced locally, while others come from regions outside the U.S., such as Mexico or international suppliers.

That helps reduce direct exposure to tariffs. They can also pass through some cost increases to consumers more easily than other industries, simply because their products are non-discretionary. It is not that they are immune, but they are generally more resilient.

Two Canadian consumer staple stocks to consider

Two names that stand out in this space are Loblaw Companies Limited (TSX: L) and Metro Inc. (TSX: MRU).

Loblaw is the dominant player, with a market capitalization of about $75 billion. Metro is smaller, around $20 billion, but still a major force in the Canadian grocery landscape.

Both companies fall into the category of low-volatility stocks. This can be measured using beta, which tracks how sensitive a stock is relative to the broader market, which for Canadian stocks is the S&P/TSX Composite Index with a beta of 1.

Loblaw’s five-year monthly beta sits around 0.41, while Metro’s is slightly lower at 0.39. That means both stocks have historically been less than half as volatile as the broader market.

On the surface, profit margins are thin, around 4.2% for Loblaw and 4.4% for Metro. That is normal for the industry. Grocery retailers have to deal with high inventory costs, labour, logistics, rent, and intense price competition.

What matters more is how efficiently they use capital. Return on equity gives a better picture here. Loblaw posts a strong 23.2%, while Metro comes in at 13.9%. These are solid figures and show that management is generating meaningful returns for shareholders.

Valuation is where things get more nuanced. Loblaw currently trades at about 25.7 times forward earnings. That is not cheap, but for a stable, dominant business, it is roughly in line with expectations. Metro looks more attractive on that front at 19 times forward earnings. You are paying less for each dollar of earnings, though the trade-off is a smaller geographic footprint and scale.

Fool contributor Tony Dong has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Person holding a smartphone with a stock chart on screen
Dividend Stocks

For BCE vs. Enbridge, a 5.7% Yield vs. 5.9% (And the One I’d Prefer for Income)

Both BCE and Enbridge offer attractive income, but BCE is a higher-risk turnaround opportunity, whereas Enbridge offers a more predictable…

Read more »

man shops in a drugstore
Dividend Stocks

How Much to Invest in RioCan for $300 a Month in Dividends

How much should you invest in RioCan for $300 a month in dividends? Explore its retail business, monthly payout and…

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Telus Dividend Safety: Is the Stock Still Worth Buying for Income?

Explore the latest insights on Telus dividend amid a challenging earnings report and management's new Transformation Strategy.

Read more »

voice-recognition-talking-to-a-smartphone
Dividend Stocks

BCE Just Reported: What $10,000 Could Earn You in Dividends Today

BCE is yielding a very generous 5.2%, as the company's telecom business improves and long-term investments drive growth.

Read more »

Transparent umbrella under heavy rain against water drops splash background. Rainy weather concept.
Dividend Stocks

Is Intact’s Rough Quarter a Blip or the New Normal for Canadian Insurers?

Intact reported $660 million in pre-tax catastrophe losses during the quarter, which dragged its net operating income per share lower.

Read more »

investor faces bear market
Dividend Stocks

How Much to Invest in BCE for $1,500 a Year in Dividends

BCE (TSX:BCE) could be a huge dividend value winner as the stock markets correct and potentially flirt with a bear…

Read more »

diversification is an important part of building a stable portfolio
Dividend Stocks

Want $6,000 a Year From Your TFSA? Here’s the Portfolio Size to Aim for

A $150,000 starting target can support a $6,000 annual TFSA income goal without requiring an extreme yield.

Read more »

top TSX stocks to buy
Dividend Stocks

Hot Take: The Best Monthly Dividend Stock on the TSX Right Now

For investors seeking monthly dividend payments, this REIT has a history of consistent dividend payments across different market conditions, along…

Read more »