U.S. president Donald Trump has turned up the trade heat on Canada again. The U.S. imposed 50% tariffs on Canadian goods worth over $25 billion last month, prompting Canada to respond with tariffs ranging from 15% to 50% on the same value of U.S. imports starting September 8.
While exporters are directly in the firing line, the impact could travel further. For example, Canadian National Railway (TSX: CNR), or CN, moves huge volumes of goods across its North American network. Any prolonged slowdown in cross-border trade could eventually weigh on freight demand.
In this article, I’ll look at what this new trade risk could mean for CN and why its strong fundamentals could help it navigate the trade uncertainty in the long run.
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Why CN stock faces new tariff risk
Notably, CN has a nearly 20,000-mile rail network that connects Canada’s eastern and western coasts with the U.S. Midwest and Gulf Coast, putting CN at the heart of North American trade. Besides rail, this transportation giant also provides intermodal, trucking, and supply-chain services.
CN stock currently trades at $170.58 per share with a market cap of about $103.4 billion. It also offers a 2.1% annualized dividend yield. Its shares have slipped roughly 5% over the last month as trade uncertainty has intensified. Despite recent volatility, the stock has gained about 27% over the last 12 months.
As the United States imposed 50% tariffs on $27.6 billion of Canadian goods effective August 22, Canada responded with tariffs ranging from 15% to 50% on $27.6 billion of U.S. products starting September 8. These measures cover sectors including steel and aluminum, dairy, appliances, agricultural equipment, pulp and paper, plastics, and electronics. Also, existing Canadian counter-tariffs on U.S. autos remain in place.
For CN, the tariff risk is largely indirect. If higher trade barriers hurt production or demand across major industries, fewer goods may eventually need to move through its network. That could put pressure on freight volumes if the dispute continues.
Strong operating and financial results provide some cushion
Nevertheless, the good news is that CN enters this period of tariff uncertainty with solid business momentum. In the second quarter, the railway’s revenue climbed 11% year over year (YoY) to $4.8 billion. Its operating income rose 9%, while net profit inched up 7%.
The railway’s revenue growth was mainly supported by strong grain and energy volumes. Its grain and fertilizer revenue surged 18% YoY, while petroleum and chemicals revenue climbed 16%.
At the same time, the company’s cash generation remained healthy. In the first half of the year, CN’s free cash flow surged 19% YoY to about $1.8 billion, giving it enough flexibility to fund investments and reward shareholders.
Why CN stock still looks attractive
While tariffs add a big risk for exporters and the businesses that transport their goods, CN’s latest performance gives investors several reasons to remain optimistic about its long-term growth outlook. The company plans to invest about $2.8 billion in its 2026 capital program.
Meanwhile, CN is also advancing its hybrid locomotive program. Its initial pilot achieved fuel-efficiency improvements of up to 50%, and three hybrid locomotives are now being tested. The railway expects to transform two more locomotives into hybrid-electric platforms by the end of 2026.
Clearly, tariff uncertainty could keep CN stock volatile in the near term, especially if cross-border freight demand weakens. However, its solid earnings, strong cash flow, extensive North American network, and continued efficiency investments still make it an attractive long-term stock to consider, especially if the latest trade dispute leads to a temporary decline in its share price.
