Tariff threats from south of the border on industrial inputs, auto parts, and manufactured goods have intensified in recent weeks, and equity markets are feeling the heat.
Several Canadian sectors such as utilities, telecom, and grocery chains are fairly immune to trade wars. However, two TSX stocks have sizeable exposure to the U.S., making them high-risk investments right now.
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Why auto stocks face the sharpest trade war exposure
Few industries are as tangled up in cross-border trade as auto manufacturing. A single component can cross the Canada-U.S. border more than once before it ever reaches a finished vehicle.
A co-dependent supply chain makes Magna International (TSX: MG) and Linamar (TSX: LNR) high-risk stocks to own in September 2026.
Magna is one of the world’s largest automotive suppliers, and builds everything from body structures to complete vehicles for major global automakers.
During its recent earnings call, Magna forecast EBIT (earnings before interest and taxes) margins of 6.5% for 2026, leaving little room for error.
CFO Phil Fracassa told investors at the J.P. Morgan Automotive Conference in August that Magna’s strong first-half performance gave management confidence to raise guidance, crediting operational excellence rather than a booming market. Basically, Magna has performed well in 2026 due to a focus on cost-cutting rather than strong demand for automobiles.
Global light vehicle production is expected to decline through 2026, and OEMs (original equipment manufacturers) facing cost pressures have limited appetite to absorb supplier price increases.
If new tariffs impact auto assemblies or components, Magna has very little cushion to protect its bottom line without passing costs on to customers.
Linamar’s industrial arm is already feeling tariff pain
Linamar operates two segments: mobility, which makes driveline and powertrain parts, and industrial, which covers MacDon agricultural equipment and Skyjack access equipment.
The company posted record sales in its second quarter, but the details tell a more complicated story.
Industrial operating earnings fell 23.8% year over year in the quarter, a decline management pinned largely on new Section 232 tariffs on metal product derivatives that took effect in April.
Executive Chair Linda Hasenfratz noted that tariffs are impacting select products within the segment, while CEO Jim Jarrell was candid about how long the pain in the agricultural side could last.
“This trough in the market sort of lingers longer than expected,” Jarrell said on the company’s August earnings call, describing weak farmer sentiment and high input costs weighing on demand.
Linamar’s mobility business is performing very well, and management stressed that more than 90% of total sales remain untouched by tariffs.
Still, third-quarter guidance points to another double-digit decline in industrial earnings, and executives openly admitted that further tariff changes have not been factored into the outlook.
The bigger picture for your Canadian stocks portfolio
Neither Magna nor Linamar is a broken company. Both have strong balance sheets, disciplined management teams, and long track records of navigating tough cycles. Linamar’s net debt to EBITDA (earnings before interest, tax, depreciation, and amortization) was just 0.52 times last quarter, among the lowest in its peer group, giving it real flexibility.
The concern here is exposure. Until trade policy stabilizes, both Canadians stocks face a risk of margin compression that management could struggle to offset.
Investors looking for steadier ground in this environment may be better served rotating toward domestic-focused sectors like utilities, pipelines, or consumer staples until the trade picture clears up.
