It has been an eventful week as President Donald Trump officially announced his long-awaited tariff strategy. From a high level, a baseline 10% minimum tariff is being applied to all countries as of April 5. Countries that account for the bulk of the U.S. trade deficits will be impacted by significantly higher tariffs (e.g., China at 34% and India at 26%) that are expected to take effect on April 9. All else equal, the average U.S. import tariff is expected to rise to around 20%. Canada and Mexico received a reassuring outcome as they were unexpectedly spared from additional tariffs.

As a relative positive, no new tariffs were announced on Canada. However, it’s worth emphasizing that a slowdown in the global economy (particularly the U.S.) is still a net negative for Canada if our trading partners are getting weaker. The ongoing trade uncertainty has sent markets into a tailspin while Trump shrugged off the selloff with “I think it's going very well".

In my view, there are four things worth remembering in this environment.

1. Tariffs aren’t good for a developed economy. They serve as an additional cost that gets passed on to the consumer and leads to deglobalization and ultimately a drag on global economic growth. For a deeper dive into the impact of tariffs on the economy I’d point you to Ben Stein’s iconic scene in Ferris Bueller’s day off.
2. Investors don’t like uncertainty. The back and forth we’ve seen over the past three months leads to slower spending and investment from both consumers and corporations. It’s difficult to know how to play the game if the rules keep changing – and I don’t think the announcements this week are the end of it. Other countries will respond with tariffs of their own and the “negotiations” could continue for months. Companies will have a more difficult time providing guidance on their earnings and consequently analysts and investors will have a more difficult time forecasting the year ahead.
3. Your plan hasn’t changed. Although all of this news has an impact on the markets, we continue to have a long term approach with your financial plan. We will maintain our disciplined approach, evaluating new opportunities with a degree of caution, ensuring our strategies are consistent with your plan. Your plan assume that market drawdowns, such as the one we are living through, may occur from time to time and to varying degrees. Sticking to a plan ensures that we remain disciplined in our approach which is particularly important during periods of market duress where emotions can often get in the way.
4. Time to be tactical & opportunistic. We fully anticipate the volatility and tariff negations to persist in the days, weeks and months ahead. In the first quarter of 2025 we rebalanced our portfolios to ensure we had an adequate allocation to our fixed income holdings (these decisions have been positive this year, especially this week). Although we did not predict this level of volatility around Trump’s tariff announcements, we did expect more volatility given the current state of the overall economy, the geopolitical backdrop and the above average strength we’ve seen in the markets over the past few years. If we see a continued pullback to levels where valuations in the market become too compelling to ignore you can anticipate a tactical change within your portfolio to capitalize on these opportunities. Please know we will always ensure your long term financial security and overall financial plan is at the forefront in any change we implement.

Looking ahead to the next quarter, we are awaiting Canadian election day at the end of April, to see whether Poilievre or Carney comes out on top. At that point, we expect more productive discussions between Canada and the US, and hope that positive progress will be made.