Believe it or not, but we are only in the month of March. Yet, it has been quite the year already given the policy shifts and twists and turns undertaken by President Trump and all the Tariff talk. While many people, including ourselves, are “tariff-ed” out at this point, we discuss some of the early impacts from the trade war thus far.

At the risk of being obsolete, I’ll refrain from providing much of an update on where things stand with respect to tariffs as the landscape seems to be changing daily, or hourly. Instead, I’ll look at the big picture and provide some perspectives on what the impact of tariffs could be.

If we do see high tariffs imposed by the U.S., our Canadian exports will be more expensive to the U.S. consumer which will decrease demand and consequently, sales. This will most likely create a slowdown in the Canadian economy and potentially put more pressure on the Canadian consumer. The likely response by the Bank of Canada will be to lower interest rates in an attempt to keep the economy moving forward.

Canada will no doubt respond to any U.S. imposed tariffs with tariffs of their own. An increase in tariffs will cause the Canadian retailers to face higher costs on products imported from the U.S. Assuming these costs are passed on to the Canadian consumer, this increase in costs will impact the purchasing power of the consumer and would typically lead to a decrease demand and sales. This will ultimately push the Canadian retailer to source their products from outside of the US.

The purpose of NAFTA when it was signed in 1994 was to make Canada, Mexico, and the United States more competitive in the global economy. Increasing tariffs in 2025 will do the opposite and make our countries less competitive globally.

The temporary exemptions and delays of these tariffs make it challenging for companies, economists, and strategist to provide estimates on earnings and to project what the rest of 2025 has in store. Not surprisingly, this uncertainty is beginning to weigh on consumers, businesses, and investors.

The question for investors is: what’s next? It is possible the market may see some relief in the short-term given the recent tariff reprieve. Better yet is the possibility of a less threatening tariff outcome by April should some favourable negotiations transpire in the weeks to come. However, the risks of a longer lasting trade war are high enough that caution is warranted in our view, even if the markets have fared better so far than we would have expected. As a result, we continue to review and assess our portfolios to ensure that our clients’ exposures are appropriate.

On the bright side, what we learned from Trump’s last term in office is that not everything he promises really gets done. In fact, on 23% of the promises he made were actually kept.

For more reading on this topic our RBC Economics team has put out a number of Thought Leadership articles. 50 ways to leave your lover: Sizing the impact of a trade breakup - RBC Thought Leadership

And if any of you are old enough to remember the I Am Canadian add from 25 years ago… it’s back! 'We are Canadian': 25 years later, Joe Canada is back with a new patriotic video | CBC News

Should you have any questions, please feel free to reach out.