Overview

In 2025, the global economy and markets face uncertainty from U.S. trade tariffs and the Trump administration’s policies more generally, but opportunities remain for patient and disciplined investors.

Summary

The first half of 2025 has been marked by constant change and contained chaos in global markets, with U.S. trade tariffs being a key source of uncertainty. Despite this, global equity markets have shown surprising resilience. President Trump's administration has established a pattern in tariff negotiations for using extreme threats, walking them back, and then negotiating from a position of strength. To date, this has led to several "better than feared" outcomes for many countries including Canada, though tariff rates remain significantly higher than before Trump's return to office.

For Canada, the economic outlook contains mixed signals. While the economy has proven resilient and appears past peak pessimism, real vulnerabilities remain. Canada faces direct tariff pressures (particularly on copper, steel, and aluminum) and indirect harm from potential global economic slowdown. Prime Minister Carney's government has announced several initiatives that could provide economic benefits, including fast-tracked NATO defense spending, personal income tax cuts, elimination of GST for qualifying first-time homebuyers, and removal of interprovincial trade barriers. These measures, along with potentially higher government spending in the fall budget, could help offset trade headwinds.

Key highlights and takeaways:

• Tariffs will remain uncertain - U.S. tariffs on global trading partners will likely be higher than during Trump's first term but lower than initially threatened – August 1^st is the next “big day” for targeted countries to reach deals with the U.S.
• Canada has some protection - Under CUSMA, more than 85% of Canadian exports to the U.S. would still be duty-free; however, the country still faces the growing threat of an economic slowdown or even recession in the months ahead
• Interest rates likely on hold – The Bank of Canada remains at 2.75%; the U.S. Federal Reserve is expected to implement two quarter-point (0.25%) cuts by year-end
• Investment recommendations - Maintain a modest overweight in equities (prefer international markets), neutral on fixed income, consider alternatives for diversification
• Gold shows unusual strength - Central bank purchases have helped drive gold prices in the face of rising interest rates and growing global instability
• "Magnificent 7" tech stocks - Now constitute nearly 30% of the S&P 500 Index's market capitalization
• U.S. economy - Showed modest contraction in Q1 2025 (first time in three years); although economic data continues to be mixed, it is unclear where the economy is headed for the remainder of the year
• "One Big, Beautiful Bill Act" is passed - $4 trillion in tax cuts could add $3.3 trillion to U.S. deficits over a decade, but dreaded Section 899 was removed from the final bill, eliciting a sigh of relief for Canadian businesses and investors

To access the full version of Counsel Views – Summer 2025, please click here.

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