Dear Clients,

We are writing to address investor concerns that have contributed to the recent sell-off in equity markets and a near-term decline in portfolio values.

As many are already aware, President Donald Trump has announced sweeping tariffs impacting a wide swath of US trading partners and this has led to heightened uncertainties across businesses and industries globally. To provide some context, the US maintained balanced trade (where imports were roughly equal to exports) until the mid-1990’s. With the introduction of the World Trade Organization in 1995, and China’s emergence as a manufacturing powerhouse around the same time, production of goods shifted meaningfully from the US to China and other countries with lower labour costs. Canada, too, has been a beneficiary of American companies’ outsourcing, particularly in the automotive sector. From a position of balanced trade, the US started running trade deficits with its trading partners in the late 1990’s, and this gap has widened significantly over time. Despite Trump’s assertions that this has been detrimental to the US, American citizens and companies have benefited from global trade and supply chains that have allowed for a wide variety of goods to be produced and sold at relatively attractive prices.

It is important to note that Trump’s stated goal in his tariff and trade pronouncements is to “Make America Great Again”, and his intention is for the US economy to be stronger over time. While his methods are disruptive and seemingly harmful to many businesses and individuals around the world, they are part of a multi-lateral negotiation process between the US and its trading partners. What is important to Trump is that he has the attention of world leaders. Depending on the responses of these leaders, what eventually transpires is likely to be different from what has been announced; there can be reversals, exemptions, and delays in the actual implementation of duties. Furthermore, for American businesses and individuals, there will likely be mitigating financial factors including corporate and personal tax cuts.

On our part, we have been careful to invest in companies that are led by strong and nimble management teams and whose business models are resilient and defensible. Many offer technology, payment, communications, and other services that are essential to their customers, and not directly subjected to tariffs. Those which sell products that are impacted by tariffs are leaders in their respective industries and they have strong pricing power based on the quality and desirability of their products and services. Challenging circumstances tend to impact their competitors to a greater extent, thus providing more market opportunity for these corporate leaders to capture over time. While production costs may rise, there are offsets to overall costs, namely productivity improvements through technological investment. Artificial intelligence and automation remain two incredibly impactful areas of technology, driving efficiencies in a wide range of industries including advertising, food services, agriculture, and finance.

As investors, we have encountered multiple periods of market shocks. In times like these, it is important to remember that economic and government policies are fluid and subject to change, but business fundamentals based on quality, resiliency and adaptability always prevail.

Please rest assured that we, too, are confident, conscientious, and adaptable as we navigate the volatile investment landscape.

If you have any questions for us, please feel free to let us know.

Warm regards,

Woon Ai on behalf of Woon Ai Tsang Wealth Management Group