Trump's second term is less than two weeks away and 25% tariffs are threatened
Canadian investors are weighing the potential impact of a trade war with the United States as the new Trump administration prepares to enter the White House.
With 25% tariffs threatened on goods including vehicles, pharmaceuticals, and natural resources, the harm to Canadian exporters would be substantial – and Ottawa is drawing up plans to fight back with retaliatory tariffs on an extensive list of US goods.
“People are nervous, people are concerned,” Allan Small, senior investment advisor at IA Wealth told BNN Bloomberg, but he added that President Trump often scales back from tough talk and may do this time “because we know that tariffs will hurt the United States as well.”
Small says concerns raised by his clients often stem from emotion with political bias affecting their investment decisions which he says you can’t do. He said investors should focus on fundamental analysis. For example, under the previous Trump administration markets went higher and they did again when he was re-elected.
He noted that Trump uses the stock market as a barometer of the success of his policies. “Will he enact policy to hurt the stock market – I don’t think so,” Small said. But he acknowledged that there may be market volatility initially.
Asked about the Canadian stock market, especially with the potential for Canadian tariffs on US goods, Small says it would not take much to tip the economy into recession.
“If there is a trade war, if businesses are finding it difficult to export to the US… there’s going to be a lot of businesses affected. Banks will be affected. Any kind of trade war would not be good,” Small stated.
Small says he confident that Trump will want to avoid a trade war with Canada but the question is when negotiations to avoid that will take place.
For now, the Canadian government is drawing up an extensive list of retaliatory tariffs on US goods with one version reportedly comprising every item imported to Canada.
