Update on Tariffs – Potential Impact & Market Outlook

Over the past few days, headlines have been dominated by tariffs, the market response, and a lot of speculation.

What is a tariff, and who pays it?

At its simplest level, tariffs are taxes placed on goods made overseas that are imported into the country. Foreign companies are not responsible for paying the duties. Instead, the businesses of the country that imposes the tariffs are responsible to pay the tariffs on their imported goods to the federal government.

Why would President Trump implement tariffs?

The threat of tariffs is a tool to secure international objectives. Listen carefully to what Trump is demanding: Border Security, Reduction in Illegal Immigration & Drugs, Reduce Foreign Protectionism, Reduce US Military Burden. Tariffs are also revenue-generating and a tool to fund tax cuts.

How has the market reacted?

The initial response was lower stock prices. Bonds remained neutral to positive. The US Dollar increased. The S&P 500 finished the day down just 0.76%. Markets recovered as Mexico and Canada responded with delayed implementations.

Portfolio Positioning

We do not invest solely in Canada, and diversify globally to minimize the impact of political events like this. We favour US markets—the US is a fairly closed economy, is less reliant on trade and has the greatest earnings momentum. Our outlook for 2025 remains positive, but with greater volatility compared to 2024.