Although the proposed Canada-U.S. tariffs have been delayed for 30 days, we continue to monitor potential economic and market impacts on both countries.
Projected Economic Impact
The Importance of Canada-U.S. Trade
Industry-Specific Impact of U.S. Tariffs on Canadian Exports
As illustrated below, certain industries will be hit harder than others, especially those with high U.S. export dependency. Given the share of U.S. exports, it is clear that the energy sector and automobile sectors will have the largest impact:
Impact By Industry
| Total U.S. Exports 2023 | % of Total Exports | Tariff Cost @ 10% | Tariff Cost @ 25% | |
|---|---|---|---|---|
| Non Oilsands & Gas Extraction | $143B | 97% | $14.3B | |
| Automotive & Light Duty Vehicles | $53B | 95% | $13.25B | |
| Canadian Petroleum Refineries | $23B | 85% | $13.1B | |
| Crop & Animal Production | $13.1B | 32% | $3.3B | |
| Aluminum Processing | $12.8B | 93% | $3.2B |
Key Sectoral Impacts
Energy
The U.S. relies heavily on Canadian crude oil, which makes up one-third of Canada’s total exports to the U.S. While tariffs could initially cause price volatility, North America’s highly integrated energy markets limit alternative sourcing options.
Automotive
Canada’s auto industry depends on seamless cross-border supply chains. Tariffs would increase production costs, reduce demand, and hurt competitiveness in both countries.
Wider Economic Consequences
Stock Market Considerations
It is crucial to distinguish the Canadian economy from the Canadian stock market:
- Many large Canadian companies are multinational and do not rely solely on domestic revenues.
- Over 50% of S&P/TSX revenues come from outside Canada, with over a quarter generated in the U.S.
Services includes Communication Services, Financials, Health Care, Information Technology, and select industries in the Consumer Discretionary, Consumer Staples, and Industrial sectors.
Source - RBC Wealth Management FactSet data as of 12/31/24
Investment Strategy Amid Tariff Volatility
At IPC Private Wealth, our portfolios are globally diversified to manage risks, including those posed by tariffs. Our macro-economic analysis informs our asset allocation and positioning, ensuring we remain adaptable.
At the individual stock level, our sub-advisors focus on opportunities that arise when tariffs create market distortions. While tariffs may cause economic pain, some sectors and companies will benefit from these shifts. Historically, equity markets have recovered from major external shocks, including the 2008 financial crisis, the COVID-19 pandemic, and even world wars. Short-term volatility is expected, but it’s critical to avoid emotional decision-making. A well-diversified portfolio—including multiple asset classes and investment managers—remains the best defense against market instability.
You can hear more about Paul's take on tariffs between the U.S. and Canada in our 4-minute video.
Sources:
1. TD Economics: Setting the Record Straight on Canada-U.S. Trade
2. Chamber of commerce “The Cost of Canada-US Trade Disruption on Full Display with New Trade Tracker”
3. Toronto Star: These industries would be hit hardest by Trump’s 25 per cent tariffs
4. Canada.ca: Canada announces $155 tariff package in response to unjustified U.S. tariffs
5. Capital Economics “Trump hits Canada, China and Mexico with tariffs”
Disclaimers:
The views expressed in this commentary are those of Canada Life Investment Management as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Prospective investors should review the offering documents relating to any investment carefully before making an investment decision and should ask their advisor for advice based on their specific circumstances. The content of this material (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.
This material may contain forward-looking information that reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as ofFebruary 5, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise. Investment Planning Counsel Inc. is a fully integrated wealth management company. Counsel Portfolios are a family of funds managed by Canada Life Investment Management Ltd., a subsidiary of the Canada Life Assurance Company. Trademarks owned by Investment Planning Counsel Inc. and licensed to its subsidiary corporations. Mutual funds available through IPC Investment Corporation and IPC Securities Corporation.
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