With U.S. President Trump’s proclaimed “Liberation Day”, many Canadians may be breathing a sigh of relief with the realization that we largely avoided tariffs on much of our exports to the US. With Canada and Mexico mostly spared, the implications in North America and abroad are still filtering through markets, with expected continued volatility in trade relations and markets in the months ahead.

At Momentum Wealth of Aligned Capital Partners, we often talk about ‘investible trends’ with clients, which we define as fact-based, researched investment opportunities that we are constantly seeking to find the next dollar of growth. This ‘North Star’ for our investment process helps focus our research on long-term, sustainable growth versus flavour-of-the-month investments, and ultimately lowers investment risk.[i] Today’s plethora of asset classes requires a process built on intellectual integrity to make good decisions, and with Trump’s announcements yesterday, we have been parsing through these opportunities to reposition portfolios as needed.

What Happened?

Trump has referred to the most recent tariffs as ‘reciprocal’, and on April 2, 2025, his administration unveiled what they will apply to imports from countries they accused of tariffing US goods, manipulating currency in their favour, and limiting US commerce with non-financial trade barriers.[ii]

Trump’s announced tariffs range from a minimum 10% on all imported goods to 49%.[iii] Below are some key details of tariffs taking effect April 3, 2025:

  • Canada & Mexico: 0% tariffs on any USMCA-compliant goods, 25% on non-compliant goods with a reduced, 10% tariff on non-compliant energy and potash.
  • Vehicles: For vehicles manufactured outside of the US, 25% tariff on non-US produced components. For vehicle parts, tariffs begin May 3. For USMCA-compliant parts, they will remain exempt from tariffs until a yet-to-be-announced future date.
  • Canada’s Exposure: an estimated 40% of goods exported to the US are USMCA-compliant, which includes our energy as the largest line item. It’s expected that approximately 80% of Canadian goods sold to the US could be compliant in relatively short order with the completion of compliance recognition processes.

Immediate Market Reactions

Global markets responded swiftly to the announcement. Major U.S. indices, including the NASDAQ, S&P 500, and the Dow Jones experienced notable declines, while traditional safe-haven assets like gold saw price surges. Markets in Europe and Japan also closed lower following the announcements, with industries most impacted showing the largest declines.[iv] Additionally, U.S. Treasury yields fell, indicating a shift towards safer investments. Analysts anticipate that these tariffs could dampen U.S. economic growth and elevate inflation, complicating the U.S. Federal Reserve’s policy decisions.[v]

What We are Watching

The full implications of these tariffs are yet to be seen, especially as trade partners of the US begin to respond. Here are a few things we are keeping an eye on:

  • Inflation & Stagflation: in much of the investible world, we have seen inflation easing following the spike in global inflation in 2023. Tariffs and trade barriers cause inefficiency in the global economy, and with higher costs we want to ensure inflation doesn’t creep up again, reversing interest rate policy that has been in decline.[vi] Long-term, tariffs can be deflationary as reduced trade efficiency can lead to decreased economic activity driven by lower consumption.[vii]
  • Unemployment: we anticipate an uptick in unemployment in both the US and globally as business leaders realign their businesses to the new environment and potentially experience a decrease in sales.
  • Capital Reconfiguration: from the beginning of Trump’s tariff threats, there has ben a lot of capital movement inside of US markets and the repatriation of capital from the US into investor’s home countries.[viii] While this has largely subsided, investors now need to absorb this.
  • Geo-Politics: while we anticipate a whirlwind of horse-trading with the US, we also are seeing a change in the mindset of private and public sectors in many countries that have been ‘sleeping’ for some time. A great example is Norway’s sovereign wealth fund – the largest in the world – that is reconsidering it’s investment policy disallowing allocations to arms manufacturers.[ix]

 

What Should You Do?

It’s important to note that there are still a lot of unknowns surrounding these tariffs, the most significant of which are if Trump intends to keep these policies in place permanently or for how long. With this in mind, we anticipate a lot of business leaders will continue holding off on major decisions until necessary. In other words, panicked decision-making with regards to long-term investments rarely pays off, and typically, those that can capitalize on panic are rewarded.

For our clients, we have been concerned about US inflation prior to Trump’s second term and positioned accordingly leading into 2025. Furthermore, we have also been concerned about the valuations of large-cap US stocks and have built positions outside of the US and in mid-cap size US companies where valuations have been much more attractive.[x] While it is still too early to determine what the clearest opportunities are as countries and businesses formulate their responses, we are always on the lookout for assets that appear to be significantly undervalued for tactical allocations.

For investors, three questions can help clarify the positioning of your investments:

  • When do I need the money in my portfolio, and how much will I need?
  • Have the assumptions that my portfolio is built on changed?
  • Have my personal circumstances changed my tolerance of risk?

While the world may have hoped for a different outcome, we are confident that markets will absorb this better than the uncertainty Trump has provided since starting his second term and we remain vigilant to any pivoting that is required in our clients’ portfolios.

We encourage you to reach out to us if you have any questions or concerns.

 

References

[i] Benefits of Holding Stocks for the Long Term

[ii] Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits – The White House

[iii] Trump’s reciprocal tariffs: How much will each country be hit? | Donald Trump News | Al Jazeera

[iv] Global stocks slide as Trump tariffs hit markets

[v] US 10-Year Yield Drops Below 4% for First Time Since Trump Won – Bloomberg

[vi] IMF’s view: The global fight against high inflation is ‘almost won’ | The Associated Press

[vii] Are Tariffs Inflationary Or Deflationary? Are They Really ‘A Beautiful Thing?’

[viii] Investors spy the dawn of a tectonic shift away from US markets | Reuters

[ix] Norway urged to let mega wealth fund take stakes in weapons makers

[x] US Stock Market Outlook: Where We See Opportunities… | Morningstar

 

 

 

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