Q – With Trump’s tariff increase policy and a weakening Canadian dollar, will it be better to invest in US stocks/ETFs in US dollars? On the Canadian side, which sectors will benefit in such an environment? – M.M.
A – The Canadian dollar is at its lowest level in four years and is vulnerable to further losses if Mr. Trump hits Canada with his America-first tariff policies. Clearly, the market sees it as a risk. Owning US-dollar denominated securities will provide protection against a further drop in the loonie, but remember this is a two-way street. If the Canadian dollar recovers, you’ll face a foreign exchange loss.
As for the second part of your question, no one really benefits from tariffs but there are some sectors that probably won’t feel much impact. Remember that Trump’s primary concern is to protect or create domestic jobs. Imposing tariffs that don’t achieve that does nothing but drive up costs and fuel inflation.
That suggests that Canadian natural resources that are scarce in the US or that are strategically important to Washington should not be affected by Trump’s tariffs. Oil is an example.
Gold is another sector that should be immune from trade wars. The metal is priced in US dollars and jobs can only be created where there are viable deposits to be developed. Banks and insurance companies, retailers, REITs, and utilities should also see little impact from tariffs. Also, companies that are not in the manufacturing business are not normally targets for tariffs, such as international consulting firms like Stantec, CGI, and Descartes Systems. – G.P.