The Trump announcement of Canadian tariffs is a risk to consider, writes Peter Watson.
President elect Donald Trump shocked Canadians by announcing Canadian goods exported to the US would be subject to a 25% tariff.
This was his way of getting everybody’s attention and highlighting things he wants Canada to do to avoid the tariff. That led to instant communications between Canada and Trump.
While those talks continue, it is reasonable for each Canadian to assess the financial harm new tariffs might cause.
Most at risk are Canadian companies that have a significant number of sales to the US market. A significant tariff would make Canadian exports more expensive and result in American customers looking to other suppliers outside of Canada that could provide the same goods without the cost of a tariff.
That would be devastating for those companies. Suddenly, losing sales would result in many companies going out of business. Bad for the business owner and bad for all the employees that would lose their jobs.
The next potential risk is to investors who own shares in Canadian companies. The shares could be owned directly or via a mutual fund investment.
An investor with a very small fraction of their assets in Canada does not face much risk. That is one of the advantages of having an internationally diversified portfolio, which in my opinion is the safest way to invest.
Some investors have far too much money invested in Canadian companies. I think this is a mistake. The threat of tariffs could motivate an investor to take a more balanced perspective and reduce over concentration in our home market.
This should involve a conversation with your financial advisor to fully understand all the implications of rebalancing your portfolio including any capital gains taxes that might be triggered.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com
