As neighbours and trading partners, Canada and the United States have deeply intertwined economies. When the U.S. government imposes new tariffs (essentially taxes on imported goods), it doesn't just affect American consumers; Canadians are likely to feel the effects too. Global headlines can feel far removed from your day-to-day life. However, these policy changes can trickle down to your wallet in very real ways.
Let’s take a moment to understand what’s happening and how you can prepare your finances to weather the oncoming tariff storm.
A Quick Primer: What Are Tariffs?
Tariffs are taxes placed on goods imported from other countries. Governments typically use tariffs to protect domestic industries or respond to trade disputes. For example, if the U.S. places tariffs on Canadian steel or technology components, the cost of those products increases for American buyers. The intention on the part of the U.S. Government is to encourage Americans to purchase American-made goods instead. That can affect cross-border trade flows, employment, and pricing on both sides of the border.
If the U.S. introduces or increases tariffs, especially on key Canadian exports like lumber, metals, or agricultural products, it can lead to reduced demand for Canadian goods. That, in turn, may affect our economy, affecting jobs, consumer prices, and even the value of the Canadian dollar.
How Could This Affect Canadians?
Of course, with the U.S. tariffs comes potential counter-tariffs – Canada imposing our own tariffs on U.S. imports. Here are a few key areas where you might notice a change:
- Higher Prices: Goods that are produced or partially produced in the U.S. or rely on U.S. materials may become more expensive in Canada due to counter-tariffs, disrupted supply chains, and higher costs of production.
- Fluctuating Currency: The Canadian dollar may weaken relative to the U.S. dollar, which can make U.S. imports (like vehicles or tech gadgets) more expensive.
- Investment Market Volatility: Trade uncertainty often disrupts financial markets. If you have investments, you may notice more volatility in your portfolio.
- Job Market Effects: Industries tied to exports or manufacturing may face challenges, which could affect employment levels or wage growth, particularly in Ontario with our large manufacturing and agricultural sectors.
While these impacts may feel unsettling, the good news is there are proactive steps you can take to weather this economic moment.
Practical Steps to Protect Your Finances
Here are some practical strategies to help you and your family prepare and respond wisely.
1. Revisit Your Budget
Start by reviewing your monthly budget. Look for areas where you can reduce discretionary spending or build a cushion for potential cost increases in goods or services. Small shifts now can make a big difference in the months ahead.
2. Build or Strengthen Your Emergency Fund
A strong emergency fund is a cornerstone of financial resilience. If you’re able, aim for 3–6 months’ worth of essential expenses saved in a high-interest savings account. It’s a practical way to cushion yourself against market volatility and maintain peace of mind.
3. Diversify Your Investments
Market ups and downs are normal, and diversification can help smooth the ride. It’s also important not to panic. We’ve already seen a few dramatic ups and downs in this current trade dispute and will likely see more. If you’re unsure how tariffs might affect your investment portfolio, consider meeting with a financial advisor. At Kindred, our Wealth and Investment team can offer you sound advice with your particular needs in mind.
4. Support Local and Canadian-Made Products
When possible, buying Canadian-made goods can help sustain local businesses and reduce reliance on imported goods subject to tariffs. It's also a meaningful way to align your spending with your values—fostering economic resilience in your own community.
5. Stay Informed, Not Overwhelmed
Although knowledge is empowering, constant headlines can create anxiety. Choose reliable, balanced news sources and set healthy boundaries around your media consumption. Focus on what you can control.
We’re Here for You
At Kindred, we walk alongside our members through every season of life including those shaped by economic or political upheaval. If you have questions about your financial plan or would simply appreciate a listening ear, we invite you to connect with a member of our team. Whether in branch or online, we’re here to help you Make Peace with Your Money®.