Canadians are monitoring their finances for any impacts as President Donald Trump regains the reins of government in the United States.
But one of the biggest economic threats of Trump’s second term — a pledge to impose sweeping tariffs on goods entering the United States from Canada and other trading partners — appears to have been postponed.
These tariffs will not be implemented on Trump’s first day in office, as the president once said, As I mentioned for the first time before Wall Street Journal. Instead, he will issue a memorandum calling for a broad review of US trade with a focus on China, Canada and Mexico, which could see tariffs imposed later.
Even with a brief reprieve from the threatened tariffs, the ripple effects of a second Trump presidency are already being felt north of the border.
Here’s what Canadians should watch to plan their finances as Trump returns to the White House.
The Canadian dollar rose compared to its US counterpart on Monday in response to news that Trump would not impose tariffs on Canada immediately.
Despite its gain of about one per cent in early trading on Inauguration Day, the Canadian dollar is still just under 70 US cents. The Canadian dollar has been considerably lower since Trump’s re-election in November, and is still down about six per cent from the beginning of last year.
Protectionist policies, such as Trump’s “America First” agenda, encourage investors to flow their money into and out of the United States, holding other currencies against the US dollar.
This was bad news for Canadian travelers heading south of the border, as their dollars weren’t buying as much as they used to.
Personal finance expert Rubina Ahmad Haque told Global News that her family chose to stay close to home rather than travel abroad while planning their 2025 vacation.
“We will travel to Canada because it means we know we have expectations and predictability when it comes to how far our dollar will go,” she says.
For those feeling the need to get out of Canada this year, Ahmad Haque says this might be a good time to book a trip to an all-inclusive resort, rather than taking a trip to American hotspots like New York City. This can help reduce the number of purchases made in US dollars and the amount travelers pay in foreign transaction fees.
Canadian businesses are also feeling the pinch of a weaker Canadian dollar and uncertainty about a second Trump presidency.
A potential trade war between Canada and the United States could result in tariffs on both sides of the border, increasing cost pressures on companies that import a variety of goods from the United States.
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The Bank of Canada said in its survey of business leaders published on Monday that about 40 percent of companies said they expect negative impacts due to the new US administration, while a third said it is too early to tell. Higher input costs were the most common impact cited by the survey.
“If these tariffs are imposed, companies will do what they do: they will pass that on to the consumer, unfortunately,” says Ahmad Haque.
The weak Canadian dollar also makes it more expensive for Canadian companies to buy from American suppliers. Cars imported from the United States are one area where Canadian consumers could see prices rise due to a weak dollar and potential trade disputes.
Canadians will also notice the pain a weaker Canadian dollar causes at the grocery store, especially in the winter, when many fresh fruits and vegetables are imported from warmer states.
That’s why Ahmad Haq says locally grown shopping may be even more important under a second Trump administration. But she adds that these options may just become an option for Canadian consumers during the summer months.
If Trump decides to use his tariff powers in disputes with China, Ahmad Haq warns that some goods sourced from Chinese suppliers could also become more expensive in Canada to offset the impact of US restrictions. That could limit consumers’ savings on the types of inexpensive goods typically purchased at dollar stores in Canada, she says.
U.S. markets were closed Monday for Martin Luther King Jr. Day, but investors widely expect Trump to enact a pro-business agenda that could be bullish for stock market gains this year.
During Trump’s inauguration speech, stock futures traded higher, with contracts on the S&P 500, Nasdaq 100 and Dow Jones Industrial Average trading higher between 0.4 percent and 0.5 percent.
Canada’s benchmark index, the S&P/TSX, rose 0.7 per cent on Monday morning before paring some of those gains.
James Reilly, chief markets economist at Capital Economics, said: “Although we suspect a fair degree of volatility will continue for some time, we ultimately expect his first year in office to coincide with further rise in the US dollar and US stocks.” “. .
Since Trump’s re-election, banking stocks and cryptocurrencies in particular have seen their prices rise amid hopes for deregulation and potential tax cuts in his second term.
Alan Small, senior investment advisor at iA Private Wealth, told Global News earlier this month that despite the weakness of the Canadian dollar, Canadians should increase their exposure to the United States, which he described as “the best place in the world to invest today.”
Economists warned in the run-up to Inauguration Day that the Canadian economy would slide into recession if the tariffs threatened by Trump were implemented.
Desjardins expects this outcome to lead to inflation rising again to three percent and the unemployment rate to reach levels not seen since the Covid-19 pandemic.
Ahmed Haq said Canadians working in industries or fields that may be particularly vulnerable to restrictive trade policy under the new Trump regime should prepare for disruptions in the coming year.
This includes sectors such as the automobile, steel and aluminum industries or cities such as Windsor, Ontario, which depend economically on their proximity to the US border.
“If companies can’t scale up and if they find that doing cross-border trade is cumbersome and expensive, that will definitely have an impact on people’s jobs in Canada and their ability to get a raise, because that company isn’t going to make a lot of money,” she says.
While there is still plenty to worry about under the Trump administration, Ahmad Haque says Canadians should remember how much of their spending, savings and economic prospects depend on local factors. Even if tariffs are eventually implemented, prices will not rise “overnight,” she says.
“I think we need to calm down a little bit. I think a lot of us are really anxious. I think we still have a lot of control over most things.”
– With files from Reuters
