Canadians are monitoring their finances for any impact as president Donald Trump takes take back the reins of government in the United States.
But one of the biggest economic threats of Trump’s second term — a pledge to impose across-the-board 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 has already implied, as first reported by Wall Street Journal. Instead, he would issue a memo calling for a comprehensive review of U.S. trade, with a focus on China, Canada and Mexico, and which could see tariffs put in place at a later date.
Even with a brief reprieve from threats of tariffs, the ripple effects of Trump’s second presidency are already being felt north of the border.
Here’s what Canadians should watch for when planning their finances as Trump returns to the White House.
The Canadian dollar soared against its U.S. counterpart on Monday in response to news that Trump would not immediately impose tariffs on Canada.
Despite a gain of about 1 percent in early trading on Inauguration Day, the loonie remains just below 70 US cents. The Canadian dollar has been largely depressed since Trump’s re-election in November and remains down about 6 percent since the start of last year.
Protectionist policies such as Trump’s “America First” agenda encourage investors to flow their money into the United States and out of other countries, holding other currencies down against the U.S. greenback.
That’s bad news for Canadian travelers heading south of the border, as their dollars aren’t bringing in as much as they used to.
Personal finance expert Rubina Ahmed-Haq told Global News her family opted to stay closer to home rather than travel abroad when planning their 2025 vacation.
“We’re going to travel to Canada because it means we know we have expectations and predictability about the value of our dollar,” she says.
For those feeling the need to leave Canada this year, Ahmed-Haq says it might be a good time to book a trip to an all-inclusive resort, rather than taking an excursion to American hotspots like New York. This can help reduce the number of purchases made in U.S. dollars and the amount travelers pay in foreign transaction fees.
Canadian businesses are also feeling the effects of a weaker loonie and the uncertainty of a second Trump presidency.
A potential trade war between Canada and the United States could result in tariffs being imposed on both sides of the border, increasing cost pressure on companies importing a variety of products from the United States.
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The Bank of Canada said in its Business Leaders Pulse survey released Monday that about 40 percent of businesses said they expected negative impacts due to the new U.S. administration, while a third said It was too early to tell. The increase in input costs is the impact most often cited in the survey.
“If these tariffs are introduced, companies will do what they do: they will unfortunately pass this on to the consumer,” says Ahmed-Haq.
A weak loonie also makes it more expensive for Canadian companies to buy from American suppliers. Motor vehicles imported from the United States are one sector in which Canadian consumers could see their prices increase due to the weak dollar and possible trade disputes.
Canadians will also notice the pain of a weaker loonie at the grocery store, particularly in winter, when many fresh fruits and vegetables are imported from warmer states.
For this reason, Ahmed-Haq says locally produced purchases could be more important under a second Trump administration. But she adds those choices could become more of an option for Canadian consumers during the summer months.
If Trump decides to exercise his tariff powers in disputes with China, Ahmed-Haq warns that some products from Chinese suppliers could also become more expensive in Canada to offset the impact of U.S. restrictions. That could limit consumers’ savings on the types of typically inexpensive products 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 embrace a business-friendly agenda that could be bullish for stock market gains this year.
During Trump’s inaugural speech, stock futures were trading higher, with contracts on the Standard & Poor’s 500 Index, the Nasdaq 100 Index and the Dow Jones Industrial Average trading between 0.4 and 0 .5 percent.
Canada’s benchmark S&P/TSX jumped 0.7 percent Monday morning before paring some of those gains.
“While we believe some degree of volatility will persist for some time, we expect his first year in office to coincide with a further rise in the U.S. dollar and U.S. stocks,” said James Reilly, an economist Principal of Markets at Capital Economics. .
Since Trump’s re-election, banking stocks and cryptocurrencies in particular have seen their prices soar on hopes of deregulation and possible tax cuts during his second term.
Allan Small, Senior Investment Advisor at iA Private Wealth Management, told Global News earlier this month that, despite the weak loonie, Canadians should increase their exposure to the United States, which he called “the best place in the world to invest today.”
Economists warned as Inauguration Day approached that the Canadian economy would tip into a recession if the tariffs threatened by Trump were passed.
Desjardins forecasts that inflation would rise to 3% and that the unemployment rate would reach levels not seen since the COVID-19 pandemic.
Ahmed-Haq said Canadians working in industries or fields that may be particularly vulnerable to the new Trump regime’s restrictive trade policies should prepare for the turbulence of the year ahead.
This includes sectors such as the automotive, steel and aluminum industries or cities like Windsor, Ontario, whose economies depend on their proximity to the U.S. border.
“If businesses can’t scale and if they find it difficult and expensive to trade across borders, that will certainly impact people’s jobs in Canada and their ability to get a pay raise, because that company is not I’m not going to make that much money,” she said.
While there are still plenty of reasons to worry under the Trump administration, Ahmed-Haq says Canadians should remember how much of their spending, saving and economic prospects are based on domestic factors. Even if tariffs were ultimately implemented, prices would not increase “overnight,” she said.
“I think we need to calm down a little. I think a lot of us are really worried. I think we still have a lot of control over most things.
– with files from Reuters