Opinion: Trump might be telling the truth

If U.S. president-elect Donald Trump’s first term is an indication, his threat to impose a 25% tariff on Canadian products is a tactic designed to tee up a renegotiation of the Canada-United States-Mexico Agreement (CUSMA), scheduled for 2026. But that doesn’t rule out implementation of a tariff, even if it is for a short time.

Much has been made of the fact that Trump signed the CUSMA during his first term, and that Robert Lighthizer, his first-term U.S. Trade Representative has been tapped to return next year in the same role. Conventional wisdom has held that given the deal’s popularity, Canadians can feel confident about it being renegotiated as scheduled.

Still, Trump made a habit of threatening tariffs on Canada while in office — including a 30% levy on automobile exports. His promise to apply 25% and 10% tariffs on Canadian steel and aluminum, respectively, were in fact implemented in 2018. Canada responded with retaliatory tariffs of its own. Both countries later lifted their tariffs.

This time around, the president-elect’s cabinet picks signal a preference for loyalty over experience. He seems genuinely to believe that tariffs will be good for the U.S., both in terms of their stimulative effect on the domestic economy and as a punishment against countries out of step with his America First agenda. There’s also an important political reality — Trump need not worry about re-election.

As the saying goes, the president-elect should be taken seriously, but not literally.

“We should take him very seriously,” said Francis Gingras Roy, a senior investment advisor with Manulife Securities and author of The Investment Revolution: How To Take Control Of Your Financial Future.

Roy said that an across-the-board 25% levy could hit multiple sectors of the Canadian economy hard and beat up our loonie in the process. “A weaker Canadian dollar could partially offset the tariffs’ negative impact on exporters, but it could make imports more expensive.”

We have entered another one of those teachable moments, in which clients get anxious watching the news and start mapping out bad moves. The challenge is how to reinforce the right long-term behaviours without overusing platitudes about time in the market versus timing the market.

Get out ahead of it, said Roy.

“Be present with your clients, either through a webinar, sending out a video, sending out an email, explaining what’s going on and that you cannot predict if it’s going to happen or not,” he said.

And if the client persists on reacting, “Document every discussion you have,” said Roy. “At the end of the day, it’s the client’s money. He’s allowed to do whatever he wants. … Humans are full of emotion. This is where our role is the most crucial — when things go south.”

Solid advice. There’s a degree of geopolitical risk at play in the weeks and months ahead that has the potential to move markets and derail financial plans. You can make a difference.