September 2025 LifeSpring Insights

The second Trump administration is only seven months old, but it feels like we’ve been talking about it – and the Canada/US trade conflict – for years now. The dispute recently entered a new chapter. Below we’ll look at how (and if) investors should respond.  

Tariffs 101

Before we go further, let’s state upfront that, despite claims to the contrary, tariffs are paid by the importing company. In the case of American firms, they pay the tariff to the US government when the goods enter the US. But a tariff’s effect on consumer prices isn’t straightforward, as we’ll see shortly.

This brings us to a recent change in the Canada/US trade standoff: Prime Minister Mark Carney has said Canada will remove tariffs on US goods that comply with the Canada-US-Mexico Agreement (CUSMA). This lines up with US tariffs on Canada, which also exempt CUSMA-compliant goods. Carney has said this move will ease negotiations with the US.  

Canadian goods will likely face higher US tariffs in the future

Over the last few months, some countries, like Japan, the UK and European nations (through the EU), have negotiated deals that tell us something else: In the longer run, Canada is unlikely to go back to having the mostly tariff-free access to the US it enjoyed in the past.  

The US deals with these nations show that the administration appears to be focused on three things:

1. Cutting imports into the US through tariffs, with UK goods tariffed at 10% and the EU, South Korea and Japan at 15% (though some products are exempt).  
2. Getting pledges from countries to invest in the US. How this will work is unclear, as countries can’t force their businesses to “buy American.” Nonetheless, the EU has pledged US$600 billion, Japan has offered US$550 billion, and South Korea has committed to US$350 billion.
3. Generating revenue for the US government through tariffs, in hopes of narrowing the government’s nearly US$2-trillion budget deficit. 

Operation Save CUSMA

Back to Canada, whose strategy appears to be to do whatever it can to keep access to the US market through CUSMA – if not tariff-free, then at least at a lower rate than other countries.  

Meantime, the Carney government is likely to wait and see what happens with other nations until scheduled CUSMA renegotiations begin in 2026. Canada is also likely to try to get some tariff relief for industries most harmed by US tariffs now – like lumber, cars, steel and aluminum.

Between now and then, expect Canada to keep boosting trade with other nations, helping blunt the effect of US tariffs and giving Canadian negotiators more leverage at the CUSMA table. As for what could happen at that table, it’s too early to tell. Mexico, for example, has said little about its approach to CUSMA. And of course, we don’t know anything about any back-channel talks that may be occurring between the three nations.

Finally, if in July 2026, when talks are slated to begin, the US is still on a path of making one-off deals and building a tariff wall around its economy, investors should be prepared for the possibility that CUSMA could come to an end.  

What would happen then? Any country can withdraw from the agreement six months after giving the other two written notice. The treaty also has a review clause, under which the three countries go over the deal every six years and decide to either extend it for another 16 years or, if one of them refuses, wind it up over the coming 10 years (though they can still extend CUSMA during this time).

Stocks really do climb a wall of worry

There are obviously a lot of moving parts here, and it will take a while yet before we have much clarity. Along the way, we’re nearly certain to see more stock-market volatility.  

What should investors do? First, bear in mind that stocks can keep rising despite bad news – hence the old Wall Street adage that markets climb a “wall of worry.” We’ve seen that in response to the Ukraine War, Middle East tensions, the US election and recent worries about an AI bubble.

So it’s possible equities could rise further, or only pull back slightly before rising again.

Moreover, several US tariffs face legal challenges. If these lawsuits are successful, many of these levies could be struck down. That would likely ignite a rally in US stocks (though the administration would almost certainly look for other ways to sustain its tariffs).

Canadian, BC economies go well beyond US trade

There are other strengths that could help Canada weather the trade storm, as well. Governments are focused on cutting interprovincial trade barriers, for one. Estimates of the value of these moves vary, and will take time to show up, but this would be a net benefit.  

Higher defence spending – which could hit $150 billion yearly by 2035 as the government works toward NATO’s benchmark of 5% of GDP – could also spark the economy. In addition, services (which are unaffected by tariffs) make up around 70% of Canada’s GDP.  

But, yes, despite these strengths, a baseline US tariff would result in job losses, especially in manufacturing. We can see this in the unemployment rate of Windsor, Ontario, the heart of the Canadian car business: a nation-leading 11.2% at the time of writing.  

But the story isn’t the same across the country: BC, for example, sends more of its exports to Asia than most provinces do. Its economy is also more service- and tourism-heavy. Both of these give the province something of a hedge. But even so, about 50% of BC exports still head south (including, of course, lumber), so we’re not fully immune, either.  

Your financial plan: a shield in the trade war

In investing, it pays to remember that market-triggering events can happen any time – no matter who’s in office in Washington, DC, and what their policies are.  

So if you developed your financial plan, say, five or 10 years ago, and it’s still relevant today, it makes sense to stick with it – despite trade wars, interest rates, stock bubbles or whatever dominates the headlines on any given day.

If your situation, goals or risk tolerance have changed, though (or if you don’t have a plan), we recommend speaking to your financial advisor. They can help you build a plan that keeps you on track – and gives you vital peace of mind, too.