On January 20, 2025, Donald Trump will be inaugurated into his second term as president of the United States. His term is widely expected to have ramifications for investors, both American and Canadian. Most obviously, Trump has pledged to slap a 10% minimum tariff on imports from all foreign nations, including Canada. Whether Trump is serious about this specific threat remains to be seen. Regardless, it does indicate an incoming administration that intends to play hardball on trade.
Speaking of trade, the expression “Trump Trade” has become a common one in financial media, referring to both Trump’s trade policies and investors buying stocks seen as gaining from said policies. The Trump trade — in both senses of the term — has implications for Canadian investors. In this article, I will explore three “Trump Trade” changes and what they mean for Canadian investors.
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Trump Trade change #1: Higher tariffs
The most obvious Trump Trade change that will impact Canadian investors in 2025 is tariffs. Trump has pledged to raise tariffs across the board. One of his more provocative threats was a 10% flat tariff rate on all non-U.S. countries. Whether Trump will implement that specific tariff remains to be seen. There is a general consensus that some of Trump’s more extreme tariff threats are intended more so as tools for negotiating leverage rather than as sincere policies. Nevertheless, Canadian investors ought to expect higher tariffs on average during “Trump 2.0.”
What are the investment implications of this?
First, Canadian companies that do business primarily in Canada would seem to be favoured over those that export to the US. There are exceptions–for example, companies that supply essential tariff-exempt goods — but in general, exporters to the U.S. probably won’t fare well if Trump enacts the expected policies.
Second, exporters to countries other than the U.S. should fare better than exporters to the U.S. for similar reasons. Many Canadian oil, mining, and fertilizer companies fit this description.
Trump Trade change #2: Fewer banking regulations
A second Trump change coming in 2025 is fewer banking regulations. Donald Trump has consistently pushed for deregulation in the banking sector, and he is expected to continue with this in his second term.
This Trump policy would be a positive for Toronto-Dominion Bank (TSX:TD) if implemented. Toronto-Dominion Bank took a $3 billion fine and a $430 billion asset cap this year because the U.S. Department of Justice (DoJ) found it to have violated various anti-money laundering laws. Such laws are expected to be weaker in Trump’s second term. That won’t be a positive for the U.S., in this author’s opinion, but it will be a positive for TD, which is still under the regulators’ watchful eyes.
Trump Trade change #3: “Buy American”
A third Trump Trade change will impact Canadian investors who own U.S. stocks: The “Buy American” campaign.
President Joe Biden introduced “Buy American” as a policy priority in his term, requiring U.S. Federal departments to buy from U.S. companies. This policy will be expanded in Trump’s second term. So, U.S. companies that supply goods to the U.S. government — car manufacturers, software companies, defence contractors — could get a boost in Trump’s second term.
Foolish takeaway
Trump 2.0 will pose challenges to Canada, but there are ways for investors to deal with the challenges. By focusing on companies with a domestic focus, investors can navigate the likely volatility ahead. And, of course, there’s always the possibility of investing in U.S. stocks.
