Quick shot: Navigating trade winds

Over the weekend, President Donald Trump signed executive orders signaling new tariffs: 25% on goods from Mexico and Canada (with a reduced 10% tariff on Canadian energy imports) and an additional 10% on goods from China. The White House has stated these measures aim to address existing immigration and drug trafficking concerns. However, on Monday, the U.S. granted Mexico and Canada a 30-day postponement of new tariffs with the hope that sustainable deals can be negotiated. Progress on tariffs provided some initial relief to global equity markets. As of now, the expectation is that tariffs on China will begin on February 4. Mexico, Canada and China have all individually hinted at possible retaliatory measures if a deal cannot be reached.

If the proposed tariffs are eventually implemented, they will cover about $1.4 trillion of U.S. imports, or roughly half of all U.S. imports. While we had initially factored in additional tariffs on China into our 2025 outlook, sustained tariffs on Mexico and Canada could contribute to slower economic growth and modestly higher inflation in the U.S. than initially anticipated. The impact of sustained tariffs could be challenging for Mexico and Canada’s economies, as a significant share of their exports are to the U.S. What’s clear is that trade policy uncertainty is likely to persist and that could create choppy waters for investors.

But just as a skilled navigator relies on a sturdy vessel to weather rough seas, a well-diversified portfolio can help navigate market volatility. Spreading investments across various geographies and asset classes can help provide a ballast against the unpredictability of global events.

All market and economic data as of 02/03/25 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.

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