Trump Tariffs

February 7, 2025

Financial Strategy

As I’m sure everyone is aware, 2025 could come with Economic Tariffs from our closest trading partner, the United States of America. At this time, “united” is not a word I would use to describe them. While the Electoral College showed a clear win for Donald Trump in November 2024, the total votes were very close. Many US voters didn’t vote at all. As of now, almost all of the votes have been counted. They show 77.3 million votes for Donald Trump and 75 million votes for Kamala Harris. That works out to 49.9% voting for Trump and 48.3% voting for Harris.¹ This was no landslide election like what Ronald Reagan did to his Democratic opponents in 1980 and 1984.² The United States is a very divided country and the tariffs that the current administration would like to move forward with are not popular. In fact, most Americans don’t even know what a tariff is.³ This will likely be a very confusing time for people across the continent.

So, what exactly is a tariff? According to one of my favorite websites, Investopedia, a tariff is described like this:

“Tariffs are a type of trade barrier that makes imported products more expensive than domestic ones. Tariffs typically come in the form of taxes or duties levied on importers, and they’re eventually passed on to consumers. They’re commonly used in international trade as a protectionist measure.

In simplest terms, a tariff is a tax. It adds to the cost borne by consumers of imported goods and is one of several trade policies that a country can enact. Tariffs are paid to the customs authority of the country imposing the tariff.

Tariffs on imports coming into the United States, for example, are collected by Customs and Border Protection, acting on behalf of the Commerce Department. In the U.K., it’s HM Revenue & Customs (HMRC) that collects the money. It is important to recognize that the taxes owed on imports are paid by domestic consumers and not imposed directly on the foreign country’s exports. The effect is nonetheless to make foreign products relatively more expensive for consumers, but if domestic manufacturers rely on imported components or other inputs in their production process, they will also pass the increased cost on to consumers.”

https://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp

US President Donald Trump has promised a 25% tariff on imports from Canada and Mexico. As the United States imports so much Oil & Gas from Canada, Trump plans to only add a 10% tariff on energy resources from our country. He has also threatened another 10% tariff on imports from China. Tariffs like these will cause economic pain and will create major divides between our two countries. They will further divide a number of people within our own two countries, while at the same time, bring a lot of Canadians closer together.

You may remember that a Trade Agreement called the United States-Mexico-Canada Agreement (USMCA) had been signed off between Canada, the United States and Mexico in 2018. This USMCA came into effect in 2020.⁴ At the time, Donald Trump said that “The USMCA is the fairest, most balanced, and beneficial trade agreement we have ever signed into law. It’s the best agreement we’ve ever made, and we have others coming.”⁵

Now that same president is saying “I will renegotiate to the benefit of our country,” indicating that he will not stick with his own USMCA.⁶ “We’ve been screwed by Mexico and by China and by Canada and by the European Union.” It seems that the USMCA was not the “fairest, most balanced, and beneficial trade agreement” that America had ever signed after all.

We knew that there was a serious threat that this new administration in the US could bring Tariffs in. We prepared for that with some profit-taking in 2024. We had a fantastic 2024 on the Global Stock Market. Both Canada and the United States hit numerous record highs. With the US Economy in good shape, many of us were hopeful that the threat of imposing tariffs on day one would be bluster. While this economic pressure was not put into force on January 20^th, it sounded like things would move forward at the beginning of February. On February 3, 2025, a couple of phone conversations between Justin Trudeau and Donald Trump led to a hold of at least 30 days. So, maybe we will see tariffs, maybe we won’t.

Although the Inflation Rate in Canada had got back down to 1.8%⁷, I believe we will see prices in Canada start to go back up if we do see Trade Tariffs later this year. The Canadian Government has lined up counter measures. Canada adding tariffs of our own will also raise prices on a number of items. We’ll all have to brace for that. The Canadian Government is in a mess of its own. Justin Trudeau has stepped down but is still in charge until a new leader is picked. We’ll now have to watch a Canadian Prime Minister who has a very low approval rating and who won’t even be around try to work through a Trade War. If there is any good news on this front, it’s that both of the front-runners for the next election are standing up to the United States. The leader of the federal Conservative party, and most likely to be the next Prime Minister of Canada, Pierre Poilievre, took a Canada-first position on the US tariff battle.⁸ He told reporters in Vancouver that, “there is no justification for these tariffs or this treatment” and that “Canada will never be the 51st state.” Mr. Poilievre followed that up with “Our friendship with the Americans is not based on any one politician, it is based on our centuries-long history of trade, of friendship, of common defense.” He also added “We’re already in a trade war and I believe no one will win. I think both countries will lose, and that’s my message to our American friends: Why?”

Mark Carney, who is the favorite to replace Justin Trudeau as the leader of the Liberal Party vowed that Canada is “going to stand up to a bully” after Donald Trump insisted he would impose 25% tariffs on Canadian goods.⁹ Carney is the former governor of the Bank of England and he promised that there would be repercussions after the introduction of tariffs by the USA. It does look like Canadian leaders from different political stripes will stick up for the people of our country. We’re hoping for the best in all of this.

RRSP Season, TFSA Contribution Room & Income Tax Documents

We are getting close to the RRSP Deadline which will be March 3^rd, 2025. If you are looking to add to an RRSP so that you can reduce your Taxable Income for 2024, we will need to get a Contribution in before March 3^rd. Please remember that we have a number of options for getting these contributions in. Natalie and I will help wherever we can. For those of you who have a Nominee Plan at Portfolio Strategies, you can use Online Banking to add to your RRSP. This is a quick and easy way to add to your plan. You can also contribute to a Nominee Tax Free Savings Account using this same Online Banking method. We are happy to provide guidance if you’d like to use this method. We can also debit your Void Cheque for a One Time Authorization to add money to your different plans. This typically takes a little more time for the money to settle, but it’s another route we can take. Lastly, we can still take a Physical Cheque to add to your RRSP, TFSA, RESP or any other type of account.

Remember that the TFSA Contribution Limit has gone up to $7,000 as of January last year. The Total TFSA Contribution Limit has risen to $102,000. This only applies to those who were at least 18 years old when the program was launched. Please reach out to us if you have any questions about your TFSA Contribution Room.

Income Tax Season is right around the corner. You’ll be getting Tax Slips and Financial Statements in the mail and through email over the coming days and weeks. Please remember that companies don’t have to prepare tax slips in February. A number of companies won’t start sending things out until later in March. We understand that a lot of you would like to get these documents immediately. In a lot of cases, you just can’t do that yet. If you have a Nominee RRSP or RRIF, the tax documents will be posted to your Portfolio Strategies Client Portal. If you would like, Natalie and I can get these for you and send them out. We are happy to do that, so just let us know if you’d like us to handle that for you. We will do our best to track down anything you are missing before your Income Tax Return needs to be submitted.

For those of you who bought into a Flow-Through Share Limited Partnership in 2024, you likely won’t get Tax Forms for those until the end of March. We have already got B2B Bank Statements in for those of you who have Investment Loans. We have a win with those! Make sure that you set those aside for your Tax Return. The Interest Payments on an Investment Loan can be Tax Deductible. While Interest Rates have come down a lot, these Tax Deductions can still go a long way. Make sure to use these Interest Statements on your 2024 Tax Returns!

If you hold a Non-Registered Nominee Account with a Fee For Service Arrangement, you may also be able to write off some of your Investment Costs. These costs are outlined nicely on your Annual Statements. If you hold F-Series or Exchange Traded Funds in a Non-Registered Nominee Plan, I can go over how you can use some costs for these plans to get a Tax Deduction.

I realize that this newsletter isn’t as upbeat as usual. I am an optimist at heart, and I believe we will get through this. It will likely get worse before it gets better, but we will get through this. Please reach out if you’d like to discuss anything here in more detail. Be well.

Bryce A. Borden