Tariff turmoil could continue for months. Here are five suggestions for what to do with your money

Globe and Mail

5 days ago

There are two things that give Donald Trump fits these days.
The first is adverse court rulings. There have been several, ordering the roll-back of some of his most controversial executive orders. The biggest one came last week when a three-judge panel of the New York-based Court of International Trade ruled that many of his tariffs exceeded the authority granted to him under the International Emergency Economic Powers Act. These included the so-called 'fentanyl and border tariffs' aimed at Canada, Mexico, and China, and the reciprocal tariffs announced April 2, the so-called 'Liberation Day'.
A day after the Trade Court ruling, an appeals court ordered a stay that will allow the U.S. government to continue collecting the disputed tariffs until the legal process plays out. But that didn't stop the White House, which is appealing all the negative verdicts, from reiterating that judges should not be allowed to overturn federal government policies. Mr. Trump has even suggested impeaching judges who have ruled against him, prompting a rare public rebuke from Supreme Court Chief Justice John Roberts.
Mr. Trump's other pet hate these days is business leaders who suggest his beloved tariffs will increase consumer prices and exacerbate inflation. He has always tried to maintain the fiction that tariff costs are borne by the exporting countries rather than U.S. businesses and consumers.
Recently, he was outraged over a report that Amazon.com Inc. (AMZN-Q) was going to display the cost of tariffs alongside the prices of items on its website, a move his press secretary described as 'a hostile and political act'. The plan was squelched after Mr. Trump got Amazon founder Jeff Bezos on the phone and gave him an earful.
Since the Amazon incident, many business leaders have tried to keep a low profile when it comes to tariffs. Home Depot's chief financial officer said recently the company will not raise prices due to tariffs.
Customers should take that statement with a large grain of salt. Lumber, steel, and aluminum have already been hit with tariffs and the company should expect to see higher prices for many more foreign-sourced items including lighting and electrical components. Home Depot (HD-N) imports many of its products from China and, while it is trying to diversify its sources, it may be difficult to do so.
The result could be a squeeze at both ends. Many of Home Depot's customers are professional tradespeople and contractors. They tend to be particularly price-sensitive because they buy in large quantities and often work on fixed budgets.
While Home Depot is staying under Mr. Trump's radar, Walmart is being straight-up about what's going on. During the company's recent earnings call in mid-May, CEO Doug McMillon said Walmart won't be able to absorb all the additional costs 'given the reality of narrow retail margins'.
Predictably, Mr. Trump reacted angrily, telling Walmart in a Truth Social post to 'EAT THE TARIFFS' and hold the price line. That's not easy when your profit margin is 2.75 per cent, as Walmart's was in April, according to The Wall Street Journal.
Boiling it all down, we're left with probability that the turbulence and uncertainty created by the President's attempt to reconfigure global trade is going to drag on for months, if not years. Mr. Trump is unlikely to back down from his position, although he may soften it somewhat over time. His opponents will continue to attack by every means open to them.
For investors, this implies volatile stock markets for the foreseeable future, with huge day-to-day swings depending on Mr. Trump's latest Truth Social posting, Oval Office musing, or out-of-the-blue policy changes like his Friday announcement that he's doubling the tariffs on steel and aluminum.
So, what should you be doing with your money? Here are five suggestions.
Focus on Canada. In the past, I've advised overweighting portfolios to U.S. securities and underweighting Canada. Now keeping more of your money at home seems like a better plan. So far this year, the TSX has outperformed the S&P 500 by a wide margin and recently reached a new record high. The weak U.S. performance may reflect a stronger reaction by American investors to Trump's declarations and maneuvers, thereby increasing volatility, but the upshot is Toronto seems to be calmer than New York at present.
Add to Europe. The STOXX Europe 600 Index is performing much better than expected, with a gain of about 8 per cent so far this year. Most Canadians have little or no European exposure in their portfolios.
Reduce risk. The coming months are going to be stressful. Both Canada and the U.S. face the risk of a recession and the market volatility we've seen so far in 2025 will almost certainly continue. Low-risk investments I recommend include shares in Canada's big six banks and a significant position in a utilities ETF, such as the BMO Equal Weight Utilities Index ETF (ZUT-T), which is up 7.4 per cent this year, including distributions.
Buy gold. The precious metal thrives in uncertain times, and this is about as uncertain as it gets. The S&P/TSX Global Gold Index is ahead 41.59 per cent year-to-date.
Keep your cool. There will be times in the coming months when you may be ready to abandon the markets altogether and opt to put your money into safe GICs. Unless you are very elderly and/or can't sleep at night, that's probably not a good plan. Suck it up and ride out the storms. If you have a well-constructed portfolio, you'll come out fine.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.
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