With new tariffs affecting US-Canada trade, many Albertans are wondering how these economic shifts could impact their investments. Trade disputes create ripple effects across the economy, influencing stock market performance, interest rates, inflation and currency values.

While uncertainty can make markets feel unpredictable, history shows that investors who stay informed and take a long-term approach tend to navigate volatility more successfully. We’re here to help you make sense of these changes and adjust your investment strategy accordingly.

How tariffs influence investments and the economy

Tariffs affect investment markets in multiple ways, often leading to short-term volatility and longer-term economic shifts.

When tariffs are introduced, the impact on stock prices can be both immediate and long term. Many Canadian sectors—including energy, agriculture, and manufacturing—may experience increased volatility as businesses assess the impact of higher costs and potential supply chain disruptions.

Beyond the stock market, tariffs can contribute to inflationary pressures by increasing the cost of imported goods. If inflation rises too quickly, the Bank of Canada (BoC) may raise interest rates to stabilize prices, which can affect borrowing costs and bond markets.

However, if trade tensions lead to slower economic growth, the BoC could lower interest rates to stimulate spending and investment. A recent analysis, from ATB’s Economics team, suggests that if tariffs persist, the BoC may move aggressively, lowering rates to 2.0% by mid-year and potentially as low as 1.5% by year-end.

For investors, these factors highlight the importance of a diversified portfolio that can weather different economic conditions.

How to navigate market uncertainty

Periods of uncertainty can be challenging, but investors who focus on long-term strategy rather than short-term reactions tend to see better outcomes.

A well-diversified portfolio remains one of the best ways to reduce risk. By spreading investments across different sectors, industries, and geographic regions, investors can avoid overexposure to industries that may be heavily impacted by tariffs.

Interest rate changes can also affect different asset classes in different ways. The value of fixed-income investments such as bonds, may rise if interest rates decline, and fall if interest rates increase. Conversely, cash investments like high interest savings accounts (HISA) and guaranteed investment certificates (GICs) may offer more attractive rates as interest rates rise. 

Trade uncertainty can also lead to currency fluctuations, particularly affecting the Canadian dollar. A weaker loonie can make US investments more expensive but can also benefit Canadian companies that export goods. Holding a mix of Canadian and global assets can help balance these currency impacts.

Moving forward

Rather than reacting to every market shift, focus on your long-term financial goals and maintain a strategic, disciplined approach. Reviewing your portfolio, ensuring proper diversification and keeping an eye on interest rate trends can help you stay ahead of economic changes. If you’re unsure how tariffs and market volatility might impact your investments, connecting with an ATB Wealth Advisor can provide clarity and help you make informed decisions.

Trade uncertainty is a reality, but it doesn’t have to derail your investment strategy. By maintaining a diversified portfolio, staying informed about interest rate changes, and focusing on long-term objectives, you can navigate market fluctuations with confidence.