In my February 7 Weekly Update, I discussed tariffs and their impact on consumers. With the US implementing tariffs on Canada and Mexico this past week – and Canada immediately retaliating, while Mexico held off implementing tariffs for now (as of the time of this post) – I wanted to dig deeper into how tariffs actually work. Beyond just driving up prices, tariffs play a significant role in trade and investing. So, what exactly are tariffs? Let’s take a look.
What Are Tariffs?
A tariff is essentially a tax on imported (or sometimes exported) goods. Think of it as a fee added to products crossing a border. While tariffs generate revenue for governments, they also serve as a strategic tool—making foreign goods more expensive to protect domestic industries.
How Do Tariffs Work?
- Government Imposes the Tariff: A country’s government decides to apply a tariff, either as a policy measure or as part of a trade dispute.
- Collected at the Border: Customs agencies (like the Canada Border Services Agency or the US Customs and Border Protection) charge the tariff when imported goods arrive.
- Passed on to Businesses & Consumers: Importers pay the tariff upfront, but the cost often gets passed down to businesses and, ultimately, consumers through higher prices.
- Trade & Economic Impact:
- Protectionism: Tariffs help local industries compete by making imports more expensive. For example, the US currently applies a combined 27% duty on Canadian softwood lumber. The US claims that Canadian lumber producers receive unfair subsidies from their government, allowing them to sell lumber at lower prices in the US market.
- Government Revenue: While the primary goal is not always revenue generation, tariffs can bring in income for governments. For instance, President Trump floated the idea of using tariffs to help pay for tax cuts, particularly on nations seen as adversaries. This was part of a broader discussion about extending his 2017 tax cuts and introducing new tax exemptions.
- Trade Negotiations & Retaliation: Countries often use tariffs as leverage in trade deals or as part of tit-for-tat disputes – like the current situation between the US, Canada, and Mexico. The US is using tariffs to push Canada on issues such as border control and security. Given President Trump’s history, it’s likely this leverage will be used again on any future trade irritants, including allegations of unfair trade practices.
Are Tariffs Just Another Tax?
While tariffs function similarly to taxes in that they raise government revenue, their main purpose is different. Unlike income or sales taxes, which fund public services, tariffs are designed to influence trade by protecting local industries and regulating market behavior. They’re a tool for shaping economic policy, not just for funding government initiatives.
Who Applies & Collects Tariffs?
Governments impose tariffs, either through legislation or executive action. Once in place, customs agencies collect the money at the border based on the type and value of goods being imported. The revenue flows into the government’s treasury, just like other taxes.
Why Should Us Investors Care?
Tariffs can shake up markets in several ways:
- Stock Prices & Market Volatility: Companies that rely on imports often face higher costs, while domestic producers may benefit. During President Trump’s first term, the US slapped tariffs of 25% on steel and 10% on aluminum imports from Canada. This hit US automakers and construction firms, which depend on Canadian metals, leading to stock price swings for companies like General Motors and Ford. Meanwhile, domestic steel and aluminum producers like US Steel and Nucor saw temporary gains as tariffs made foreign metals more expensive, giving them a competitive edge.
- Supply Chain Disruptions: Higher costs on imported materials force businesses to adjust pricing, sourcing, or production strategies. When the US imposed tariffs on auto parts, production costs surged, leaving automakers with two choices – absorb the hit or pass it on. You can probably guess which one they will choose. 😊
- Trade Tensions & Economic Uncertainty: Retaliatory tariffs can escalate disputes, impacting everything from consumer prices to investor confidence. Recent US consumer sentiment and confidence readings have dropped as people brace for higher prices, fearing inflation will rise and force interest rates to stay higher for longer. And how have markets reacted to the renewed tariff threats? Spoiler alert: they’ve dropped sharply.
- Long-Term Industry Trends: Tariffs aren’t always permanent – many are renegotiated or removed over time. Understanding these shifts can help investors anticipate market changes.
Tariffs might seem like just another trade policy or negotiating tool, but their effects ripple across industries, markets, and entire economies, shaping trade relationships and international negotiations. From driving up consumer prices to fueling market volatility, they create challenges for consumers and opportunities for us investors. 😊
With tariffs back in the spotlight, their impact on markets is something investors can’t ignore. Now, let’s take a look at how markets performed this week and what’s been driving investor sentiment.
Items that may only interest or educate me ….
More Changes, Canadian Economic news, US Economic news, An Unnecessary Trade War, ….
More changes
In my January 17, 2025 ‘Weekly Update,” I mentioned removing the ‘Weekly Market Review’ section to keep things more focused. Now, I’m streamlining further by dropping the ‘Portfolio Update’ section, which listed Buys, Sells, Dividends Paid, and Earnings Reports for each of the three portfolios. Since this section doesn’t change much week to week, cutting it helps keep the updates tighter.
For those who want to see the detailed activity of each portfolio, I’ve created a ‘Monthly Update.’ Posted once a month, it will include everything from the ‘Portfolio Update’ section, organized by portfolio. This keeps the ‘Weekly Update’ concise while still providing a full breakdown for those interested.
Canadian Economic news
This past week’s key economic data that the Bank of Canada (BoC) considers when deciding whether to raise or lower the interest rate.
Trade Surplus
Statistics Canada reported that Canada recorded a higher-than-expected merchandise trade surplus of C$3.97 billion in January 2025, more than doubling December’s upwardly revised surplus of $1.69 billion and far surpassing analysts’ predictions of $1.28 billion. The surge was fueled by a record trade surplus with the US, Canada’s top trading partner. American companies rushed to front-load orders – particularly for automobiles and vehicle parts – ahead of potential 25% tariffs, while higher oil and natural gas prices further boosted the value of exports.
Labour Force Survey (LFS)
February’s job numbers from Statistics Canada came in far below expectations. Instead of the projected 20,000 new jobs, the economy eked out just 1,100 – marking a sharp drop from January’s impressive 76,000 gain and ending a three-month streak of solid growth. On the bright side, employment is still up 1.9% year-over-year.
Despite the sluggish job growth, the unemployment rate held steady at 6.6% after two months of decline. Workers did see a small win, though – average hourly wages rose 3.8% over the past year, edging out January’s 3.5% increase.
It’s hard to say whether the weaker job numbers reflected uncertainty over what were then looming tariffs, but this latest data could add pressure on the BoC to cut interest rates at their next meeting on March 12 – potentially lowering the benchmark rate to 2.75% to stimulate the economy. And with trade tensions still hanging over markets, further cuts could be in the cards.
Canadian market volatility
Canada’s Volatility Index (VIXC) kicked off the week at 13.23 but didn’t stay there for long. It quickly surged into the 15.5 range and remained between 15 and 16, with occasional spikes and dips, before settling at 14.72 by week’s end. Heightened concerns over tariffs kept the index on edge, reflecting the market’s nervous sentiment.
For those unfamiliar with the VIXC (traded as VIXI on the Toronto Stock Exchange), think of it as Canada’s market “stress-o-meter.” Readings below 10 indicate calm seas, while 10 to 20 signals typical market ups and downs. If the VIXC climbs above 20, it’s a sign of rising uncertainty, and things can start to feel a bit more turbulent.
US Economic news
This past week’s key data points that the Federal Reserve (Fed) considers when deciding whether to raise or lower the interest rate.
Labour data
The latest labour reports from the Job Openings and Labor Turnover Survey (JOLTS), the ADP Employment Report (ADP), and the Employment Situation Summary (ESS) provide a snapshot of the US labour market, highlighting both its strength and potential challenges.
JOLTS
For as long as I’ve been covering US labour data, the JOLTS report has been the usual kickoff of labour data, followed by ADP and the ESS at the end of the week. But this month, JOLTS is fashionably late – pushed back to March 11 for reasons unknown. So, we’ll just have to wait a little longer for those job openings numbers. Something to look forward to next week! 😊
ADP
The ADP data for February showed US private payrolls rising by just 77,000 – well below expectations of 140,000 and a sharp drop from January’s 183,000 gain. This marks the smallest increase since July 2024, signaling a hiring slowdown, particularly in trade, transportation, education, and healthcare. Small businesses also saw a decline in employment.
The data suggests the labour market is cooling, possibly reflecting employer caution amid economic uncertainties like policy shifts and the looming impact of tariffs on consumer spending. While leisure and hospitality showed some resilience, the broader trend points to more cautious hiring.
ESS
February’s ESS data reinforced signs of a slowdown, with the US economy adding 151,000 jobs – missing forecasts of 160,000. This followed a downwardly revised gain of 125,000 jobs in January, indicating weaker hiring momentum.
The unemployment rate ticked up to 4.1%, rising from 4.0% in January and 3.9% a year ago, suggesting a labour market that is gradually cooling.
Wage growth also lost steam. Average hourly earnings rose just 0.3% for the month, down from January’s 0.5% increase. That slowdown brought annual wage growth to 4.0%, slipping slightly from the previous month’s 4.1%.
Implications
This week’s labour data suggests the job market is relatively stable but is running into some headwinds. Hiring is still growing, but it’s falling short of expectations, and the rising unemployment rate – paired with slowing wage growth – points to a cooling trend. Employers may be taking a more cautious approach, while easing wage growth suggests the fierce competition for workers could be subsiding.
One of the biggest headwinds was likely the looming tariffs, hanging over February like a storm cloud. By driving up business costs, fueling uncertainty, and influencing consumer behaviour, they likely contributed to the slowdown. Together, these factors can make companies more hesitant to expand, weighing on job growth and leaving the labour market on shakier ground.
American market volatility
The CBOE Volatility Index (VIX) – often called the market’s “fear gauge” – started the week at 19.83 and quickly jumped above 20, reflecting heightened uncertainty over impending tariffs. Once the tariffs took effect, it fluctuated between 20 and 26.5 throughout the week, peaking on Thursday with a close of 24.87—the highest since December 18. Although the index eased slightly by week’s end, closing at 23.37, it remained in territory that keeps investors on edge, signaling increased market uncertainty and heightened volatility, which often leads to wilder market swings.
For those new to the VIX, think of it as the market’s stress meter. A reading below 12 means smooth sailing, 12 to 20 signals typical market swings, and anything above 20 suggests rising anxiety. When it climbs past 30, buckle up—markets are in turmoil. With the VIX closing above 20, traders are clearly bracing for volatility ahead
An Unnecessary Trade War
This past week, US President Trump kicked off what some are calling the dumbest trade war ever, slapping a hefty 25% tariff on almost all Canadian goods – though oil and energy products got off a little easier with a 10% tariff. Naturally, Canada wasn’t going to let that slide. In response, the Canadian government fired back with its own 25% retaliatory tariffs on a broad mix of American products, including:
- Food & beverages: Poultry, dairy, fruits, vegetables, coffee, tea, and alcohol (wine, beer, and spirits).
- Consumer goods: Cosmetics, toiletries, clothing, and kitchenware.
- Building materials: Lumber, plywood, and flooring.
- Other items: Tires, stationery, and certain paper products.
These weren’t just random choices – the Canadian government strategically picked goods that would maximize economic and political impact. Many of these products, like agricultural goods and alcohol, are major US exports, making the tariffs a direct hit on industries that rely heavily on Canadian buyers. The idea is to create pressure on American producers and exporters while minimizing the harm to Canadian consumers, who have alternatives to many of these goods. Politically, the tariffs target key US states – think Wisconsin and Iowa, where dairy and poultry are vital – hoping lawmakers will push back against the trade war.
If that wasn’t enough, President Trump also slapped 25% tariffs on Mexico, the US’s largest trading partner after Canada. Now, the US finds itself locked in economic battles with its two biggest trading partners and closest neighbours – both signatories to the Canada-United States-Mexico Agreement (CUSMA). This is the same deal Trump signed in 2020 and called “the greatest trade deal ever made,” claiming it was a huge improvement over NAFTA.
At the end of the day, it’s a calculated move by Canada to stand its ground while making sure the message is loud and clear: no one wins in trade wars. Unless, of course, President Trump has another reason for stirring the pot. 😒
Weekly Market and Portfolio Review
For the week, the TSX (SPTSX) shed 2.5%, the S&P 500 (SPX) lost 3.1%, the DJIA (INDU) fell 2.4% and the Nasdaq (CCMP) plunged 3.5%.
The chart that usually appears in this space is unavailable this week due to discrepancies in the data.
| Index | Weekly Streak |
| TSX: | 1 – week losing streak |
| S&P: | 3 – week losing streak |
| DJIA: | 1 – week losing streak |
| Nasdaq: | 3 – week losing streak |
Investors didn’t take kindly to the uncertainty sparked by what’s being called the dumbest trade war in history, launched by President Trump. As a result, all four major North American indexes – the Toronto Stock Exchange Composite Index (TSX), the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) – sank deeper into the red, extending the previous week’s losses. The S&P posted its worst weekly decline since September 2024, while the Nasdaq officially entered a market correction (when a stock index or individual stock drops 10% or more from its recent high).
February ended on a weak note as the artificial intelligence rally lost steam, consumer confidence hit multi-year lows, and the looming threat of tariffs cast a shadow over both the Canadian and American economies. This week, those fears became reality – then were temporarily paused – disrupting the $900 billion annual trade relationship between Canada and the US, their largest trading partnership. Analysts warn that tariffs could fuel inflation, drive interest rates higher, and curb consumer and business spending.
The markets felt the impact almost immediately. A wave of selling hit at the start of the week, with investors rattled by the potential economic fallout caused by the tariffs. By Tuesday, the S&P had erased all its post-election gains, sinking to a four-month low. Oil prices also ended the week lower, weighed down by concerns that slowing economic activity could dent demand.
Now, I can’t help but wonder – is the bull market of the last two years just catching its breath, or is this lingering tariff uncertainty a sign of prolonged weakness? By week’s end, facing global backlash, retaliatory tariffs that raised prices across the board, and a plunging stock market, President Trump paused tariffs on Canada and Mexico until April 2.
Combine tariffs with signs of slowing economies in both countries, and a great deal of uncertainty has crept into the markets. And as I’ve said before, the markets hate uncertainty – this week’s results made that abundantly clear.
Next week could be a pivotal one for the markets, with tariffs still casting a shadow over both economies. In Canada, investors will be waiting for the BoC’s latest rate decision where a 0.25% cut is expected, while in the US, fresh inflation data and consumer sentiment readings could set the tone for what’s ahead. With uncertainty running high, volatility is likely – creating opportunities for those willing to be greedy while others are fearful. 😊
| Portfolio | Weekly Streak |
| Portfolio 1: | 3 – week losing streak |
| Portfolio 2: | 1 – week losing streak |
| Portfolio 3: | 3 – week losing streak |
It was a brutal week across the board, with all three portfolios taking a sharp hit, as reflected in the weekly performance chart below.
Portfolio 1 had a rough week, tumbling 6.1%, as just 25% of its holdings managed to post gains. TMX Group (TSE: X) was a rare bright spot, hitting an all-time high to end the week in positive territory. Unfortunately, that lone victory was drowned out by steep losses elsewhere. Celestica (TSE: CLS) plunged 20%, while Magnite (NASD: MGNI) and CrowdStrike (NASD: CRWD) both tumbled 16%. Carnival Corp (NYSE: CCL) lost 14%, Cloudflare (NYSE: NET) slid 13%, and Shopify (TSE: SHOP) dropped 12%. With Nvidia (NASD: NVDA) – the portfolio’s largest holding – also slipping, there was little hope of turning things around.
Portfolio 2 fared the best of the bunch, only losing 4.9% of its value. A bright spot was Dollarama (TSE: DOL), which reached an all-time high on its way to a weekly gain. But with only 29% of holdings in the green, the gains couldn’t outweigh the damage elsewhere. The biggest blow came from MongoDB (NASD: MDB), which plunged 30%, while Brookfield Infrastructure Partners LP (TSE: BIP.UN) and South Bow Corp (TSE: SOBO) both dropped 10%.
Portfolio 3 took the hardest hit this week, sinking 6.2% and extending its losing streak to three weeks, with only 30% of its holdings finishing in the green. Lithium Americas Corp (TSE: LAC) provided a rare bright spot, jumping 13%, but that wasn’t nearly enough to offset the wave of losses elsewhere. Magnite tumbled 16%, Brookfield Asset Management (TSE: BAM) slid 15%, while Cloudflare and Shopify dropped 13% and 12%, respectively.
There’s not much to say after a week like that other than to borrow a line from Marvin the Martian once again: “Not good. Not good at all!” Hopefully, next week brings a turnaround—but with the uncertainty of tariffs remaining, I’m not holding my breath. ☹
Companies on the Radar
No new companies made it onto my radar this past week. With tariffs dominating headlines – first as a looming threat and now a reality – I’ve been more focused on assessing the impact on my existing holdings rather than scouting for new opportunities.
That said, I took a step back and realized my radar list is entirely made up of American companies, with no Canadian names in the mix. Given the current political environment, I’ll be making more of an effort to spot Canadian companies I’d be proud to own. And if I come across compelling opportunities on both sides of the border, all things being equal, I’ll likely lean toward home turf when it’s time to invest.
For now, my radar list remains unchanged, featuring these five companies:
- Sportradar Group AG (NASD: SRAD): A mid-cap Swiss company specializing in sports data, content, and integrity services that support businesses in sports, media, and betting industries.
- Interactive Brokers (NASD: IBKR), A large-cap American online brokerage firm known for its advanced trading platform used by professionals and retail investors like us at all levels.
- Ultra Clean Holdings (NASD: UCTT): A small-cap American company specializing in critical components and ultra-high purity cleaning and analytical services in the semiconductor industry.
- Rubrik, Inc. (NASD: RBRK): A high-growth, large-cap American cybersecurity firm.
- Axon Enterprise, Inc. (NASD: AXON): A large-cap American innovator in body cameras, TASER devices, and cloud-based evidence management software, serving law enforcement and public safety agencies.
As always, these are not buy recommendations – be sure to do your own research and make decisions that align with your personal financial goals!
The Radar Check was last updated March 7, 2025.
And that’s it for this week.