Sam Sivarajan is a keynote speaker, independent wealth management consultant and author of books on investing and decision-making. His forthcoming book explores how to thrive in a world of uncertainty.
At a recent Toronto Raptors game, the crowd booed the U.S. national anthem, after similar incidents at hockey games in Ottawa and Calgary. They weren’t booing the unfortunate singer or the other team but rather what’s happening off the court. Donald Trump, back in the White House, has threatened, imposed and occasionally backed away from multiple waves of tariffs.
The impact for Canadians goes way beyond trade policy – it’s about the cost of living, job security and economic stability. After years of dealing with inflation, high interest rates and a volatile housing market, another hit to the wallet is the last thing Canadians need. And yet, here we are, facing another round of economic uncertainty.
The challenge isn’t just the tariffs. It’s the unpredictability surrounding them. If Mr. Trump follows through, businesses that rely on U.S. trade will need to adjust, consumers will see higher prices, and, as always, financial markets will react. Yet no one knows exactly what will happen or when. Mr. Trump could escalate trade tensions further, negotiate exemptions or abruptly change course. The lack of clear rules makes it difficult to prepare.
That’s the key distinction between risk and uncertainty. Risk is something we can measure and account for – like calculating the odds of winning a lottery. But uncertainty is different. It’s what happens when the variables are unknown, when history provides little guidance and when even experts struggle to predict outcomes. The pandemic is a prime example. And a trade war with the U.S. also falls into this category.
The last time Canada faced Trump tariffs, in 2018, the impact was severe. They reduced steel exports by 40 per cent, halved aluminum exports and resulted in the loss of 75,000 manufacturing jobs across North America. Now history seems to be repeating itself, with the stakes even higher. If the new tariffs fully take effect, economists project a 1.3-per-cent drop in GDP, 8-per-cent decline in exports and 43,000 Canadian jobs at risk.
Yet there are still too many unknowns to be overly confident in any projections. Will the tariffs expand beyond current targets? Will there be exemptions? Will Mr. Trump use them as leverage in broader trade negotiations? No one – not economists, not policy makers, perhaps not even Mr. Trump himself – can say for sure.
If the tariffs go through, the most obvious impact will be on prices. But the job market will also take a hit. Businesses rely on stability to make hiring and investment decisions. When trade policy is unpredictable, companies hesitate. Those that export heavily to the U.S. may have to reconsider expansion plans or even cut back.
Financial markets are also sensitive to trade disputes. Investors don’t like surprises and tariffs create volatility. Manufacturing, transportation and retail stocks will see increased turbulence.
Another complicating factor is how the Bank of Canada will respond. If tariffs push up prices, that will make it difficult to justify cutting interest rates. For those with variable-rate mortgages or loans, the prospect of prolonged high rates is another layer of financial pressure. The challenge for policy makers is to determine whether tariff-driven inflation is temporary or a longer-term issue.
So, what can Canadians do in the face of all this uncertainty? On a personal level, it makes sense to prepare for potential price increases. Those considering big purchases – a car, home renovations or major appliances – may want to move sooner rather than later. Locking in rates for some part of the borrowing, or paying down debt, could provide some financial stability if interest rates stay elevated. And for those without a financial cushion, now is a good time to shore up emergency savings.
For investors, the best defence against uncertainty is diversification. Trying to predict market movements based on political decisions is nearly impossible, but spreading investments across industries and geographic regions can help mitigate risk. Defensive sectors, such as consumer staples and utilities, have been more resilient during economic uncertainty. Look at which geographies are underrepresented in your portfolio and which ones might be less affected or even profit from the trade war. Preparing your portfolio for these eventualities, even when you don’t know the probabilities, is a prudent course of action. While market swings are inevitable, the key takeaway is to have a long-term plan, stay the course and avoid reacting emotionally.
But perhaps the biggest adjustment needed is in mindset. Many people assume that somewhere, someone must have the answers – whether it’s a market analyst, an economist or a politician. But history has repeatedly shown that even the best get it wrong when dealing with uncertainty. Instead of trying to predict what will happen next, Canadians should focus on what they can control: taking steps to make their finances stable enough to withstand a range of outcomes rather than betting on a single scenario.
Whether or not the tariffs take effect, the bigger lesson remains the same. The economy will always be subject to surprises – whether from geopolitical events, policy shifts or financial market disruptions. The goal is not to predict them, but to be prepared for them. Canadians may not have control over what happens in Washington, but they have control over how they prepare and how they respond. And in an uncertain world, that’s the most important advantage of all. As Charles Darwin said, “It is not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change.”
