As tariffs rise and trade tensions escalate, many Canadians may be nervous about how their finances, job security and retirement plans could be affected by economic uncertainty.
From potential layoffs to rising consumer prices and volatile markets, the impact of the trade war triggered by the U.S. on Tuesday could ripple through the economy in unexpected ways.
“This is going to be tough. The American trade war is going to hurt the Canadian economy, and it’s going to hurt all of us,” Prime Minister Justin Trudeau said while speaking to reporters on Tuesday.
“Over the past month, we have been working on measures that if these tariffs last longer than a few hours or a few days, we will be able to help Canadian citizens, Canadian workers, Canadian companies, make it through this time.”
U.S. President Donald Trump’s 25 per cent tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20 per cent, sparking trade wars that could slam economic growth.
In retaliation, Trudeau said Ottawa was launching 25 per cent tariffs on C$30 billion worth of U.S. imports. Hundreds of thousands of jobs in sectors across the country will be at risk, premiers have said.
So what does this mean for Canadians who are concerned about their jobs, savings and retirement?
“We just don’t know how long this trade war is going to last. We understand that inflation could be taking off. It’s not going to happen tomorrow, and it’s not going to happen within the next 30 days, but it is going to happen three to six months out from now,” Moshe Lander, an economics professor at Concordia University in Montreal, told Global News.
Here is some advice from experts, such as Lander, on how Canadians can help weather this financial storm.
Lander advised Canadians to focus on essentials as they prepare for potential financial strain.
“Start preparing now. Ask yourself: What is essential? What can you not do without?” Lander said.
Whether it’s a trip to Disneyland that may be beyond your budget, having that extra entertainment subscription or a home renovation that can wait, he suggested postponing any non-essential spending.
For items that must be purchased from the U.S., he suggests putting personal feelings and partisans aside and making pragmatic choices.
Whether that is a good American stock to invest in, a cheaper product at the grocery store, or a U.S. item that simply offers the best value, the key is to make smart financial choices rather than emotional ones, Lander stressed.
When it comes to retirement, the impact of economic fluctuations can be concerning.
According to Lander, your current stage in retirement and investment strategy will play a significant role in how much you should worry.
“If you’re 65 and have just retired with maybe 25 to 30 years ahead of you, over time, these market dips will smooth out. We’ve seen that every market high ends up being higher than the previous one. The real question is whether you can ride through these dips,” he said.
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For those nearing retirement, such as someone just a few years away from leaving the workforce, he said you may need to rethink timelines and consider flexibility.
“If you’re just a couple of years away from retirement, now might be the time to have a conversation with your employer. If you were planning to retire in two years, can you extend it to three or even four?” he said.
“Is there a way to stay on part-time or transition gradually? This flexibility can help ease the financial uncertainty while you see how the economic landscape plays out,” he added.
Charles St-Arnaud, the chief economist at Alberta Central, echoed these thoughts.
When managing your RRSP or personal investment account, he said it’s important to regularly assess your portfolio, especially if you’re nearing retirement.
If you have a financial advisor, it’s crucial to meet with them to review whether your current level of risk aligns with your retirement goals. For those planning to retire in the next couple of years, it may be wise to reduce risk during the current economic climate, he said.
Job instability is a valid concern, especially in the context of trade wars and tariffs, St-Arnaud said.
For those working in industries that are at risk of being negatively impacted by tariffs, it’s crucial to take extra precautions.
If you have excess savings, it’s a good idea to use that to pay down any outstanding debt, as having cash reserves can be invaluable in uncertain times.
“It’s about making sure that you have that safety buffer saving in case of a job loss. I think it does become even more important in the current situation, especially for those who are in industries that will be affected,” he said.
Savings, set aside for emergencies, should ideally cover rent and utilities for two to three months.
“If you don’t have that, maybe it’s time to reduce their spending and try to build back the nest egg,” St-Arnaud said.
Michael Dobner, an economist at PwC Canada, stated that one of the job sectors in Canada most likely to be hit hardest by the trade war is the manufacturing sector.
“You should expect potentially bad times and potential terminations could be coming,” he said.
This is why workers in this sector should start planning.
Instead of just talking to their managers, Dobner suggested that if they’re part of a union, now is the time to have a conversation with them about any measures in place.
It’s important, he said, to understand what the union offers in terms of temporary layoffs or other protections.
When times are tough and financial stress mounts, debt such as credit cards, student loans or mortgages may seem more daunting, but it’s important to focus on maintaining manageable payments and avoiding unnecessary borrowing during uncertain times, Lander said.
“If you need to run a deficit on a personal level, if you need to outspend your income, that’s okay. As long as you have the credit available, you can borrow. And so whether that’s from the bank, whether it’s from loved ones, coworkers, children, wherever it is that you can find it, there’s nothing wrong with that,” he said.
However, it’s crucial to balance your approach to debt carefully.
Lander emphasized that while paying down debt might not be a priority, maintaining your credit score is.
“Focus on maintaining your credit score. Pay the minimum balance on credit cards, make sure you’re paying interest on your line of credit, and meet the minimum loan payments,” he said. “Don’t stress about paying off everything right now.”
He said when the trade war clears up, that may be an opportunity to get your financial ship back on track.
At the same time, he warned against unnecessary borrowing.
“You shouldn’t be borrowing money if you can’t afford it. Avoid borrowing for things that don’t offer long-term benefits,” he cautioned.
For example, borrowing to go to Las Vegas is a bad idea, but borrowing to further your education or upgrade your skills is a solid investment.
Stock market fluctuations are often one of the most immediate concerns during periods of economic uncertainty, and recent declines have highlighted the real impact of trade tensions.
“We’ve already seen stock markets around the world have fallen,” Lander said.
“Now there will come a point where the stock market will fall to some point and it’ll bounce back. But of course, if you’re living on a retirement fixed pension, if you’re close to retirement and you were expecting to see a certain bank balance by the end of the year, your plans might have changed very quickly,” he said.
“And that’s often the way it is when the stock market drops, is that people that were relying on it to continuously go up and don’t have that long time frame, they’re going to be the first ones to suffer because there’s very little that they can do to find their way out of it,” he added.
For those managing their own investments, the volatility can be even more challenging. Lander advised reaching out to professionals who have the knowledge and resources to navigate the market efficiently.
“If you’re managing your own investments, ask your money manager or retirement planner for advice. If you don’t have one, find someone. Many will offer initial consultations for free because they want your business,” he said.
The trade war comes at a time when Canadians are already financially struggling with high inflation, and Lander believes that there won’t be any relief anytime soon, even with some government support.
“The longer the trade deficit, the longer the trade war goes on, the worse it’s going to get,” Lander said.
“So I always expect that tomorrow will be worse than today. It’s not a good life philosophy, but just right now, that’s the climate in which we find ourselves.”
He emphasized the importance of staying flexible and adaptable to changing circumstances. By approaching each day with the mindset that tomorrow’s economy might be worse than today, the worst-case scenario is that you’ll be pleasantly surprised.
St-Arnaud agreed.
“Prepare for the worse, hope for the best,” he said.
“Make sure that you are rebuilding that precautionary saving in case there’s a job loss and there’s some money available. Maybe instead of buying that gift, maybe put that money towards credit card debt or even a higher payment on your mortgage to try to reduce your debt load,” he said.
— With files from Reuters
