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An image of U.S. president-elect Donald Trump is displayed as traders and financial professionals work on the floor of the New York Stock Exchange at the opening bell on Nov. 26, in New York City.TIMOTHY A. CLARY/AFP/Getty Images
U.S. president-elect Donald Trump’s promise to impose 25-per-cent tariffs on all imports from Canada and Mexico has set off alarm bells among politicians and economists north of the border.
But should Canadians change what they’re planning to do with their money in response to the news?
To think about the possibilities is to contemplate a bewildering range of what-ifs, so The Globe and Mail asked four experts to help Canadians think through whether they should tweak their personal finances.
What to do if you’re worried about the U.S. dollar exchange rate
The Canadian dollar threatened to hit pandemic-era lows early on Tuesday, dropping to 70.534 US cents early on Tuesday before bouncing back later in the day. It’s hard to know where the loonie might be headed next, but the sure bet is to focus on avoiding extra costs whenever you make the conversion to U.S. dollars, said Barry Choi, a personal finance and travel expert at moneywehave.com.
If you’re purchasing greenbacks, you’ll save by relying on a money transfer service such as Wise instead of traditional banks, which usually charge a hefty exchange-rate markup, he said. Among other competitive options are Knightsbridge Foreign Exchange and the Canadian Snowbird Association’s currency exchange program.
Another easy win is getting a payment card that avoids the typical 2.5-per-cent foreign currency conversion fee that most credit cards charge for purchases outside Canada, Mr. Choi said. Bank of Nova Scotia offers a few credit cards with no foreign transaction fees, while Wise, online bank EQ Bank, and online investment platform Wealthsimple all offer reloadable prepaid cards that will also spare you those fees.
Should you change up your investments?
The short answer, according to Benjamin Felix, chief investment officer and portfolio manager at PWL Capital, is: “Probably not.”
Financial markets adapt right away to the expected effects of news such as Mr. Trump’s pledge to raise tariffs, he said. By the time small investors learn about the new information, which they could use to tweak their portfolios, market prices have already adjusted, he added.
You also shouldn’t let your assumptions about the presidency guide your decisions. People who cashed out their investments in 2016, after Mr. Trump became U.S. president for the first time, because they believed he would wreck the economy, missed out on four years of great stock market returns, Mr. Felix said.
Similarly, loading up on equities because you believe Mr. Trump will be good for the stock market could also serve you poorly in the long run.
“Everyone has their own ‘what-if’ or ‘this time is different’ scenario in their head. I think doing nothing is one of the hardest things for people to do when they have stuff like this happening around them,” he said.
Proposed Trump tariff poses big risk to Canadian industry, consumers
Will Trump’s threats affect mortgage rates?
David Larock, a mortgage broker and owner of Integrated Mortgage Planners, says it’s tough to know whether Mr. Trump will make true on his tariff threats, but the actual impact of any realized tariffs is also murky.
That’s because the trade war that would likely ensue would have opposing effects on the bond market and the Bank of Canada’s policy rate – the two forces that influence mortgage rates the most.
On the one hand, a 25-per-cent tariff on all goods heading into the U.S. would likely throw the Canadian economy into a recession and bring bond markets and interest rates down as a result. That signals lower mortgage rates for Canadians.
On the other hand, a trade war would cause inflation to tick up again and could weaken the loonie, creating the need for the Bank of Canada to fight inflation in the only way it can: increasing interest rates.
“How would it net out? I wish I could confidently assert an answer, but I’d be a fool to try and do that,” said Mr. Larock.
As Trump threatens tariffs, here are five things we know so far
Should you beef up your emergency savings while cutting expenses?
If you have a standard emergency fund that will cover three to six months of expenses in the event of a financial calamity, you should feel comfortable weathering any financial blowbacks from a Trump presidency, according to Evan Parubets, a certified financial planner and head of advisory services at Steadyhand Investments.
He has two caveats, however. One is if you work in an industry that is particularly reliant on trade with the U.S.
The other is if you’re simply nervous and are looking for peace of mind.
“If somebody just feels nervous, there’s nothing wrong with having more in your emergency fund. It’s not going to negatively impact your life,” said Mr. Parubets
On the question of whether Mr. Trump’s presidency should make you second-guess your spending habits, Mr. Parubets says it’s always good to try and limit your spending and maximize how much you save.
His advice is similar: If you’re particularly nervous, it never hurts to ensure you’re spending smartly. But otherwise, if you have adequate savings, carry on as normal.