Newsletter Volume 02 | February 15, 2025

What You Need to Know About Tariffs and Your Finances

With all this talk about tariffs, you might be wondering what it means for you and your finances. Tariffs are essentially taxes on imported goods. They can have ripple effects across the economy, impacting everything from the cost of everyday consumer goods to broader financial markets. Lately, there’s been a lot of buzz about new tariffs between the U.S, Canada and globally, and it’s got a lot of people wondering: What does this mean for my financial future? Let’s break it down.

What’s Happening With Tariffs?

Recently, the U.S. announced plans to impose a 25% tariff on certain Canadian imports, citing economic and security concerns. In response, Canada has proposed its own set of tariffs on certain American goods. While these moves might sound like high-level political maneuvering, they can have real consequences for businesses, consumers, and investors alike.

How Could This Impact Canada’s Economy?

Tariffs don’t just affect the companies involved in trade, they can influence the economy. Here’s how:

• Higher Prices for Consumers: When tariffs are imposed, the cost of importing goods rises. Companies often pass these costs on to consumers, meaning you could see price hikes on products that rely on cross-border trade. In the end inflations rises, reducing your daily purchasing power.
• Slower Economic Growth: Analysts predict that if these tariffs go into effect, Canada’s GDP could shrink by around 2.5% over the next year. A slowdown like that can affect job markets and overall economic confidence.
• Job Losses: Some sectors, particularly manufacturing and energy, could see job cuts if tariffs make it more expensive to do business. Estimates suggest up to 150,000 jobs could be at risk.

Which Industries Are Most Affected?

Not all industries feel the impact of tariffs equally. Here are a few that could be hit the hardest:

• Energy Sector: Canada exports a lot of oil and gas to the U.S. If tariffs disrupt this trade, it could mean lower revenues and job losses in the energy sector.
• Steel and Aluminum: Canada is the biggest is the biggest supplier of steel and aluminum to the U.S., proving almost 25% of its steel imports. An estimated 90% of the our exports go to American companies. A tariff here would have a rippled effect across multiple industries life automotive, construction energy etc.
• Automotive Industry: Many car parts cross the U.S.-Canada border multiple times before a vehicle is finished. Tariffs could raise production costs and lead to higher car prices for consumers.
• Retail and Consumer Goods: If the cost of importing goods rises, you might see price increases on everything from electronics to groceries.

How Are Financial Markets Reacting?

Markets don’t like uncertainty, and the tariff talk has already made waves:

• Canadian Dollar: The loonie has dropped in value as investors worry about potential economic fallout.
• Interest Rates: To help stabilize the economy, the Bank of Canada recently cut interest rates by 0.25%, bringing them to 3%. This could make borrowing cheaper but is also a signal that economic challenges are ahead. However, if inflation was to rise again, could this impact the Bank of Canada's decision to continue cutting rates? Potentially yes.

What Can You Do?

While it’s impossible to predict exactly how things will play out, there are a few smart financial moves you can make:

• Keep an Eye on Inflation: If tariffs drive up prices, everyday expenses could rise. Now’s a good time to review your budget and ensure you’re prepared for potential increases.
• Consider Your Investments: Certain industries could be more volatile due to trade tensions. Diversifying your portfolio can help reduce risk during uncertain times.
•  Watch for Interest Rate Changes: If borrowing costs continue to drop, it might be a good time to refinance debt or lock in a favorable mortgage rate.

Final Thoughts:

Tariffs might seem like an abstract policy issue, but they can have real effects on your financial well-being. From higher prices to potential job market shifts, it’s important to stay informed and be proactive with your financial planning. If you have any questions about how this could affect your investments or financial strategy, let’s chat, we’re here to help!

Shiv Oberoi: shiv@oberoifinancial.com

**Now Available! book a meeting with Shiv directly below**

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Shivani Oberoi : shivani@oberoifinancial.com

** Now available, book your next meeting with Shivani directly below:

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Oberoi Financial Group Inc | www.oberoifinancial.com | 514-362-8400