08/25/2026
The tariff story isn’t the market story
The breakdown in Canada–U.S. trade negotiations has understandably raised concerns about the outlook for Canadian markets. Tariffs will hurt specific industries, particularly autos, manufacturing and some exporters, and the economic effects bear watching. But for investors, the impact on the broader Canadian market may be much more limited than the headlines suggest.
The reason is the composition of the TSX. Materials, energy and financials account for roughly 70% of the index and are likely to remain the primary drivers of returns over the next year. Much of the materials sector, particularly gold, is largely outside the current tariff net. Energy is similarly insulated, while Canadian financials are not exporters in the traditional sense. In other words, a significant majority of the TSX has relatively little direct exposure to the tariffs themselves.
There is also an important distinction between the Canadian economy and the Canadian stock market. Tariffs may weigh on parts of the economy, but that does not necessarily translate into weaker TSX returns.
In fact, the TSX has performed well this year not despite Trump’s policies, but in part because of them. The war in Iran has helped keep oil prices elevated, supporting Canadian energy producers, while intervention in the U.S. Treasury market and growing concerns about fiscal sustainability and dollar debasement have provided another tailwind for gold.
We would make a similar distinction with the Canadian dollar. Trade uncertainty is an obvious near-term headwind, but currencies ultimately tend to follow larger forces. If oil prices remain firm and the Bank of Canada ultimately follows a path toward higher rather than lower interest rates, particularly as Canadian rates push closer to U.S. rates, the fundamental backdrop could favour a stronger Canadian dollar over the next year.
None of this makes the trade dispute irrelevant. It will create winners and losers and could become more economically significant if tariffs broaden materially. But from an investment perspective, the larger fundamentals still matter more than the noise. The sectors that dominate the TSX remain well positioned, and the same forces creating uncertainty in Washington may continue to provide support for Canadian equities and the Canadian dollar.
As always, we will keep you updated as conditions evolve.
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Philip Petursson, Chief Investment Strategist
Pierre-Benoît Gauthier, Vice-President, Investment Strategy
Ashish Utarid, Assistant Vice-President, Investment Strategy
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