Market Commentary – Q1 2025

Earlier this month, Ken Fisher, Founder, executive Chair and Co-Chief Investment Officer for Fisher Investments wrote an excellent piece in the Globe and Mail that clearly paints a picture of the effects (or lack thereof) of Trump’s tariff policy. Here is a summary of his article:

• All things being equal, tariffs are bad. The theory is that they create frictions for commerce and often channel demand counterproductively. The reality is nuanced

• In his first term, Trump posed similar arguments for tariffs. But inflation didn’t spike, Growth didn’t tank. US inflation was just 2.4% in 2018 and 1.8% in 2019

• When global inflation spiked in 2021 and 2022, COVID-19 lockdown-induced supply chain disruptions and global monetary supply explosions were the culprits, not tariffs

• Growth? US GDP rose 2.5% in 2017 – before tariffs. After? 3% and 2.6% in 2018 and 2019, respectively. Tariffs neither hammered demand nor spiked prices

• Global GDP echoed this, growing 3.5% in 2017, 3.3% in 2018 and 2.7% in 2019. Even China – Mr. Trump’s prime first-term tariff target, grew 6.9% in 2017, 6.8% in 2018 and 5.9% in 2019. The overall impact of tariffs wasn’t significant, economically

• In his first term, many Chinese companies skirted tariffs by routing shipments through Vietnam and other countries. Perhaps Canadian wouldn’t but does anyone really think a 10% tax will dry up pipelines?

• Energy is a huge slice of Canada’s exports to the US. Elsewhere, would supply chains such as in the auto sector, unwind? No.

• Exporters likely cut some costs, change suppliers, raise some prices, and eat some of the rest. This blend reduces the effects

• If all newly announced tariffs on all countries were fully collected, they would total on 0.75% of US GDP at the very most, without any “skirting”

• For Canada? New tariffs could total as much as $66 billion. That may sound big but put in perspective: If fully collected (which they won’t be), total about 2.2% of Canada’s 2024 GDP. Negative, but not catastrophic

• Tariffs on China…0.5% of its GDP and Mexico…3.4% of its GDP

• Tariffs hit goods, not services. Globally, services dominate, accounting for 70% and 65% of Canadian and global GDP, respectively

• Tariff talk sounds “tariffying”. It can rattle stocks short-term, as recent volatility illustrates but widespread tariff terror likely proves much more benign than feared – which could be a powerful relief set to propel stocks higher in 2025

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