Understanding Tariffs: What They Are and How They Affect You

A tariff is a tax that a government places on imported goods. It’s like a toll that foreign products must pay before they can be sold in a country. Governments use tariffs to encourage people to buy local products instead of imports, protect domestic industries, or raise revenue.

A Simple Example of How Tariffs Work

Imagine you want to buy a car from another country that costs $20,000. If your government places a 10% tariff on imported cars, that car now costs $22,000 ($20,000 + $2,000 tariff). The idea is that if the price of the imported car goes up, more people will consider buying a similar car made locally, which helps domestic car manufacturers.

But tariffs also have downsides. If the local industry doesn’t produce enough of that product or if the quality isn’t as good, consumers might end up paying higher prices without better choices. Tariffs can also lead to trade wars, where countries impose tariffs on each other’s goods, making global trade more expensive and unpredictable.

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Investing in an Uncertain Economic Environment

Periods of rising tariffs and economic uncertainty can make markets more volatile. Investors may be tempted to make frequent changes to their portfolios in response to headlines. But smart investing isn’t about chasing short-term market trends—t’s about sticking to a solid long-term plan.

Rather than reacting to economic events like tariffs or inflation by constantly adjusting your investments, focus on asset allocation (how your investments are divided between stocks, bonds, and other assets). A well-balanced portfolio spreads out risk, helping to absorb market ups and downs.

One of the greatest advantages of investing today is that we’re no longer limited to just our home country. We can invest anywhere in the world, gaining exposure to global economies, industries, and currencies. This means no single economy, government policy, or tariff decision can single- handedly derail your retirement plan. By diversifying across different asset classes and regions, you ensure that economic challenges in one country don’t threaten your long-term financial security.

For those who rely on their investments for retirement income, asset allocation becomes even more important. Portfolios are carefully designed to include stable income-producing assets like high-interest savings accounts, GICs, bonds, and dividend-paying stocks. These assets provide cash flow and help smooth out volatility, ensuring your retirement plans stay on track—regardless of short-term economic turbulence.

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Staying the Course in Uncertain Times

When we build a financial plan, we do so using conservative assumptions. We know that there will be periods of economic uncertainty that cause fluctuations, and we account for this from the start. Your portfolio and financial plan were designed with the understanding that markets will rise and fall. Unless your financial needs or goals have changed, making portfolio adjustments in reaction to market events is not only unnecessary—it can actually hurt you.

As humans, we are wired to respond to fear. Seeing declining investment values can be scary, and it’s natural to feel the urge to "do something." But history has shown that reacting emotionally to short-term market declines is one of the biggest mistakes an investor can make. Those who sold their investments during the 2008 financial crisis locked in their losses and never fully recovered. Those who stayed the course saw their portfolios rebound and continue to grow.

By maintaining discipline and not making emotional investment decisions, you reduce the risk of selling at the wrong time. Staying invested in a properly diversified portfolio leads to better long-term outcomes than trying to time the market.

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The Bottom Line

Tariffs can influence prices and economic conditions, but as an investor, your best strategy is to stay disciplined, diversify, and focus on long-term goals. Managing your asset allocation and accepting some level of market volatility is key to financial success, even when the economy feels uncertain. And thanks to global investing, you have more tools than ever to ensure that no single economy can threaten your retirement income.

Your financial plan was built with these economic uncertainties in mind. It’s not market fluctuations that determine your success—it’s your ability to stay disciplined through them.

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This information has been prepared by Brandt Butt who is an Investment Advisor and Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.

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