What you should know about Trump’s tariffs 🌎

5 minute read

The US president moved to enact 25% tariffs on Mexican and Canadian imports – and then negotiated a month’s pause across both. So, what comes next?

Why the focus on tariffs?

In making imports more expensive, the president hopes to make American-made wares more appealing. The theory is that this could boost sales for US companies and bring back jobs. But the reality is more complex – relocating global supply chains is easier said than done.

Higher tariffs also mean higher costs for American businesses. They’ll likely pass these on to customers through higher prices, running the risk of re-igniting inflation at a time when the US Federal Reserve is working to keep things stable. There's also the matter of retaliation: America’s trade partners have already signaled that they're prepared to respond with counter-tariffs.

What’s the takeaway here?

As we’ve learned from the last Trump administration, expect plenty of noise – and with it, market volatility. But for long-term investors, it's important to separate that noise from the real signals. Unless the economic data show a real threat to growth, it’s simply better to stay the course with a resilient, diversified portfolio. This means investing in a mix of growth assets, like stocks, and balancing assets, like gold. Our General Investing portfolios, for example, have allocations to gold across every risk level.

Our CIO, Stephanie Leung, shared her insights on navigating market uncertainty, and separating the noise from real economic signals – watch her interview on Bloomberg.

💡 Investors’ Corner: Why 2025 could be a good year for gold

Gold hit several all-time highs last year, and it’s showing no signs of slowing down: its price has climbed about 9% year-to-date. In addition to its role as a portfolio diversifier, here are three factors driving the momentum:

1. Gold is less affected by real yields

Real yields are the returns on bonds after adjusting for inflation. Gold shines when real yields are low – the metal doesn't pay interest, so it’s more attractive when you're not giving up much from bonds. But despite the recent run of interest rate hikes, gold has stayed strong. It now seems to move asymmetrically: falling less when yields rise and climbing more when yields fall.

2. The US dollar may weaken

Gold and the US dollar have a seesaw-like relationship. Since the precious metal is priced in dollars, its value tends to move in the opposite direction of the currency. When the dollar weakens, gold becomes more attractive, pushing its price higher. In the past few years, the US dollar gained strength, buoyed by an inflation crisis and an aggressive run of interest rate hikes. But the dollar might begin to lose ground now that inflation has cooled and rate cuts have started.

3. Demand for gold is growing

A powerful factor supporting gold’s price is the sustained demand from central banks. They've been on a gold-buying spree, snapping up record amounts over the past few years. A recent World Gold Council survey found that 81% of central banks plan to continue increasing their gold holdings – so don’t expect demand to fall anytime soon.

These articles were written in collaboration with Finimize.

🎓 Simply Finance: Tariffs

Tariffs are taxes that governments place on imported goods and services. Think of them as tolls – just as you pay to use certain roads, companies pay tariffs to sell their products. Governments can use tariffs to protect local industries or raise revenue, but there are tradeoffs: they lead to higher prices, and can result in retaliation from trading partners.

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