Christopher Liew is a CFP®, CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.
If you’re a Canadian investor, tariffs have probably dominated your news feed for the past year. Between sweeping duties on steel, aluminum and automobiles, plus threats of even higher levies, it has been difficult to know what it all means for your portfolio.
Below, I’ll break down how the ongoing Canada–U.S. trade conflict is affecting Canadian stocks, which sectors are most exposed, and what everyday investors can do to protect and position their portfolios.
A turbulent year for Canada–U.S. trade
The trade landscape has shifted dramatically since February 2025, when the U.S. first imposed broad 25 per cent tariffs on most Canadian goods under the International Emergency Economic Powers Act (IEEPA).
Since then, sector-specific duties under Section 232 of the U.S. Trade Expansion Act have piled on, targeting steel, aluminum, automobiles, lumber, and furniture. As CTV News recently reported, the list of levies still hitting Canadian industries remains long, even after the U.S. Supreme Court struck down the IEEPA tariffs on February 20, 2026.
That Supreme Court ruling was a watershed moment. In a 6–3 decision, the justices ruled that IEEPA does not authorize the president to impose tariffs. Within hours, U.S. President Donald Trump announced a replacement 10 per cent global tariff under Section 122 of the Trade Act of 1974, effective Feb. 24.
He has also threatened to raise it to the 15 per cent maximum allowed under that law, though as of publishing time, the tariff took effect at 10 per cent. These Section 122 tariffs are time-limited to 150 days unless Congress votes to extend them.
What investors should know
1. Understand which sectors carry the most tariff risk
Not all corners of the TSX are equally exposed. The sectors taking the hardest hits are those most integrated with U.S. supply chains.
Production and employment in the most tariff-targeted industries, particularly autos and steel, are noticeably underperforming the rest of the economy. Energy exports face a lower potential 10 per cent tariff rate, but with roughly 88 per cent of Canadian energy still flowing south, even modest duties create cost pressure across the sector.
If your portfolio is heavily concentrated in Canadian industrials, materials, or auto-exposed names, it is worth assessing how much tariff risk you are actually carrying.
2. Recognize that markets have already priced in much of the fear
Here is some encouraging context. Despite a year of tariff escalation, the S&P/TSX Composite Index hit a record high of 33,817 on Feb. 20, the same day as the Supreme Court ruling. As of late February, the TSX was up over 36 per cent on a one-year basis, according to S&P Dow Jones Indices.
Financial markets are forward-looking. Much of the tariff shock was absorbed in early 2025, when the initial announcements caught investors off guard. Since then, companies have adapted through Canada–United States–Mexico Agreement (CUSMA) compliance, supply chain adjustments, and trade diversion.
That being said, headline risk is not going away. New threats, such as a potential 100 per cent tariff or the possible exit from CUSMA, can still trigger short-term volatility. The key is not to confuse short-term noise with long-term investment fundamentals.
3. Diversify beyond the Canadian market
Canada’s economy remains structurally exposed to U.S. trade policy, with roughly a fifth of GDP tied to American exports. For investors, this is a reminder that home-country bias can be costly during periods of geopolitical uncertainty.
Holding a mix of Canadian, U.S. and international equities helps insulate your portfolio from country-specific shocks. Maintain geographic diversification and avoid the temptation to abandon long-term strategies to dodge short-term dips. A broadly diversified portfolio with exposure to markets that may actually benefit from trade diversion, such as parts of Europe and Asia, can provide a meaningful cushion.
4. Pay attention to the CUSMA review
Perhaps the biggest wildcard for Canadian investors in 2026 is the upcoming review of CUSMA, which is expected to intensify around mid-year. According to TD Economics, the outcome of this review is a “total wildcard” for the Canadian economic forecast. If CUSMA’s exemptions are weakened or the agreement is terminated, the effective tariff rate on Canadian exports could rise significantly.
I’d recommend keeping a close eye on how these negotiations unfold, as they could meaningfully shift the outlook for trade-sensitive sectors on the TSX.
Final thoughts
The tariff environment remains fluid, and uncertainty is unlikely to disappear anytime soon. That being said, Canadian businesses and markets have shown remarkable adaptability over the past year, from rapidly boosting CUSMA compliance to redirecting exports to new partners.
For investors, the playbook is clear: understand your sector exposure, diversify across geographies, stay informed on the CUSMA review, and resist the urge to make sweeping portfolio changes based on the latest headline. A steady hand and a long-term perspective remain your best tools in a trade war.
Read more from Christopher Liew:
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