Written by: Terry Vaughan & Mo Lidsky
Published on: March 18, 2025
Protectionism is not new – threats to Canadian sovereignty are
Protectionism and tariffs have been relatively common over the past several decades. A lot has been written about the negative impacts of tariffs. The preponderance of economic evidence suggests that sustained protectionism generally reduces economic growth, dampens market returns, and creates more losers than winners across the broader economy.
Although it’s only been a couple of months since the Trump administration took office and began implementing its MAGA policies, in that short time, we’ve seen the following response from equity markets:
- Eurozone equities up 10%
- Canadian equities flat
- US equities down 5%
The territorial aggression we’re seeing in Canada from the US is far less common – with the 20thand 21st centuries being essentially free of this – making it feel like something that doesn’t happen anymore in our part of the world.[1]
We should all be alarmed by this. Per the Economist[2], Wayne Eyre, who retired as Canada’s top general in 2024, says Canada no longer has “a benign superpower to the south.” “For too long, we’ve had a case of strategic apathy bordering on strategic negligence. Hopefully, now this is a call to strategic action.”
Let’s all hope that our governments can hear each other, focus on common goals, dial back the rhetoric (“51st state” and “dropping the gloves”), and get back to being terrific neighbors.
How should affluent families position themselves amidst these shifts?
As in most areas of life (relationships, leadership, investing, etc.), the most essential positioning is mental. Remember Seneca’s wisdom: “We suffer more in imagination than in reality.” Our minds are wired to assume the worst, yet anxiety-driven decision-making and the accompanying over-management rarely lead to positive outcomes. Uncertainty is a powerful force that can cause a double whammy of both acting on poor decisions and avoiding acting on good ones.
Uncertainty, while unsettling, also creates opportunity. Market downturns and economic volatility often lead to mispricing, rewarding those willing to take calculated risks. The classic Warren Buffett quote is, “Be fearful when others are greedy, and greedy when others are fearful.” Mr. Buffet also said, “The most important quality for an investor is temperament, not intellect.”
Disruptions expose weaknesses in long-standing strategies, creating opportunities for those who can adapt quickly. Just as the COVID era birthed technological and scientific breakthroughs, times of uncertainty often catalyze innovation and progress. We expect the current challenges with our neighbor to the south will catalyze many positive outcomes here in Canada.
Focusing on what we control
In our investment work with client families, we build broad and thoughtfully diversified portfolios that benefit from volatility (e.g., diversifying strategies), cash flows that aren’t a function of equity values (e.g., credit), or assets that are inflation-protected (e.g., tangible assets). A long-term approach with talented investment partners who thoughtfully manage these risks is a good position to be in – and, unlike the news, is something families can control.
In our family office work, we help families minimize various risks by increasing clarity of family values and governance, supporting family preparedness with coaching and education, and taking on a wide range of financial administration, management, and reporting responsibilities. Again, all elements that families can control – and provide stability when the rest of the world feels less so.
At an individual level, successfully navigating uncertainty builds resilience, adaptability, and strength. Viktor Frankl, a Holocaust survivor, observed, “When we are no longer able to change a situation, we are challenged to change ourselves.” From seeing uncertainty as purely a risk to recognizing its potential rewards, this mindset shift can be the key to long-term personal growth – national progress and growth, too!
No sugar-coating
This is an incredibly challenging time for Canada. And while we cannot control the news, we can control our responses. Thoughtful stewardship requires stepping back, asking the right questions, focusing on what we can control, influence, or improve, and where we need to let go.
References
[1] The 19th century is another story, of course – with the War of 1812 – and a handful of other territorial disputes between Canada and the US.
[2] Canada’s security complex has woken up to Trump’s menace. The Economist. 12-Mar-2025
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