Markets breathed a sigh of relief today following the month-long extension put in place before tariffs could be brought back to the table. It seems Trump’s endgame is a new deal, not disaster.

In our view, Canada should be doing everything humanly possible to make that happen, given our weak negotiating position in a potential dispute.

Post-pandemic, our reliance on the U.S. economy to support our own has jumped, with U.S. exports representing >25% of GDP in 2023.

This dependence on America chokes out our ability to grow our other international relationships, with U.S. exports making up nearly 75% of total goods leaving the country.

Trade relationships aren’t fluid.

We can’t replace lost demand from America instantly, threatening jobs linked to U.S. exports. Our data tells us a whopping 1.2M workers are directly tied to American exports, with an additional 1.2M upstream from those direct workers.

Every 5% jump in job loss from this part of the labour force equates to an increase in total unemployment by 0.27% and 0.54%, respectively. With unemployment already at 6.7%, this could bring dire consequences to labour markets here at home.

The natural response would be a stimulus package of some sort, but with elevated debt levels and an already weak CAD, the BoC would be left with no good decisions.

So what should we do?

Assuming we can strike a deal, Canada should focus on removing barriers to trade between provinces, a move some economists predict could boost GDP by up to 7%.

If we can’t strike a deal, well, the outlook is bleak. But there are a few weapons we have if we need them.

The Three Ps:

If the above link won’t work, try this: https://www.bullpen.finance/content/29

We’re all for fighting back… but maybe a little bit of work in the gym first, before we try to throw a haymaker?

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Own the house: TMX Group (X) reported a stellar Q4 and the stock ran >8% on the day. The strategic M&A it’s been doing is showing up in numbers and its derivatives division performed strongly, driving a 5% revenue beat (up 30% y/y) and a 10% EPS beat (up 30% y/y). We expect that derivative line will continue to be strong on the back of a still nascent Canadian derivatives market and heightened volatility. It also announced a 5% increase in its dividend - congrats shareholders!