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Trump's Potential Return: Economic Risks for Investors

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  Published in Stocks and Investing on Saturday, January 3rd 2026 at 6:02 GMT by The Globe and Mail

Navigating a Trumpian Economic Storm: How Investors Should Prepare for 2025 and Beyond

The prospect of Donald Trump returning to the White House in 2025 has sent ripples through global financial markets, prompting investors and businesses alike to reassess their strategies. A recent quiz published by The Globe and Mail’s Financial Review highlights key economic uncertainties surrounding a potential second Trump administration, focusing particularly on the implications of renewed tariffs and broader trade tensions. The article isn't just about predicting outcomes; it's about understanding the range of possibilities and how to position portfolios accordingly.

The Tariff Threat: A Return to Protectionism?

The core concern driving much of the anxiety revolves around Trump’s history with trade policy. During his first term, he implemented significant tariffs on goods imported from China and other countries, arguing that these measures would protect American jobs and industries. While some argued these tariffs achieved limited success (and often hurt U.S. consumers and businesses reliant on imports), the potential for a more aggressive and widespread tariff regime in 2025 is very real. The quiz emphasizes that this isn't just about China; Trump’s rhetoric suggests targeting various sectors, including automobiles, electronics, and even seemingly untouchable industries.

The article points out that many of the initial tariffs imposed during the first term were implemented under Section 301 of U.S. trade law, which allows for retaliatory measures based on unfair trade practices. Trump has indicated he would be willing to impose tariffs significantly higher than those previously enacted – potentially exceeding 10% across a broad range of imports. This is crucial because while previous tariffs were disruptive, their impact pales in comparison to what could occur with substantially increased rates.

The quiz highlights the potential for escalating trade wars. China has repeatedly demonstrated its willingness to retaliate against U.S. tariffs, leading to cycles of reciprocal measures that disrupt global supply chains and increase costs for businesses and consumers worldwide. A return to this scenario would likely trigger volatility in financial markets as investors react to shifting trade policies and uncertainty about future economic conditions.

Beyond Tariffs: Broader Economic Uncertainty

While tariffs are the most immediate concern, a second Trump administration could also bring other significant economic shifts. The article references Mark Carney's (former Bank of Canada Governor and former Governor of the Bank of England) commentary on potential disruptions to global financial stability. Carney has warned that a return to protectionism combined with unpredictable policy decisions creates an environment ripe for instability. He suggests the possibility of a dollar crisis if Trump’s policies undermine confidence in U.S. debt, although he acknowledges this is a more extreme scenario. (See related article: [ https://www.bnnbloomberg.ca/carney-warns-of-dollar-crisis-if-trump-returns-to-office-1.1932864 ]).

The quiz also touches on the potential for changes to monetary policy, although this is less directly linked to Trump’s personal preferences and more tied to how a second term might influence the Federal Reserve. A trade war could force the Fed to reconsider its interest rate strategy, potentially leading to lower rates to cushion the economic impact – although such actions could also fuel inflation.

Investment Strategies in a Volatile Landscape

The Globe and Mail’s quiz doesn’t offer definitive investment advice but instead presents scenarios and asks readers to consider their responses. However, certain themes emerge regarding how investors might navigate this uncertain period:

• Diversification: Spreading investments across different asset classes and geographies is crucial. Reducing exposure to sectors heavily reliant on international trade would be prudent.
• Defensive Stocks: Companies that produce essential goods or services (e.g., utilities, consumer staples) tend to perform relatively well during economic downturns and periods of uncertainty.
• Commodities: Some commodities could benefit from increased inflation stemming from tariffs or supply chain disruptions. However, commodity markets are notoriously volatile.
• Inflation Hedges: Assets like real estate (though with caveats about rising interest rates) and precious metals can act as a hedge against inflation.
• Active Management: A more active investment approach, where fund managers can quickly adjust portfolios based on changing market conditions, may be preferable to passive investing during periods of heightened volatility. The quiz implicitly suggests that a "set it and forget it" strategy might not be ideal in this environment.
• Consider Currency Exposure: The strength of the US dollar is a key variable. A weaker dollar (potentially triggered by trade tensions or policy changes) could impact multinational corporations and investments held in other currencies.

The TSX Perspective: Canadian Implications

For Canadian investors, the situation presents unique challenges and opportunities. Canada’s economy is heavily integrated with the U.S., making it particularly vulnerable to shifts in American trade policy. The article notes that the Toronto Stock Exchange (TSX) could experience increased volatility as investors react to developments in the United States. Canadian companies involved in cross-border trade will be directly affected by tariffs, while those focused on domestic consumption might fare relatively better. Furthermore, a weaker Canadian dollar – potentially resulting from U.S. policy changes – could benefit exporters but increase import costs for consumers.

Conclusion: Preparing for Uncertainty

The Globe and Mail’s quiz serves as a valuable reminder that the future is not predetermined. While a Trump presidency presents significant economic uncertainties, understanding the potential risks and opportunities allows investors to make informed decisions. The key takeaway isn't necessarily predicting what will happen but rather preparing for a range of possible outcomes and adjusting investment strategies accordingly. The article emphasizes the importance of staying informed, diversifying portfolios, and considering active management to navigate the potentially turbulent economic landscape ahead.

I hope this summary fulfills your request! Let me know if you’d like any adjustments or further elaboration on specific points.