Tariffs, Trade Wars, and Your Money: What Actually Happened and What to Do Now

February 1, 2025. Trump signs an executive order. 25% tariffs on Canadian goods, 10% on Canadian energy, effective immediately. The largest peacetime trade disruption between two countries that share the world's longest undefended border.

Your reaction at the time probably landed somewhere between "that's unhinged" and "wait, does this actually affect me?" It does. And fourteen months later, the story is messier and more interesting than the original headline.

The tariffs got struck down by the US Supreme Court. New ones replaced them under a different law. Canada quietly rolled back some counter-tariffs. Grocery prices kept climbing. Youth unemployment hit levels not seen since 2010. And a meaningful number of Canadian investors made one very expensive emotional decision in the spring of 2025.

Tariffs are not just a trade policy story. They are a personal finance story. Understanding the chain from a signed executive order to your grocery bill to your TFSA tells you exactly what to do, and not do, right now.

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What Actually Happened (The Short Version)

A tariff is a tax on imported goods. The importer pays it at the border and usually passes at least some of it to the consumer. One sentence, done.

February 1, 2025: the order is signed. 25% on most Canadian goods, 10% on Canadian energy. Canada retaliates within days with tariffs on roughly $30 billion worth of American goods. The back-and-forth escalates through spring and summer: steel and aluminum get hit with 50% tariffs by mid-2025, lumber and auto parts get targeted under separate rules, and businesses start making decisions based on uncertainty as much as the actual tariff rates themselves.

Here is the concrete version of how this works. A Canadian auto part worth $100 crosses into the US under a 25% tariff. It now costs the American manufacturer $125. They eat some of it. They pass the rest to the sticker price. Multiply that dynamic across thousands of products crossing the border millions of times, and you start to see why tariffs show up in your grocery bill, not just trade statistics.

Then February 23, 2026: the US Supreme Court rules that the original legal authority used to impose the tariffs, the International Emergency Economic Powers Act (IEEPA), was invalid for broad tariff use. The administration pivots within 24 hours. A 10% global import surcharge takes effect on February 24, 2026, this time under Section 122 of the 1974 Trade Act.

The key thing for Canada: CUSMA-compliant goods remain exempt. CUSMA, the Canada-United States-Mexico Agreement (the updated NAFTA), covers the vast majority of Canadian exports. If a product meets CUSMA's rules of origin, meaning it qualifies as North American-made, it avoids the 10%. What is still getting hit hard: steel and aluminum at 50%, lumber at 10%, autos at 25%. None of those have CUSMA exemptions. Canada removed its Phase 1 retaliatory tariffs on September 1, 2025, as negotiations continued. The situation is ongoing.

What It Did to Prices and Jobs

The price picture

The inflation story from the last 14 months is more nuanced than "tariffs made everything expensive."

Overall CPI hit 2.4% year-over-year in March 2026, up from 1.8% in February. That jump was driven primarily by a global energy price spike tied to Middle East conflict, not tariffs specifically. Excluding gasoline, March CPI came in at a more modest 2.2%. The headline number is real, but the source matters.

Where tariffs showed up clearly: groceries. Grocery inflation ran at 4.1% in February 2026 and ticked up to 4.4% in March. Fresh beef alone was up 13.9% year-over-year in February. Canadian grocery prices have risen 30.1% since February 2021, a five-year stretch of pandemic supply shocks, the 2022 inflation surge, and now tariff pressure layered on top. Your grocery bill is not just a tariff story. But tariffs are part of the story.

A complicating factor: Canada removed its consumer carbon levy in April 2025, which put meaningful downward pressure on headline inflation at the same time tariff-driven categories were pushing up. The two effects partly cancelled each other in the aggregate data. That is why overall inflation looks less alarming than the grocery line does on its own.

Money Campus version: Tariffs made specific things meaningfully more expensive. The overall inflation number looks calmer than it feels at the checkout because other forces pulled it down at the same time.

The job picture

This is where young Canadians took the most direct hit.

Youth unemployment (ages 15 to 24) peaked at 14.7% in September 2025. That is the highest rate since September 2010, excluding the pandemic years. The summer job market was specifically rough: the unemployment rate for returning students averaged 17.9% between May and August 2025, the worst summer since 2009. From January to August 2025, there was essentially no net employment growth in Canada.

The hardest-hit regions mapped directly to tariff exposure. Windsor's unemployment rate climbed to 11.1% by August, up from 9.1% in January. Southern Ontario's auto-adjacent communities got it worst. But the damage spread beyond manufacturing, because when a factory worker loses shifts, they stop buying coffee on the way in, and eventually the coffee shop cuts staff too.

By January 2026, youth unemployment had pulled back to 12.8%. The broader labour market has stabilized. Economists are calling it "static" though, not recovering. Canada's population actually shrank in 2025, the first time on record, which makes job data harder to interpret than usual.

What It Did to Your Investments

Consumer confidence in Canada cratered in spring 2025. Markets dropped hard. A lot of investors looked at their portfolio, watched the number go red, and sold.

That was the most expensive decision they made all year.

If you held an all-in-one ETF like XEQT through the volatility, the market came back. The investors who sold at the bottom did not recover, because they were sitting in cash when prices climbed back up. Volatility is the price of long-term returns. It has always been the price. A tariff war is not a new reason to sell.

Here is the concrete version. Say you had $10,000 in XEQT in January 2025. At the peak of tariff panic in the spring, your portfolio was down maybe 15 to 20%. If you sold in April, you locked in a $1,500 to $2,000 loss. If you held, you recovered. The entire outcome came down to a 30-second emotional reaction to a news cycle. That is how most long-term investment returns actually get destroyed: not by the market, but by the investor deciding to react to it.

The TFSA angle is worth stating plainly. The 2026 TFSA contribution limit is $7,000. If your money is in a TFSA and you stayed invested through 2025, the tariff volatility was essentially noise. Tax-free growth means you also did not pay on the gains you recovered. The account is designed to absorb a year like this one.

For a full breakdown of how registered accounts work and where to park different types of money, our piece on TFSAs, RRSPs, FHSAs, and non-registered accounts covers the structure.

The Three Things Worth Actually Doing

1. Do not touch your long-term investments.

If you sold during the spring 2025 volatility, the lesson is learned. If you did not, do not start now. The next period of volatility will come from a different source, for a different reason, with different headlines. The job is not to evaluate each one and decide whether this time is different. The job is to not react. Selling during a tariff scare is the worst time to sell because prices have already fallen and the recovery happens before most people feel comfortable buying back in.

For the first-principles case for staying invested, our piece on your first investing plan lays out why one ETF and one account beats most other approaches for young Canadians.

2. Buy Canadian where the math actually works.

This is not a political statement. It is a rational one. American goods subject to Canadian counter-tariffs cost more. A Canadian-made equivalent at similar quality is rational substitution. The caveat is important: do not turn this into an expensive lifestyle project. If the Canadian version costs 40% more and your budget is student-tight, that substitution does not help you. Be deliberate, not zealous.

3. Build your emergency fund before optimizing anything else.

The real tariff risk for most young Canadians was not their portfolio. It was their income. Youth unemployment hit generational highs. Summer job markets were the worst since before most of us were old enough to work them. Before you think about optimizing your ETF allocation, make sure you have three to six months of expenses sitting somewhere accessible. A TFSA high-interest savings account is exactly the right place: accessible, growing, and not taxable on the way out.

What not to do: Panic-sell investments. Load up on gold as a trade war hedge (if you want to understand the gold rally and why chasing it now is different from buying it in 2024, we covered the drivers here). Change your long-term strategy because of short-term trade news. Or wait for certainty before investing: the CUSMA renegotiation timeline is unclear, the tariff picture is still evolving, and certainty is not coming.

The personal finance lesson from 14 months of tariff coverage is simpler than most of the coverage made it sound: the investors who held came out ahead of the investors who reacted. That will probably be true for whatever comes next.

TL;DR

• Feb 1, 2025: Trump signs 25% tariffs on Canadian goods. Canada retaliates. Fourteen months of escalation, partial de-escalation, and ongoing negotiations follow.
• Feb 2026: US Supreme Court strikes down the original IEEPA tariffs. A 10% tariff under Section 122 replaces them. CUSMA-compliant goods remain exempt. Steel and aluminum (50%) and lumber (10%) are still hit hard under separate rules with no CUSMA exemption.
• Grocery inflation ran at 4.1% in February 2026 and 4.4% in March. Canadian grocery prices are up 30.1% since February 2021.
• Youth unemployment peaked at 14.7% in September 2025, the highest since 2010 excluding the pandemic. Summer student unemployment averaged 17.9%.
• Investors who sold during spring 2025 volatility locked in losses they did not have to take. Holding recovered.
• The 2026 TFSA limit is $7,000. It is designed to absorb exactly this kind of year.
• Three things to do: Leave long-term investments alone. Buy Canadian where the math works for your budget. Build your emergency fund before optimizing anything else.
• The situation is still evolving. Check current tariff status before any major purchase decisions that depend on cross-border pricing.

Disclaimer

This article is for educational purposes only and does not constitute financial advice. Tariff rules, CPI figures, and TFSA limits change. Verify current figures directly with the CRA, Statistics Canada, and the Government of Canada's trade resources before making financial decisions. Some figures in this article reflect data available as of April 2026.