equity strategist – BNN Bloomberg

A stock strategist says U.S. President-elect Donald Trump’s threat to impose sweeping tariffs on goods from Canada on his first day in office next month would immediately hurt U.S. consumers and is unlikely to happen without major opt-outs.

“The way I think about (Trump) is that he needs to be taken seriously, but not literally,” Ian de Verteuil, equity strategist at CIBC Capital Markets, told BNN Bloomberg in a Wednesday interview.

“Historically, he’s quite extreme and uses a lot of rhetoric, but at the end of the day… we have to think it through in terms of what he’s trying to achieve and let’s go back to first principles: MAGA.”

He said Trump’s Make America Great Again (MAGA) slogan would be tested if Trump followed through on his threat to impose a 25 percent tariff on Mexican and Canadian goods entering the United States unless both countries addressed it future president’s border problems.

“The concept of a 25 percent over-the-board tariff on everything from fossil fuels to auto parts to a number of things like that, I think almost immediately will negatively impact the American consumer,” he said.

“So I think it’s unlikely, but let’s be very clear; we’re anticipating what a relatively mercurial incoming US president will do, but our view is certainly that the impact will be less than what the market currently expects. ”

His assumption, de Verteuil noted, is that U.S. tariffs, whatever form they end up taking, will not apply to Canadian fossil fuel auto parts coming into the U.S., since the U.S. economy is still heavily dependent on those imports.

But companies that export discretionary goods to the United States, such as apparel maker Gildan Activewear Inc. or powersport vehicle maker BRP Inc., are more likely to be at risk, he said.

He added that in his opinion, Mexico-based companies that export goods to the United States are more at risk of being adversely affected by tariffs than Canadian firms, since Trump’s border concerns mainly involve America’s southern neighbor.

“At the end of the day, the fight is not with Canada, the fight is largely with Mexico, and it is with Mexico for three reasons,” explained de Verteuil.

“One is immigration coming across the border from Mexico to the United States, the second is the movement of drugs into the United States from Mexico, and third, there has been a massive investment by Chinese companies in Mexico under the guise that products will flow south as opposed to flow north.”

He said the U.S. has “far less” of a problem with its northern border when it comes to immigration and trade, but he also acknowledged there appears to be “some animosity” between Trump and Justin Trudeau’s Liberal government in the moment.

“It looks like there are some issues with that, but I would say, by and large, Canada has been an excellent trading partner for the United States,” he said.

“We’re not immune, but I’d say the likelihood of us having big problems in 2025… is pretty low.”