Worried about layoffs and retirement? Steps you can take during a trade war

The Rising Tide of Trade Tensions: How Canadians Can Navigate Economic Uncertainty

As global trade tensions escalate, many Canadians are rightly concerned about the potential impact on their finances, job security, and retirement plans. The U.S.-led trade war, which includes increased tariffs on Canadian and Mexican imports, has sparked fears of economic instability. Prime Minister Justin Trudeau has acknowledged the challenges ahead, stating that the trade war will "hurt the Canadian economy and all of us." While Ottawa has retaliated with its own tariffs on U.S. imports, the ripple effects of this trade war could be far-reaching, from job losses to rising consumer prices and market volatility. For Canadians, the big question is: how can we prepare for this financial storm?

Experts like Moshe Lander, an economist at Concordia University, warn that the full impact of these tariffs may not be felt immediately but could become apparent in the next three to six months. "Inflation is going to take off," Lander predicts, urging Canadians to start preparing now by focusing on essentials and postponing non-essential spending. Whether it’s avoiding discretionary purchases like extra entertainment subscriptions or delaying home renovations, the key is to make pragmatic financial decisions rather than emotional ones. For example, if a product from the U.S. offers the best value, it may still be worth considering, even if it feels counterintuitive during a trade war.

Retirement and Investment: Navigating Market Volatility

For those nearing or in retirement, the impact of economic fluctuations can be particularly concerning. Market dips and stock market declines could affect retirement savings, especially for those relying on fixed pensions. Lander suggests that younger retirees with longer time horizons may have little to worry about, as markets tend to recover and grow over time. However, for those just a few years away from retirement, flexibility is key. Extending retirement timelines, transitioning to part-time work, or rethinking investment strategies could help ease financial uncertainty.

Charles St-Arnaud, chief economist at Alberta Central, emphasizes the importance of regularly assessing retirement portfolios, especially for those nearing retirement. Reducing risk in investments and consulting with financial advisors can help safeguard retirement goals during volatile times. For those managing their own investments, reaching out to professionals for guidance is crucial. While stock markets may eventually recover, the immediate impact on retirement plans can be significant, particularly for those who were counting on consistent growth.

Job Security and Debt Management: Building a Safety Net

The manufacturing sector is among the most vulnerable to the trade war, with economists like Michael Dobner of PwC Canada warning of potential job losses. Workers in at-risk industries should start planning by building an emergency savings buffer to cover essential expenses for at least two to three months. Paying down debt, such as mortgages or credit cards, can also provide a financial safety net. While borrowing may be necessary during tough times, Lander cautions against taking on unnecessary debt, especially for non-essential expenses like vacations. Instead, he recommends focusing on maintaining credit scores by paying minimum balances and avoiding new borrowing unless it offers long-term benefits, such as furthering education or upskilling.

Staying Flexible and Preparing for the Worst

As trade tensions drag on, economists agree that the situation could worsen before it improves. Lander advises Canadians to adopt a cautious mindset, preparing for the possibility that "tomorrow will be worse than today." St-Arnaud echoes this sentiment, urging people to "prepare for the worst, hope for the best." This means rebuilding precautionary savings, reducing debt, and avoiding unnecessary expenses. By staying flexible and adapting to changing circumstances, Canadians can better navigate the uncertainty ahead. While it’s impossible to predict exactly how the trade war will unfold, taking proactive steps now can help mitigate its impact on personal finances and retirement plans.

In conclusion, while the trade war presents significant challenges, Canadians can take control of their financial health by prioritizing essentials, building safety nets, and seeking professional advice when needed. With preparation, flexibility, and a focus on long-term goals, Canadians can weather this economic storm and emerge stronger on the other side.