US President Donald Trump has confirmed that he will impose 25% tariffs on imports from Canada and Mexico, effective February 1. It remains to be seen whether crude oil, a significant import from these countries, will be included in the tariffs.

The tariffs are intended to address issues such as migration, fentanyl trafficking and trade imbalances. However, Nigel Green, CEO of deVere Group, a global financial advisory and asset management firm, warned that the move carries significant risks for investors worldwide.

The US imports around 40% of its crude oil, mainly from Canada. If oil is hit with tariffs, it could impact energy markets, leading to higher costs for businesses and consumers. This could potentially push inflation higher and hurt economic growth. Green suggested that energy markets, already fragile due to global supply constraints, could face unnecessary volatility, making fuel and transportation more expensive globally.

The tariff announcement also fuels uncertainty about trade policy, leading to potential market volatility. With Canada and Mexico planning to retaliate, global markets are bracing for potential turbulence. Investors with exposure to North American equities, currencies and sectors that rely on supply chains may need to reassess their positions. Green suggests investors consider diversifying their portfolios to protect themselves from increased volatility and potential trade disruptions. This can be achieved by increasing exposure to defensive sectors such as healthcare, utilities and consumer staples, as well as exploring alternative assets such as gold and real estate.

Certain industries are expected to feel the impact of these tariffs more than others. Manufacturing, automotive and consumer goods sectors that rely on cross-border supply chains could face higher costs, potentially impacting profitability. Agriculture could also be hurt if retaliatory tariffs target U.S. exports. Conversely, domestic energy producers, certain U.S.-based manufacturers and industries supported by protectionist policies could see short-term gains due to reduced competition. (AL)

Source: Investing.com