The Current - How will tariffs affect your money? We answer your questions

Episode Date: March 6, 2025

What will U.S. tariffs mean for prices at the grocery store? What if you're about to renegotiate your mortgage? Matt Galloway puts your questions about the trade war to personal finance columnist Rob Carrick and economist Armine Yalnizyan.

What do you see when you look around? Lively cities, growing neighborhoods, things that connect us. For those into skilled trades, it's a world they helped create. Discover more than 300 careers, paid apprenticeships, and the unmatched feeling of saying, I made that. Learn more at Canada.ca slash skilled trades. A message from the government of Canada. This is a CBC podcast. Hello, I'm Matt Galloway and this is The Current Podcast. If you've had trouble thinking about almost anything other than tariffs this week, you are

not alone. The trade war with the United States has sparked widespread fear in Canadians about what will happen to our money, the markets and our country. We spoke with a few people at Toronto's Union Station yesterday to see where their heads are at. The average consumer, the average business owner is already struggling. There's such volatility in the market so I don't know maybe you just hold tight if you're, because you don't know what's going to happen. Is there an opportunity for Canada to receive cheaper goods from Mexico? I really like people's suggestions about list of how to buy Canadian to cope with the situation.

It's going to be an emptier fridge. That's for sure. Buy what you can, what you need. And that's about it. Yesterday on the program, we asked for your tariff questions and questions about how these tariffs will impact all of us. You had many, many questions.

And so we have brought together some experts to bring us some answers about what this means for the bottom line and for the economy as a whole. Rob Carrick is a personal finance columnist with the Globe and Mail and Armin Yalnyzian is an economist and the Atkinson fellow on the future of workers. Good morning to you both.

Good morning. Good morning. Um, we'll get to the questions in a moment, but Armin, we are at day three of this trade war, we heard from a lot of listeners, they're rattled and they're worried about the future. And I thought it was interesting in the conversation that you and I had earlier this

week, you admitted there are a lot of unknowns when it comes to what's going to happen. What do we know now about how bumpy the economic road in front of us is going to be? Well, look, as with almost every aspect of reality, expectations will shape the reality and expectations are for the greatest amount of uncertainty in the market. This is what the markets are saying, much greater than even in the pandemic. So if you're feeling like you're on a roller coaster ride, get in line because we're all on that same ride. We don't know what's going to happen next. Rob, same question to you. A lot of people are feeling nervous about what this is going to mean and we'll get to the questions,

but you've been writing about this in the Globe just broadly and briefly. What's the big picture? What should people be focusing on right now when it comes to personal finance? I think people should be focusing on their own personal security, cutting risk, figuring out how they're gonna weather yet another storm. You mean it's exactly five years ago that the pandemic was hitting, right? And I think we have to adopt almost the same mindset. We don't know what's happening.

How can we prepare and increase our own personal security? It's gonna be tough. So I asked yesterday what the questions were from people who are nervous, people who are feeling a bit freaked out by what's going on. We got a lot. Here's one question about the low Canadian dollar.

Have a listen. Hello, this is Lisa from Winnipeg. With these tariffs in place, how will they affect the Canadian dollar? Specifically, I'm wondering how this will affect travel plans to Europe in the latter part of the year. Armin, how concerned should people be about to Europe in the latter part of the year. Armin, how concerned should people be about the value of the Canadian dollar compared

to the US dollar, but also as we heard other currencies if people are heading abroad? Well, this is another area of uncertainty. In the last, in the run-up to Mr. Trump, the Canadian dollar had been faltering as had every other currency. So if you're going to go to Europe, actually the exchange rate between Canadian currencies and European currency and the euro or the peso had not changed that much. It's our relationship to the to the US dollar. But what Trump is doing is now starting to devalue the US dollar and so we don't know where the future of that lies but just a note of caution. Quite apart from going traveling, Canada is available at fire sale prices to anybody that's

investing with US dollars. Every single US dollar buys $1.45 in Canadian priced assets. So watch out real estate, watch out businesses. The takeover might not be military. It could be purely economic. That people will see bargains here north of the border. Absolutely. As our businesses weaken, not only are they going to be cheaper to buy, but that price differential between the Canadian dollar and the American dollar will buy more.

Rob, we got a lot of questions from listeners who are set to renegotiate their mortgages. There are more than a million mortgages that are apparently in this country up for renegotiation in 2025. Have a listen to this question. Hello, my name is Christine. I'm calling from Prince Edward Island. We have a mortgage that's up for renewal in a few weeks. I wonder if your panel could share some insights or predictions on where they think borrowing rates might go. Rob, the Bank of Canada is going to make a rate announcement next week. What are you looking for in that announcement?

I'm expecting a cut of 0.25 of a percentage point. The bank will want to do what it can to help stimulate the economy, keep confidence going. So that's why rate, there'll be a rate cut then and probably subsequent rate cuts. One of the things people are juggling is again, if they are renewing mortgages, renegotiating, the decision is between a fixed or a variable mortgage rate. There are different terms.

You have a competitive market where you can go to your lender and say, listen, somebody else is going to give me this rate. What are you going to do to match? But when people are looking at that difference between a fixed or variable rate, what should they be thinking about? Well, variable rates scared a lot of people, uh, did

a lot of damage when people took them out, uh, during the peak of the pandemic and that interest rates soared higher and so did the cost of the variable rate mortgages. Now we are going to see variable rate mortgages falling in price. They have fallen and they're going to continue to fall. Every time the Bank of Canada cuts a rate, a variable rate mortgage will cost a little bit less.

Fixed rate mortgages, they're harder to predict because the Trump economic policies are roiling the bond market and the bond market has an influence on fixed mortgage rates. And it's sort of hard to predict what's exactly going to happen there. But I can say with reasonable confidence that variable rate mortgages are going to remain the same or get cheaper in the next little while. And if you've got the stomach for a floating mortgage rate and a lot of people don't after what's happened in the past few years, then I think variable has some attraction right

now. Is there anyone who… Sorry, Armin, go ahead. Yeah, pick that up. Can I just weigh in on the uncertainty that Rob is saying that rates will continue to come down? The Central Bank of Canada has already said, we're not sure if rates are going to go up or down because we are in this weirdo moment where unemployment is going to go up and so is inflation.

So as a central bank, do you try and tame inflation by hiking rates or do you try and tame unemployment by dropping rates? That's the bind that they're in. And while we haven't seen price spikes yet, we will. So it's unclear how the future is going to play out for interest rates. I mean one of the concerns is, and we heard about this earlier this week, if these tariffs stay in place there's a real belief that the economy could slide into recession. What does that do to that conversation, Armin? Well, for sure, we are looking at at least a million people

that are in trade and trade adjacent jobs that might be affected. We know unemployment is gonna go up. There's just no question about that because anybody that was going to hire is not hiring now. So even if it wasn't an expansion, if it was just replacing people that were leaving, that's not happening on both sides of the border, by the way.

So we are looking at higher unemployment in an era where we've got only about 35% of people who are jobless receiving jobless benefits, though they pay in from their very first hour of work. So we are absolutely not recession ready. And that's, for me, job one for the federal government is EI reform that they have been promising since 2015. Let's get going.

What do you see when you look around? Lively cities, growing neighborhoods, things that connect us. For those in the skilled trades, it's a world they helped create. Discover more than 300 careers, paid apprenticeships, and the unmatched feeling of saying, I made that. Learn more at Canada.ca slash skilled trades. A message from the government of Canada. BDCA BDCA

You're an entrepreneur. Growth is essential for your business. At BDC, we get that. And we're here to help you stay two steps ahead. With our flexible financing and advisory services, we help you adapt, growing your business in the face of today's challenges and tomorrow's

opportunities. Stepping up for entrepreneurs. We're on it. BDC, financing, advising, know how. Rob, if you go back to the housing market, I mean, the squeeze in the housing market existed long before Donald Trump was back in office. Is there anybody who might gain from the terrorists disrupting that market here?

Aside from the foreign buyers that Armin was talking about. Young people. This could be an entree to them. I mean, a lot of young people have been despairing about the affordability of a first home and we did get a big drop from peak prices in 2022 to now, but it hasn't made that much of a difference because mortgage rates are higher than they were when the market was peaking. This could be, if you're looking for a long-term entry point into the real estate market and

you've got a job, et cetera, then I think we may be repricing the housing market. The numbers out of the Toronto and Vancouver market for February, preliminary numbers show it's kind of freezing up. There's a lot of people putting their houses on the market and not a lot of people buying them. It's really switching to a buyer's market. I don't think in a trade war, a lot of people are going to want to stick their neck out and buy a house and that will keep prices where they are or down. One of the other things you wrote about in a piece that was kind of looking at, these are the four things you need to do right now to protect your, your, your family and your

personal finances. And you talked about preparing and Armin's hinted at this, preparing for inflation 2.0 and looking at your expenses. Can you tell me a bit more about that Rob and what people might do now to try to figure out if this is coming, how they could save a little bit of money down the line?

One thing I'm floored about is how angry people still are and how they still feel the recessionary surge of the past few years. I was just looking at some polling results and I've asked people, what do you think the number one issue facing the country is? And obviously Donald Trump is one, inflation was just behind it and the inflation rate today

is right where it should be at, below 2%. But as Ramin said, I think we are gonna see inflation kick higher, driven by a lot of things that we import from the United States. And I think people are going to need to figure out what can I cut to offset that. And I was suggesting the easiest pickings are those subscriptions that we've all signed up for. Get your credit card statement out and start thinking I'm going to trim expenses A, B and C, and maybe I can generate enough savings there to help offset higher costs when we do grocery shopping. Actually look at the credit card statement and say this is where the, see where the money is going

and figure out what you can do without. You know, believe me, if they're anything like me, you can let expenses slide because oh, there's a line there for this service and that service and if everything's going okay, you think fine, maybe we'll enjoy it more next month than we did last month. Now you got to get tough. Go line by line on the credit card. These are recurring statements. These are companies you've allowed to deduct money every month. Do you want to continue with that?

You can save, you could probably round up $50 if you cut a couple streaming services per month. Armin, did you want to pick up on that? I mean, again, people, this is specifically what people are looking for in some ways is very practical information on not just what's coming, but if this is going to happen, if this is, we don't know, the decision changes minute by minute, day by day. What can people do to kind of future-proof themselves? Well, can I just say that everybody wants to know how they can fix it for themselves, and everything that Rob has said is correct.

We've gone from an ownership society to being owned by digital services. And so, anything you can do to get free of that, go for it. Especially since, don't forget, the people that were standing behind Mr. Trump during the inauguration were four of the five richest people on the surface of the planet, and they made their money from digital services, and they don't want us to tax them.

We introduced a digital services tax in June of 2024, and part of this is to get us to change our laws and change our taxation. That brings me to a bigger point. We cannot buy or save our way individually out of this bind. We need to do things collectively. We need to treat this economic war like it is an economic war and lever all of our collective power and that happens through governments. So who we elect as our government is incredibly critical because they will all have different

plans on how to deal with what happens going forward. Christine in Calgary has a question specifically about that. Have a listen. I'm most concerned about how this affects the overall economy and employment. What's Canada going to do to help people who are going to obviously be affected by these tariffs, whether losing their job or not having the same amount of spending power that they would because of all the price increases. So, I mean, pick up on that. Doug Ford, the Premier of Ontario,

said in his remarks earlier this week that he believed what would be required from governments across the board, in his words, was similar to the pandemic, almost exactly the same as the pandemic. That means a large support system that would be put into place to help people through difficult times. What are you looking for?

Well, it isn't just incomes, but it's incomes like EI reforms that I was referring to. The last time we reformed EI was 1996. The fact that only about a third of people who are jobless get something out of an insurance plan that they and their employer pay into is nuts. So we should get moving on that. But another thing that can be done to offset costs is not make us reach deeper into our pockets for healthcare, not make us reach deeper into our pockets for childcare,

for pharmacare, for dental care. So the federal government has been starting to move in that direction, not fast enough, not far enough, but actually dealing with the affordability crisis through what it can do without intervening directly in the market. The second area is we need greater surveillance over how prices get spiked up.

We saw greedflation was a real thing all over the world in the pandemic. Businesses use the economic shock as cover for raising prices, not only to cover the cost increases, but to add a little bit more. So we saw not only prices go up, but profit margins go up during the pandemic. So we had a question specifically about that from Michelle Ailes in BC who wrote, what happens if grocers increase the price of Canadian products as well? Think about it.

If USA sour cream goes up in price, grocers won't miss the opportunity to raise all sour cream product price. Is that what you expect to see grocery store chains taking advantage of the tariffs to crank up the costs and the prices at all of their stores across the board? It certainly won't be limited to grocery groceries, but you know, it's one of those fool me once, you know, fool me twice problems. If we do not pay closer attention to how prices are being manipulated in an era of economic shocks,

where the big players can, who are already price setters, can get away with jacking up prices. Look, the Canadian economy is so concentrated in terms of corporate concentration. There's three or four players in almost every sector that set prices. So why not be more vigilant about how prices go up? And as Tiff Macklem, the central bank governor said back in the pandemic, we are expecting prices to come down as fast as they go up when this economic storm is over.

Those prices have not come down. So let us expect that of the people that are around us. Rob, it is not just the president of the United States that pays close attention to the stock markets. Many people who have investments feel like they are on some sort of elevator that is going up and largely going down, and their stomach kind of

jiggling around when it comes to what's happening in the markets. Wall Street, the belief is that it's going to open with losses again because there's still anxiety. There's often a fear of tearing open that statement or going online and looking at what your investments have done, and you have written that we need to suck it up and see what has happened to our investments. Why should we look at that horror movie? Well, I think there's going to be some, a little bit of good news if you have a properly diversified portfolio, by which I simply mean that you have lots of stock market exposure, which also has some exposure to bonds or to GICs. And if you have bonds or GICs, they're fine. If you have 40%, like a normal portfolio might have 60% stocks, 40% bonds,

the 40% is doing okay right now. The 60% is going to get hammered hard, but that happens every 5 to 10 years anyway. If it wasn't the pandemic was the last time, if it wasn't for the trade war, if it wasn't for any other unexpected event, we're always saying that, but stocks go down, they always come back. It's painful, it's horrible. I hate stock market declines. I've lived through many of them, but this is normal procedure for investing. There's nothing exceptional going to happen to your stocks that hasn't happened before.

We will come through it, but it's going to take time for it to heal. If you take a peek now, don't make a habit of it, but if you take a peek now, you will see that, okay, at least my bonds are hanging in there, my GICs, any cash you have, that's stable. That's something to hang on to as we go through the uncertainty of the weeks and probably months ahead. Are there any aspects of the current economy, Rob, that might give people a bit of comfort about how we can weather this storm?

Like, is there anything that's going well? You know, I would- It's a big sigh. Yeah, I could say it's going well and then Trump slaps a terrifying like in a tweet at 9 a.m. I can't really single anything out that's economically killing it right now. But if you're an investor, there's these

old-fashioned utility stocks, they generate electrical power for households. They're doing okay, they're holding their own, they're paying nice dividends. If you want to invest in something that's going to be relatively stable, I would say start your search there. We just have a couple of minutes left. Let me read one final letter and I'll get you to comment quickly both on this. It comes from Wendy Grater who wrote, having navigated a tourism business through COVID, I feel and understand the uncertainty that's being felt. However, the solidarity and sense of support from the

whole country across party lines, across provinces, territories, ages, genders, backgrounds is inspiring. There is this kind of elbows up mentality right now. Um, Rob, briefly from you, is this a good thing in terms of how it's going to allow us kind of some sort of energy or some sort of initiative to protect ourselves and the economy? I think it's inspiring.

And I think it gives us latitude to do things as a country, to reorient ourselves, acknowledging that there is going to be some pain ahead and that if we're all in solidarity on this, I think it makes it easier for the next government that Armin alluded to to take the measures that are going to need to be taken. Armin, if this is economic warfare, is that approach of elbows up the kind of thing

that's going to give us the initiative to make our way through this in a way that's not going to leave people behind? The Elbows Up is actually quite inspiring because it's elbows up against another nation. Let's make sure it's not elbows up against one another within the country. We have the fiscal firepower to take care of one another.

Rob's been talking about what you can do with your savings. A lot of people in Canada don't have savings. And when they become unemployed, they're going to strip through the very thin financial cushions they've got. We're already at, before Trump, we were at record food bank usage and record numbers of people being evicted from their homes. We can take care of one another, but it can't be an elbows up strategy around one another. Great news is we do have savings both federally and as well as in our own pockets. Why don't we treat this as the economic war it is and reissue victory bonds so that we can actually infuse our coffers with the funds we need to help one another when we need that

help and fight the good war for democracy. This is really helpful. I think we will have you back because people will still have questions. This is to Rob's point. This is not going to go away. It may change again later on this morning. In the meantime, thank you both for being here. You're welcome. My pleasure. Rob Carrick, personal finance columnist with The Globe and Mail. Armin Yalnazian is an economist, Atkinson Fellow on the future of workers. If you have any further questions on the tariffs and how they may impact you, email us, thecurrent at cbc.ca.