XEQT and the 2026 Trade War: What Canadian Tariffs Mean for Your Portfolio

If you’ve been paying attention to the news lately – and let’s be honest, it’s been hard to avoid – the words “tariffs,” “trade war,” and “retaliation” have been popping up everywhere. The US-Canada trade relationship, once taken for granted as the most stable economic partnership in the world, has been rocked by escalating tensions throughout 2025 and into 2026.

As a Canadian investor holding XEQT, I’ll admit: the headlines had me worried at first. When your largest trading partner starts slapping tariffs on your country’s exports, and your government fires back with its own, it’s natural to wonder what that means for your portfolio.

But after digging into the numbers and the history, I came away feeling more confident in XEQT than ever. Here’s why.

1. What’s Actually Happening with Canada-US Tariffs

Let’s quickly set the stage for anyone who hasn’t been glued to the trade news.

Starting in 2025, the US imposed or threatened tariffs on a range of Canadian exports including steel, aluminum, lumber, energy products, and agricultural goods. Canada responded with retaliatory tariffs on American products. The situation has evolved throughout early 2026 with new rounds of tariffs, negotiations, partial rollbacks, and fresh escalations.

For Canadian investors, the concern is straightforward:

• Canada exports roughly 75% of its goods to the US – tariffs directly threaten Canadian corporate earnings
• The Canadian dollar has been volatile, adding currency uncertainty
• Consumer confidence on both sides of the border has taken a hit
• Specific sectors like energy, materials, and manufacturing are caught in the crossfire

It sounds scary. And if you held a portfolio concentrated entirely in Canadian stocks, you’d have good reason to be nervous. But that’s exactly why XEQT exists.

2. XEQT’s Geographic Diversification: Your Built-In Shield

Here’s the thing most people forget when they panic about Canada-specific trade risks: XEQT is not a Canadian fund. It’s a global fund that happens to be listed on the Canadian stock exchange.

Let’s look at what you actually own inside XEQT:

Only about a quarter of your XEQT portfolio is directly exposed to Canada-specific trade risks. The other 75% is invested around the world, in companies and economies that may not be affected by US-Canada tariffs at all – and in some cases may actually benefit from the disruption.

Compare this to a common DIY Canadian portfolio:

XEQT’s global diversification isn’t just a nice-to-have. In a trade war, it’s your portfolio’s best defense.

3. Which Sectors Win and Lose in a Trade War

Tariffs don’t affect all companies equally. Some get hurt, some benefit, and some barely notice. Let’s break down the major sectors inside XEQT:

Sectors Under Pressure

• Canadian Energy – Tariffs on Canadian oil and gas exports to the US directly squeeze margins for companies like Suncor and Canadian Natural Resources. However, global energy demand provides a floor.

• Canadian Materials and Mining – Steel and aluminum tariffs hit companies like Teck Resources and Nutrien. Lumber tariffs have been an ongoing saga for years.

• Canadian Auto Manufacturing – Canada’s auto sector is deeply integrated with US supply chains. Tariffs create uncertainty about production and jobs.

• US Consumer Goods – American companies that import Canadian raw materials face higher input costs, potentially squeezing margins.

Sectors That May Benefit

• US Domestic Manufacturers – Companies that compete with Canadian imports can benefit from tariff protection. This is part of the stated rationale for the tariffs.

• International Exporters to North America – If tariffs make Canadian goods more expensive in the US (or vice versa), international competitors may step in to fill the gap.

• Technology – Major tech companies (Apple, Microsoft, Google) have relatively low exposure to physical trade tariffs. Their revenue is digital and global.

• Healthcare and Consumer Staples – Defensive sectors tend to be less impacted by trade policy.

The XEQT Advantage

Because XEQT holds all of these sectors across all geographies, the winners and losers partially offset each other. When Canadian energy gets squeezed, US tech might be rallying. When North American trade slows, European and Asian exporters might pick up the slack.

This natural hedging effect is exactly what diversification is supposed to do. You don’t need to predict which sectors will win or lose – you own them all.

4. History Lesson: Trade Wars and Market Recovery

This isn’t the first time tariffs have rattled investors. Let’s look at what happened during past trade conflicts:

US-China Trade War (2018-2020)

The most recent major trade war saw the US impose tariffs on $370 billion worth of Chinese goods, with China retaliating in kind.

• Initial market reaction: S&P 500 dropped about 20% from September to December 2018
• What happened next: Markets recovered and went on to hit new all-time highs by early 2020 (before COVID)
• Lesson: The market priced in the worst-case scenario, which never fully materialized

Smoot-Hawley Tariffs (1930)

The most infamous tariff act in history raised tariffs on over 20,000 imported goods and is widely credited with deepening the Great Depression.

• Context: This was an extreme, broad-based tariff increase combined with already terrible economic conditions
• Lesson: Even this worst-case scenario was eventually overcome. Markets recovered over the following years and decades.

Canada-US Lumber Disputes (Ongoing Since the 1980s)

Softwood lumber tariffs have been a recurring theme in Canada-US trade for over 40 years. The Canadian forestry sector has survived every round.

• Lesson: Industries adapt. Companies find new markets, reduce costs, and negotiate solutions.

The Pattern

In virtually every trade war in modern history:

1. Headlines cause panic and markets drop
2. Negotiations eventually occur – both sides have economic incentive to deal
3. Markets recover as uncertainty diminishes
4. Long-term investors who stayed the course come out ahead

Selling your XEQT during trade war fears means locking in losses and betting that you can time the bottom. History says that’s a losing strategy.

5. The Canadian Dollar Factor

One often-overlooked aspect of trade tensions is the currency effect.

When the Canadian economy faces headwinds (like tariffs on our exports), the Canadian dollar tends to weaken against the US dollar. For XEQT holders, this actually provides a natural currency hedge:

• ~75% of XEQT is in non-Canadian assets (US, international, emerging markets)
• When the CAD weakens, those international holdings are worth more in Canadian dollar terms
• This partially offsets any losses in the Canadian portion of the portfolio

For example, if the Canadian stock market drops 5% due to tariff fears, but the CAD also weakens 3% against the USD, your US holdings (45% of XEQT) effectively gain about 3% in CAD terms just from the currency movement.

This is not a perfect hedge, and it doesn’t guarantee positive returns during trade tensions. But it does mean XEQT investors have a built-in buffer that investors holding only Canadian stocks do not.

6. What You Should Actually Do Right Now

Alright, enough analysis. Here’s the practical playbook for XEQT investors during trade tensions:

Keep Buying on Schedule

If you have a regular investment schedule, stick to it. Market dips caused by trade fears are actually opportunities to buy more shares at lower prices. Your dollar-cost averaging strategy works best when you don’t interrupt it.

Don’t Sell in Panic

I know this is easier said than done. When headlines scream about economic catastrophe, every instinct says to run to cash. But here’s what actually happens when you sell during a dip:

1. You lock in a loss
2. You sit in cash, watching the market (which may recover quickly)
3. You agonize about when to get back in
4. You either buy back at a higher price or miss the recovery entirely

Consider Tax-Loss Harvesting (Non-Registered Accounts Only)

If you hold XEQT in a non-registered account and it’s currently sitting at a loss, a trade-war-induced dip might be a good time to harvest that tax loss. You’d sell XEQT, immediately buy a similar ETF (like VEQT) to stay invested, wait 30 days to avoid the superficial loss rule, and then switch back if you prefer XEQT.

This lets you claim a capital loss on your taxes while staying fully invested. It’s the one silver lining of market dips.

Revisit Your Risk Tolerance (Honestly)

If the current trade tensions are causing you genuine anxiety or sleep loss, it might be worth asking: is my portfolio too aggressive for my comfort level?

XEQT is 100% equities. If you have a shorter time horizon or lower risk tolerance, a balanced fund like XGRO (80/20 stocks/bonds) or XBAL (60/40) might let you sleep better at night. There’s no shame in dialing back the risk – the best portfolio is the one you can stick with.

Stay Informed, But Don’t Obsess

Read the news, understand the situation, but don’t refresh trade war headlines every hour. The market processes information far faster than you can react to it. By the time you read a headline, it’s already priced in.

7. The Bigger Picture: Why XEQT Was Built for Moments Like This

Let me zoom out for a moment.

XEQT was specifically designed by BlackRock to give Canadian investors exposure to the entire global stock market in a single, low-cost ETF. It wasn’t designed for calm, easy markets where everything goes up. It was designed for exactly these kinds of moments – when geopolitical tensions, trade wars, pandemics, or other crises make investors question everything.

The beauty of owning 9,000+ stocks across 40+ countries is that no single event – not even a major trade war between the two largest trading partners in the world – can sink your entire portfolio. Some parts will get hit. Other parts will hold steady or even benefit. And over time, the global economy has always grown through and past these disruptions.

Since its inception in 2019, XEQT has weathered:

• The COVID-19 pandemic and crash of 2020
• The rapid recovery and inflation surge of 2021
• The interest rate hiking cycle and tech correction of 2022
• The AI boom and market recovery of 2023-2024
• Multiple rounds of US-Canada trade tensions in 2025-2026

Through all of it, long-term holders who kept contributing and didn’t panic sell have been rewarded.

8. A Personal Note on Staying the Course

I’ll be honest: the first time I saw a headline about major new tariffs on Canadian exports, my stomach dropped. I thought about my Canadian energy holdings inside XEQT, my job in a trade-sensitive industry, and the broader economic uncertainty.

But then I remembered why I chose XEQT in the first place. Not because I thought Canada-US relations would always be smooth. Not because I expected zero volatility. I chose it because I wanted a portfolio that could handle whatever the world threw at it – including things I couldn’t predict.

Trade wars are temporary. Global economic growth is the long-term trend. And XEQT is my bet on the world continuing to grow, adapt, and innovate, regardless of what any politician does with tariff policy.

So I’m doing what I always do: contributing on schedule, ignoring the noise, and trusting the process. I’d encourage you to do the same.

The Bottom Line

The 2026 trade tensions are real, and they will cause real economic impacts for some Canadian companies and workers. This isn’t something to dismiss or minimize.

But for XEQT investors, the situation is far less dire than the headlines suggest:

• Only ~25% of XEQT is directly exposed to Canadian trade risks
• Global diversification means winners offset losers across your portfolio
• Currency effects provide a natural buffer when the CAD weakens
• Historical precedent shows trade wars eventually resolve and markets recover
• Long-term investors who stay the course consistently outperform those who react to headlines

The whole point of buying XEQT was to build a portfolio that doesn’t require you to predict the future. Trade wars, pandemics, recessions – XEQT is designed to weather them all. Trust the diversification, keep contributing, and let time do its work.