How U.S.-Canada Tariffs Could Impact Life Insurance & Investments

Think the U.S.-Canada tariff war only affects big industries like steel and energy? Think again—it could have surprising ripple effects on your financial security.

TL;DR: Trade tensions between the U.S. and Canada are heating up, but what does that really mean for your wallet? While life insurance remains a steady ship, the broader financial world—banks, investments, and consumer spending—might hit some turbulence. Could this impact your savings, loans, or even job security? Let’s break it down in simple terms so you can stay ahead and protect what matters most.

What’s Happening with the U.S.-Canada Trade in 2025?

In early February 2025, things got heated between the U.S. and Canada. President Donald Trump slapped a 25% tariff on most Canadian imports, and Prime Minister Justin Trudeau retaliated with $155 billion CAD worth of levies on American goods. The result? A trade showdown that’s shaking up industries across North America.

While sectors like energy, agriculture, and manufacturing are feeling the brunt of it, life insurance and financial services aren’t completely off the hook. These areas might not be front-page news, but they’re still vulnerable to the broader economic fallout. Let’s dive into how this could affect you.

Update (Feb. 3, 2025): Trump agrees to pause the tariffs for 30 days after meeting with Trudeau.

Life Insurance: Still a Safe Bet?

Why Life Insurance Stays Strong
Good news: Life insurance tends to hold up well during tough economic times. Most Canadian insurers are diversified—they operate globally, so they’re not overly reliant on any one market. That helps them stay stable when things get rocky.

Plus, people prioritize protecting their families, no matter what’s happening in the economy. Products like term life policies, whole life plans, and annuities remain popular because they offer peace of mind when everything else feels uncertain.

But Watch Out for These Risks
Even though life insurance is generally reliable, there are a few things to keep an eye on:

• Investment Risks: Insurers who invest in stocks and bonds. If markets get shaky, their returns could take a hit.

• Interest Rates: If rates rise sharply, some interest-linked products might struggle to keep up.

• Currency Issues: A weaker Canadian dollar could hurt insurers with foreign liabilities.

For example, a company focused mostly on Canada might face more challenges than one that operates globally.

Not sure if your coverage is solid? Reach out to a Greatway agent to review your options!

Financial Services: Vulnerabilities in the current state of Economy

Banks Under Pressure
Unlike life insurers, Canadian banks are deeply tied to the health of the domestic economy. If the tariff war leads to a recession, here’s what could happen:

• More Loan Defaults: As unemployment rises and budgets tighten, more people may struggle to pay back loans and mortgages.

• Slower Borrowing: With less spending and borrowing, demand for credit cards, personal loans, and home equity lines of credit could drop.

• Market Swings: Economic uncertainty often leads to stock market ups and downs, which can hurt wealth management services.

The Bigger Picture
It’s not just banks that are affected. Rising inflation and unemployment will strain household budgets, making it harder for people to spend. Businesses that rely on cross-border trade will also feel the pinch, leading to layoffs and reduced corporate spending. All of this creates a challenging environment for financial institutions—and for you.

Broader Economic Spillover Effects
The ripple effects of the tariff war extend beyond banking. Rising inflation and unemployment will strain household budgets, further depressing consumer confidence. Businesses reliant on cross-border trade will also feel the pinch, leading to layoffs and reduced corporate spending. All of this creates a challenging environment for financial institutions operating in Canada. 

Lessons from History
History shows us how trade wars can shake things up. Take the Smoot-Hawley Tariff Act of 1930, which made the Great Depression worse by stifling international trade. Or look at the U.S.-China trade disputes since 2018, which disrupted supply chains and slowed global growth.

Closer to home, Canada’s experience during the 2008 financial crisis highlights the importance of a strong financial system. While banks faced liquidity issues, life insurers stayed steady, proving their role as anchors of financial security.

What You Can Do to Protect Yourself:

Here’s how you can prepare for whatever comes next:

• Stick with Life Insurance: Even in uncertain times, life insurance remains a cornerstone of financial planning. It provides protection and peace of mind, making it indispensable.

• Diversify Your Investments: Spreading your money across different geographies and asset classes can help reduce risks.

• Plan Ahead: Review your budget, build an emergency fund, and consider locking in low-interest rates before they rise further.

Are you worried about how the tariff war might affect your financial future? Now’s the time to act. Reach out to a trusted agent at Greatway Financial to ensure you’re prepared for whatever comes next.

Disclaimer
This article does not constitute financial advice. Individual circumstances vary, and readers are encouraged to consult with a qualified professional before making decisions based on the information provided.

Sources:

1. https://www.canada.ca/en/department-finance/news/2025/02/government-of-canada-announces-next-steps-in-its-response-plan-to-unjustified-us-tariffs.html?t

2. https://financialpost.com/pmn/business-pmn/tariff-war-likely-to-plunge-canada-into-recession?

3. https://www.bbc.com/news/articles/cn93e12rypgo?t

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7. https://www.nytimes.com/2025/02/01/business/trump-tariffs-canada-mexico-china.html?t

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