Unprecedented. A word used regularly during the pandemic and being heard again with the current economic uncertainty. Considering the scale of the current crisis – a disruption of the global economic order – perhaps it’s time for words that describe the degree of unprecedented.

After the U.S. inauguration and the announcement of 25 per cent tariffs on Canada and Mexico, ATB Financial began to model the impact of tariffs, resulting in detailed models with multiple contingencies. On March 6, it was announced that the CUSMA terms for energy would remain in place, challenging initial assumptions. The overall tariffs announced in April were deeper, broader, and less comprehensible than expected.

Almost overnight, the U.S. went from a country with an average tariff rate of 2.5 per cent to closer to  30 per cent – the highest level in almost a century. As a result, April 2025 was one of the most volatile months in markets across all asset classes. The impact was significant: margin calls increased by 180 per cent, the U.S. dollar index dropped as the greenback sold off against most major currencies, and bond yields spiked.

This volatility could be expected considering the scale of the changes the U.S. is implementing. Absent complete knowledge of the broad intention, financial markets are concluding that these are not simple trade protection enhancements, but an intention to overturn the 80-year rules-based trading regime initiated by the U.S. This is an understanding that helped rebuild Europe after WWII, provided a framework to develop  Asian economies, and integrated the former Soviet-bloc countries into the global trading platform. It also established the U.S. dollar as the premier global reserve currency and US Treasury Bonds as a safe haven for investors internationally.

While the tariff announcements seemed arbitrary, the ideas behind them are supported by most Americans. The program aims to move manufacturing and production back to the U.S. Recent polls suggest that this has the support of 80 per cent of Americans, and about 25 per cent of them say they would like to have one of the manufacturing jobs created, potentially tripling the eight per cent that work in the sector today. If this sentiment is solid, we should plan on tariff and trade disruptions as an ongoing challenge for at least the next few years.

The test of this support will come as market volatility moves into the broader economy and begins to impact consumers. Already, we have seen shipments through the LA/Long Beach, California port that handles 45 per cent of the shipments from China, slowed by a third. CEOs of Target and Walmart have already met with the White House to discuss the impact on Christmas supply chains for consumer goods, and consumer confidence has reached a five-year low.

Clearly, the tariff policy is starting to break real things – and when you break companies and supply chains, it takes time to fix them.

For Canada, the impact is just beginning.

ATB Financial is predicting negative growth for Canada in Q2 and Q3 (typically known as a recession), anticipated to begin this summer. We don’t foresee a quick recovery and advise investors to look for opportunities that will weather the downturn. To offset the impact, governments are expected to invest in infrastructure, making the construction sector an attractive investment choice. Nuclear energy, defence, and the Canadian North are also considerations.

The energy sector, a key driver of the Canadian economy, is a key focus for ATB Financial. At over $99 billion in 2024, energy represented nearly all our positive trade balance. While CUSMA-compliant energy products will not be subject to tariffs, the demand destruction from tariffs will have a significant impact. For every one per cent drop in global GDP due to the trade disruption, we expect a decline of 1 to 1.6 million barrels of oil.

Compounding this is OPEC’s announcement to increase its daily output by 411,000 barrels in May, followed by a further daily increase of 411,000 barrels in June, adding to the surplus we have forecast for 2025.

To address these headwinds, the new government must make good on its promise to turn Canada into a “world energy superpower.” Given that most of our ATB Capital Markets' Spring 2025 Energy Sector Survey respondents consider federal government policies as the top risk for the sector, this would be a significant step.

Diversifying our export markets will be critical. The commissioning of the TMX pipeline last year reduced our energy exports to the U.S., but just to 91 per cent compared to 96 per cent in 2023.

Completing the LNG Canada and Ksi Lisims LNG projects will enhance this and open important new markets. While there has been more stability in the North American benchmark gas prices, LNG Canada is expected to start operations in 2025,  allowing Canadian producers to move additional crude to other markets.

Initiatives take time, but Canadian energy companies are better prepared than most sectors to face the headwinds. They are financially sustainable with stronger balance sheets than previous price downturns and have low leverage profiles. They also focus on delivering value to investors with free cash flow available to provide robust dividends and share buybacks. Well-run management teams are prepared to seize opportunities as the market expands.

Operating in unprecedented times is challenging and disruptive for the Canadian economy. At the same time, it presents us with an opportunity to reset our trading relationships, build long-term resiliency, and put the Canadian economy on a new growth trajectory.


From the June 2025 edition of Business in Calgary, and Business in Edmonton. Shared with permission.