MIDDLE EAST CONFLICT
It’s funny how certain thoughts surface as impactful headlines break into the news cycle. When the U.S. partnered with Israel to attack Iran, I was reminded of a December 1971 article published in U.S. News & World Report. It was an interview with U.S. Senate Democratic Leader Mike Mansfield which aside from one section, was entirely unremarkable. What stood out was a heading that read: “Only a ‘Nixon’ Could Go to China.” This appeared before President Nixon undertook his landmark February 1972 trip aimed at normalizing relations between the United States and the People’s Republic of China.
Over time, that phrase evolved into a widely used political metaphor. It refers to situations in which a leader can defy ideological expectations without facing backlash, precisely because their reputation shields them from criticism.
Richard Nixon was known to be a staunch anti‑Communist. As such he was uniquely positioned to make diplomatic overtures to China without being dismissed as “soft” on Communism. Because of this, the phrase entered political folklore as shorthand for bold, unexpected initiatives that only a leader with a specific set of Bonafide’s could pursue.
Enter Donald Trump, long known for his hardline anti-war rhetoric, who now seems increasingly willing to flex America’s military muscle. Where the art of the deal is now backstopped by a large stick.
Trump’s Department of War, partnering with Israel’s Defense Forces, is wielding that large stick over Iran with a non-stop bombing blitz that has eradicated many within Iran’s leadership ranks. Most notably, killing the Islamic State’s Supreme Leader Ayatollah Ali Khamenei.
Khamenei held ultimate sway over Iran for thirty-seven years and now with his son “elected” by Iran’s “Assembly of Experts” it begs the question… what’s changed? So far there have been no public appearances by the “elected” supreme leader whose reign some suspect, will be lucky to last thirty-seven days. Currently he is living in a swath of underground bunkers recognized as the cleric with an outsized target on his back.
Now that we are nearing the two-week anniversary, the Iran conflict / campaign / military operation, you choose the narrative, has degraded into a war of attrition. Given the large gap in military power, Iran’s best hope is to destabilize the region and draw out the conflict.
Iran has put into effect the Middle East’s version of guerrilla warfare. The Revolutionary Guard has engaged in a three-pronged response; 1) disrupting the global economy by limiting or eliminating tanker traffic through the Straight of Hormuz, 2) launching ballistic missiles and Shahed-series drones that target Israel and U.S. bases in the region and by extension, wreak havoc on so-called friendly neighbours and 3) keeping a tight lid on domestic protestations by threatening immediate public execution against anyone who dares to question the regime.
While the ideal endgame – at least from Israel’s perspective – might be regime change, that is not a likely outcome as it has never been successfully accomplished by a bombing-only campaign. Regardless of its intensity!
Since the military has hit its’ list of pre-ordained targets, Trump is likely considering a victory lap assuming he “feels it in his bones.” At best we can hope that Iran’s capacity to threaten the region will be severely degraded.
American consumers are feeling the impact at the gas pump which is a political hot potato. Through a broader lens, the U.S. economy was already showing signs of weakness. Employment data released during the first week of March surprised the market as the U.S. economy shed 92,000 jobs in February with downward revisions for the January 2026 and December 2025 stats.
These conditions would challenge policymakers at the best of times. More so when developing policies overshadowed by the “fog of war.” The ‘fog of war’ refers to confusion and uncertainty on the battlefield and the attendant possibility of fatal error. This principle has a parallel when it comes to the economic consequences of wars as well, especially when they occur in a region that is a chokepoint for the production and shipment of one-fifth of the world’s oil and a third of its natural gas.
The concern for financial markets is not so much about the outcome, it is about the timeline. The length of the war, the range of countries involved and the costs, determining factors that will explain whether the war has a lasting impact across economies in the U.S. and around the globe. Realities underscored by Quatar’s energy minister who issued a dire warning on March 6th that spotlights the gravity of the situation: ‘This [war] will bring down the economies of the world.’
Hyperbole? Maybe… maybe not!
Historically, there is little evidence to help decipher the possibilities. The 1979 Iranian Revolution caused a spike in the price of oil, which was a contributing factor to the United States and Europe experiencing an economic phenomenon called ‘stagflation.’ Something we are hearing on the sidelines but not yet a central theme.
In our view, stagflation is an unlikely outcome. Modern day economies are less dependent upon oil and natural gas than they were in the late 1970s and early ’80s. And the U.S. is not beginning the war with a previous decade of high inflation that made it more difficult to reduce price pressures as expectations of inflation feed into actual inflation.
Supply shocks are also notoriously difficult to manage, as the world was reminded during the COVID‑19 pandemic. Ultimately, policymakers will be forced to confront hard economic tradeoffs. Specifically, prioritizing the fight against inflation or mitigating the risk of recession.
Central Bank Limitations
These are the questions that will consume the U.S. Federal Reserve (Fed) over the next two quarters. Does the central bank raise interest rates to combat inflation or lower them to offset weakness in the economy amidst rising unemployment? Lifting rates brings down inflation by reducing demand for loans and curbing growth, while lowering rates has the opposite effect.
In both the late 1970s and during the onset of the pandemic, central banks opted to keep rates low to help support the economy and the job market. A strategy that eventually led to a spike in inflation.
The inflation of the late 1970s and early ’80s was brought down by a strong reversal of monetary policy with high interest rates, causing a recession that was, at that time, the deepest since the 1930s.
Notably, the reduction of inflation in the wake of COVID-19 did not require a similar economic downturn to achieve that goal. The reason was a period of low inflation in the decades before the 2020s which ‘anchored’ consumer expectations.
But that could change… quickly! Currently, the Fed has a well-deserved anti-inflation reputation. But that credibility with financial markets is at risk because of President Donald Trump’s attacks on Chairman Jerome Powell, the prosecution of the Fed’s Lisa Cook and the appointment of a new Chair who may push for lower rates because that’s what the President wants.
Psychology can play an outsized role in the inflation debate especially given the K-shaped recovery underway in the U.S. The widening gap between rich and poor and their segmented approach to spending patterns could lead to higher inflation and become a self-fulfilling prophecy that brings about the very thing that people are worried about. Seeds of new inflation pressures may be falling on fertile soil.
Uncertainty triggered by the war is not the only negative economic signal. Tariff policy, cuts to government employment, rising federal debt and the possibility of financial vulnerabilities are all weighing on the U.S. economy. A spike in the price of oil could exacerbate these exposures, and possibly lead to a recession, as consumers and businesses pull back from spending.
CLIMBING THE WALL OF WORRY
Financial markets have a long history of advancing during periods of uncertainty which is often described as climbing a “wall of worry.” This wall is not built of bricks and mortar, but of uncertainty, where investor sentiment oscillates between fear and greed. It is an understandable dynamic given the market’s recent pattern, which has felt like a rinse‑and‑repeat cycle of sharp declines followed by equally sharp rebounds.
Today’s wall is a familiar one filled with obstacles and supports. We note that inflation has eased from its post-pandemic peak but remains above the Fed’s 2% target and a hotter than expected rate on the Producer Price Index that came out on February 27th did nothing to ease that concern. Rates have remained relatively benign but are still high enough to influence borrowing and spending patterns… commonly referred to as “affordability.”
Despite the President’s frustration, most members of the current Fed maintain that short‑term interest rates are already sitting in a neutral “not‑too‑hot, not‑too‑cold” range. When Kevin M. Warsh takes over as Fed Chair in May, he is widely expected to adopt a more dovish stance. Markets are looking closely, as Mr. Warsh has previously advocated both meaningful rate cuts and a substantial reduction in the Fed’s balance sheet in his role as Trump’s National Economic Advisor. Investors worry that a combination of aggressive easing and rapid balance‑sheet contraction could ultimately put upward pressure on longer‑term inflation.
The ongoing Middle East “excursion” continues to reverberate through financial markets, with stocks and bonds oscillating in mirror image opposition to oil. The conflict’s macro-economic impact primarily through rising energy prices and renewed strain on supply chains, has slowed global growth just enough to keep forecasters continually revising their pre and post war outlook.
Assuming the Iran conflict is relatively short-lived, the U.S. economy could return to above trend momentum with some unconventional projections forecasting GDP growth that could surpass 5% through the second quarter of 2026. These ambitious expectations, however, rest on the assumption that the U.S. can maintain – and potentially expand – its trade surplus. As a reminder, the gap between imports and exports directly affects GDP: a trade surplus adds to growth, while a trade deficit subtracts from it.
Another macro‑economic headwind is the softening in the U.S. labor market. The latest report from the Bureau of Labor Statistics shows a meaningful decline in job openings, and for the first time in recent memory, there are now more job seekers than available positions. This shift suggests that labor market tightness, which has been one of the economy’s strongest tailwinds, is beginning to crack, raising questions about the durability of the economic momentum.
Against this backdrop, it might seem counterintuitive that the S&P 500 Index has found solid support at the 200-day moving average (200 day moving average is ~ 6650). At least for now!
It is also important to understand that investors rarely wait for clarity. Markets tend to advance as long as economic conditions remain solid enough to support corporate earnings and financial stability. Ancillary concerns are absorbed, debated, and repriced.
Along the way, investors must be willing to sop-up disproportionate volatility, which from our perspective characterizes the steepness of the wall of worry. Sharp pullbacks are part of the journey, particularly when headlines are dominated by policy shifts, inflation readings, oil price shocks, and the unintended consequences that accompany geopolitical conflict. The key is to recognize that while uncertainty colors the landscape, equity markets have repeatedly demonstrated an ability to move forward albeit on an uneven path.
The appropriate investment strategy must incorporate diversification to manage risk, allowing investors to maintain perspective. Climbing the wall of worry is uncomfortable. Coping requires the financial equivalent of a safety harness to steady the anxiety associated with short-term noise and a reasonable forecast about the economy’s mid-to-long-term trajectory.
Investment Strategy
To formulate our base case forecasts, we follow a top-down approach. Assigning probabilities to macro-economic factors and unintended consequences related to unknowable dynamics. We then apply that outlook to tweak a client’s asset mix within ranges that fit within personal risk tolerances and mid-to-long-term objectives.
In the current environment there are four key elements to consider. They include primarily a North American growth forecast within a global outlook for gross domestic product (GDP). We then incorporate the labor market, inflation and unknowable’s, which in this case, are the unintended consequences associated with the timeline for the Iran conflict and tariff uncertainty.
The longer the timeline for the Iran excursion and the potential fallout from the upcoming USMCA negotiations spotlight a long list of unintended consequences. In short, we are working with factors that could present a wide range of outcomes.
Our base case for U.S. growth in 2026 is 2.5%. The base case for the US is predicated on the stimulus associated with Trump’s ‘big beautiful bill.’ This bill was backend loaded with tax reductions that began in January 2025. Which is to say, American taxpayers will receive significant tax refunds that will kick in when the April 15th tax filing deadline passes. We believe this will allow the U.S. economy to accelerate in the second half of 2026.
Our Canadian 2026 growth forecast comes in at 0.5% depending in large part on how the USMCA negotiations conclude. We believe the U.S. is unlikely to walk away from the USMCA which is the predominant threat from President Trump (see commentary entitled “What if the U.S. Revoked USMCA”).
We have limited visibility for U.S. inflation. Our year-over-year base case comes in at 2.5% for 2026. However, much depends on the price of oil and the impact of the stimulus associated with the tax refunds which are expected to average around US $1,200 per taxpayer. That per taxpayer refund is in line with refunds that were paid during Covid and were the principal reason behind the post-pandemic inflationary surge.
Canadian inflation should settle at a rate that is slightly less than the U.S. There are a couple of reasons underpinning this assessment. First, Canadians are not getting outsized tax refunds, and secondly, Canadian consumers tend to have less of an appetite for aggressive spending.
The U.S. labor market is reasonably solid but, according to most economists (~60%), will be subjected to a “soft-slack” deterioration through the first quarter of 2027. Consensus baselines see U.S. unemployment drifting between 4.4% and 4.8% throughout 2026.
This soft-slack analogy reflects cost controls set in motion by small businesses to manage disorderly expenses (i.e. tariffs). Small and mid-sized companies are pursuing a “low-hire-low-fire” strategy by leaning into AI-enabled productivity tools.
We anticipate this subdued job creation forecast will be partially offset by a shrinking labor pool brought about by immigration constraints. Labor supply demand equilibrium is expected to settle in the 4.5% range by 2026 year-end.
Data from the U.S. Congressional Budget Office (CBO) projects unemployment to top out at 4.6% in 2026, while several US money-center banks see a stabilization around the mid-4% range assuming growth slows but remains positive.
The odds of a more material softening where unemployment surges beyond 5.2% currently sits at 25%. The risks that give rise to this position include a sharper decline in job openings, additional tariff‑related uncertainty that causes small business to double-down on cost controls by extending hiring freezes.
The Canadian labor market will feel greater pressure from tariffs and the loss of manufacturing jobs that have been reshored into the U.S.. Longer term, we think the “Buy Canadian” position posited by the government will temper some of the losses, but the full impact of this strategy will not likely be felt until late 2027 and early 2028.
As mentioned earlier, the wildcard is the Iran conflict. Our base case is that the war will be short-lived probably lasting no more than eight weeks. Trump has a notoriously short attention span and should seek a viable exit strategy before the U.S. mid-term elections get into full swing. Or if you believe in conspiracy theory, he may try to cancel the mid-terms citing national security concerns because the U.S. is on a war footing.
Assuming the mid‑term elections proceed as scheduled, the prevailing view is that Republicans are likely to lose their majority. Democrats are strongly favored to regain control of the Senate and have a plausible path to winning the House. Should both chambers shift, President Trump would effectively operate as a lame duck for the remaining two years of his term. To suggest that would be challenging given his governing style would be an understatement.
Taking the conspiracy theory off the table, the Canadian government will likely be able to negotiate more favorable trade terms if they are negotiating with a lame-duck. Which is to say, Canada’s best strategy is to slow walk the negotiations in the hopes of gaining traction with more constructive politicians.
That is not to suggest that we will not have some baseline tariffs to access the US market. But the outcome should be manageable.
HAS GOLD LOST ITS’ GLITTER?
As we look at how financial assets are behaving during the Middle East conflict, it’s striking that gold, considered the quintessential “safe‑haven” asset, has performed so underwhelmingly. Gold climbed from US $5,296 to US $5,423 per troy ounce after the U.S. and Israel carried out strikes on Iran on Feb. 28, reflecting the typical flight toward “safe haven” assets during geopolitical shocks. But, by the end of trading on March 3rd, gold had fallen nearly 6% to US $5,085. Since then, even as tensions have intensified, gold has traded in a relatively narrow range between US $5,050 and US $5,200.
The metal’s weakness caught many by surprise, especially considering the sharp rally during Israel’s twelve‑day war with Iran that began on June 13th, 2025. That said, gold surrendered the bulk of those gains when a ceasefire was announced (see chart).
There are factors at play that were not evident during the twelve-day war. For one thing, gold was trading at much lower prices in June 2025. More importantly, the June 2025 conflict was limited to exchanges between Israel and Iran and thus was not impacting the funds flow from global central banks that have been major investors in gold to diversify away from U.S. dollars.
When the conflict incorporates the U.S. military and the blowback from Iran is to inflict economic harm by restricting oil shipments through the Strait of Hormuz, there are serious inflation expectations that get priced into U.S. treasuries across the yield curve. Higher interest rates make treasuries more attractive, increase the value of the U.S. Dollar and push up the costs associated with holding a financial asset that pays no income. Public and private wealth funds across the Arab Emirates have been investing new monies into U.S. treasuries opting for a liquidity buffer against Iranian retaliatory strikes. In a strange twist higher oil prices have been a tailwind for the U.S. dollar against major world currencies (see chart).
U.S. Dollar Index YTD Performance
The year-to-date rise in the U.S. dollar index has more to do with weakness across European and Asian economies that face greater disruption from higher oil prices. The U.S. is a net exporter of oil, Europe and Asia are net importers. Point is, a rebounding U.S. dollar takes the shine off gold.
Other possible reasons for gold’s “no-show” is its’ correlation with the Swiss franc. Both are traditionally the safest of safe havens in stressful times and get bid up in tandem. That theory played out as the Swiss Franc surged when the bombs began to fly. However, the Swiss National Bank quickly intervened with massive selling on March 2nd which reversed the currency’s gains against both the dollar and the euro. The resulting unwind of safe-haven trades may have added to the downward pressure on gold.
Another explanation, one we believe has real staying power, is that investors and speculators who aggressively bought into an asset that nearly doubled over the past year may now be adopting a risk‑off stance by taking profits on their strongest performers. As concerns about liquidity, a potential energy shock and increased volatility emerge, investors may simply be raising cash. A de-risking strategy typically begins by unwinding a portfolios’ most profitable positions.
In this case, gold and silver, the second- and third‑best‑performing assets of 2026, were prime candidates for selling. This explanation seems to coincide with the March 3rd reversal in South Korea’s Kospi benchmark index. The Kospi benchmark had been the year’s best-performing stock market having risen by nearly 50% before the sharp 7% sell-off on March 3rd, propelled by South Korean traders just returning from a long week-end holiday.
The upside is that following a period of de‑risking, assets sold to shore up liquidity are typically repurchased once markets stabilize.
THE DON-ROE DOCTRINE
On January 3rd, 2026, President Trump issued his so-called Don-Roe Doctrine which he stated in the press conference, was a modern-day restoration of the Monroe Doctrine that was sidelined by the Obama administration in 2013. To understand the implications and potential fallout from this reset, it is helpful to understand the doctrine’s history.
On January 3, 2026, President Trump unveiled the so-called Don‑roe Doctrine. It was a modern revival, at least from Trump’s perspective, of the Monroe Doctrine that he claimed had been set aside by the Obama administration in 2013. To grasp the implications and potential fallout of this policy shift, it’s essential to first understand the historical context of the original doctrine.
It was in December 1823 when President James Monroe delivered an annual message to Congress that would go on to shape nearly two centuries of U.S. foreign policy. Though it wasn’t immediately labeled as such, this moment marked the birth of the Monroe Doctrine.
At its core, the Monroe Doctrine issued a bold message to Europe: The Western Hemisphere was no longer open to colonization or interference by European powers. In exchange, the United States pledged to stay out of European political affairs. This diplomatic understanding sought to create a stable environment in the Americas, one where an independent nation could grow without fear of renewed imperial control.
The context of the time was crucial. Much of Latin America had recently won independence from Spain and Portugal, but the political situation remained unstable. The United States, still developing its own military capacity, worried that European monarchies might attempt to reassert control in the region.
While the U.S. lacked the naval power to enforce the doctrine alone, it found an unlikely enforcer: the British Royal Navy. Britain, eager to maintain open trade within the Americas, effectively “backstopped” the doctrine, giving it the influence and credibility it needed.
Even though the Monroe Doctrine began as a straightforward, defensive message, the U.S. was still an infant nation and European powers tended to honor it only when it worked to their advantage. A prime example: France’s intervention in Mexico in the 1860s, which made it clear that the doctrine’s influence was never absolute.
In 1904, President Theodore Roosevelt introduced the Roosevelt Corollary, which went a step further by claiming the U.S. had the right to intervene militarily in Latin American countries experiencing internal turmoil. This shift transformed the doctrine from a warning aimed at Europe into a justification for U.S. involvement in the region. The doctrine’s role had clearly evolved from keeping others out to giving the U.S. a reason to step in.
The Monroe Doctrine was never repealed, since it wasn’t a law but was simply a policy statement. Its relevance shifted through reinterpretation and changing global dynamics.
A major shift came in 1933, when Franklin D. Roosevelt introduced the Good Neighbor Policy, emphasizing cooperation, sovereignty, and non‑intervention. While it didn’t erase the Monroe Doctrine, it marked a clear step back from the unilateral intervention that defined the Roosevelt Corollary.
The Modern-day End Game?
Jump to 2013, when Secretary of State John Kerry declared that “the era of the Monroe Doctrine is over.” While not legally binding, it signaled a major diplomatic shift that recognized a 19th‑century framework no longer matched the realities of a globalized, multipolar world. Trump’s resetting of an old doctrine makes him the ultimate disruptor.
The Implications of the Don-Roe Doctrine
Given Trump’s broader hemispheric strategy, regime change and oil blockades function as tools to weaken governments viewed as adversarial, opening the way for U.S. access to raw materials, notably oil which has been framed as essential to national security.
We’ve already seen the consequences of this approach: first, the destruction of small boats and their crews on suspicion of drug trafficking; then the seizure of oil tankers accused of transporting sanctioned crude. Much of that “sanctioned” Venezuelan oil, it’s worth noting, was destined for Cuba.
Buoyed by the perceived success of targeting small vessels and intercepting “sanctioned” tankers, the U.S. military escalated its actions by entering Venezuela and capturing President Nicolás Maduro and his wife in a nighttime raid. Most of the Cuban Special Forces assigned to protect Maduro were killed in the operation.
The official justification centered on corruption and the long‑standing dispute over U.S. oil assets nationalized under the Chávez government. That also had a major impact domestically as several U.S. refineries were originally built to process Venezuela’s heavy crude, though they now rely largely on Canadian supply.
From our perspective, Trump’s pursuit of “energy supremacy” likely influenced the decision to remove Maduro and initiate regime change.
A cooperative Venezuelan government gives the U.S. more direct access to oil, potentially undermining Canadian producers which could become a central theme in the upcoming renegotiation of the U.S.–Mexico–Canada trade agreement.
Following the Venezuelan operation, Trump turned his attention to Colombia. In characteristic fashion, he escalated tensions by calling President Gustavo Petro “a sick man who likes making cocaine and selling it to the United States.” He went on to suggest that Petro was living on borrowed time and floated the possibility of a military intervention to “overwhelm” a country long associated with the global cocaine trade.
Of course, the U.S. President has a history of issuing dramatic threats only to shift focus when something new captures his attention. In this case, within twenty‑four hours the toxic rhetoric softened after Trump and Petro spoke by phone.
Even so, Trump’s posture can’t be dismissed. His unpredictability is creating real uncertainty for the more than 650 million people across Latin America and the Caribbean. This instability also hits close to home for Canada, given that Canadian resource companies have invested billions in the region over the past three decades. Firms such as Teck Resources Ltd., First Quantum Minerals Ltd., Agnico Eagle Mines Ltd., Sherritt International Corp., Pan American Silver Corp., and Aris all have significant operations throughout Latin America.
These companies invested with the expectation that the era of nationalist upheaval was fading. Yet with Trump’s sudden surge of aggression, that long‑dormant instability is reemerging.
To that point, we are witnessing a strategy of maximum pressure being applied on Cuba, including restrictions on oil shipments that have severely disrupted the tourism sector, Cuba’s principal economic pillar.
Driven in part by the political priorities of Secretary of State Marco Rubio, the apparent objective is to push Cuba’s economy to the point of collapse, with the hope that internal unrest will trigger a change in government. In that scenario, the United States could step in to shape the rebuild. If that approach fails, we suspect that military intervention will eventually be considered, especially given that the U.S. already maintains a major base on Cuban soil.
This process may take time, given that the Trump administration is juggling several foreign‑policy flashpoints, including the Gaza Strip, Iran, and Ukraine.
But, make no mistake, Trump is motivated. Securing Cuba as a U.S. protectorate as is the case with Puerto Rico, would be a major political achievement, especially given that the previous fourteen presidents were unable to accomplish anything close to that outcome.
There’s also a near‑term political dimension. Trump faces enormous political pressure coming from his base in Florida which is home to a large Cuban‑American community eager to return and rebuild. Under U.S. protection, the builder mentality that is key to Trump’s personality most likely envisions transforming Cuba into a kind of tropical Las Vegas less than 100 miles from the American mainland.
What is clear is that Trump’s revived Monroe Doctrine signals a more interventionist, hemisphere-focused U.S. strategy with implications for trade, geopolitics, supply chains, and capital flows. We are monitoring developments closely, as this shift introduces both strategic opportunities and elevated regional risks, particularly across Latin America and in sectors tied to global supply chains, defense, and commodities.
WHAT IF THE U.S. CANCELLED USMCA
The United States–Mexico–Canada Agreement (USMCA) has served as the cornerstone of North American trade since replacing NAFTA in 2020. But what if the U.S. were to suddenly withdraw from it? Canadians recognize the domestic risk, but should also understand the consequences that cancelling the USMCA would have across virtually every aspect of American life.
Ending the USMCA wouldn’t simply be a political decision; it would fundamentally reshape the economic architecture of North America. Companies that have spent years integrating cross‑border supply chains would face immediate disruption. Americans would feel the effects at the grocery store, in household budgets, and in job stability.
Without the USMCA in place, the cost of groceries would surge. In 2023, Mexico accounted for 63% of U.S. vegetable imports and 47% of fruit imports, supplying staples like tomatoes, avocados, peppers, and berries. Once the agreement is gone, these goods would be hit with steep tariffs that would show up at the checkout line. A basic salad that sells for US $8 today could easily jump by 50% turning everyday produce into a near‑luxury item. The impact would be especially painful in winter, when Americans rely most heavily on Mexican farms for fresh fruits and vegetables.
The consequences wouldn’t stop at the supermarket. Auto manufacturing would be thrown into crisis. Modern car production depends on parts moving across the U.S.–Mexico and U.S.–Canada borders six to eight times before a single vehicle is finished. Without the USMCA, these cross‑border flows would face new tariffs that add thousands of dollars to production costs. Automakers would be forced to raise prices or accept major losses. Assembly plants in states like Michigan, Ohio, and Texas could face layoffs or even closure within months. More than 7 million Americans employed across the auto ecosystem would feel the strain which would lead to higher prices on new vehicles.
And then there’s energy. Canada sends roughly four million barrels of crude oil per day to the U.S., making it America’s largest foreign supplier. Eliminating the USMCA would mean new tariffs on that oil, disrupting the integrated North American energy market that helps stabilize fuel prices. Gas stations would respond immediately, raising prices as refineries pay more for Canadian crude. Drivers could see US 50 cents to US $1 more per gallon, hitting commuters, truckers, and delivery services hardest. Since nearly every product in America travels by truck at some point, these fuel hikes would ripple through the entire economy raising the price of goods far beyond the gas pump.
American farmers, which Trump says he loves, would lose their biggest customers. Canada and Mexico purchase more than US $40 billion in American agricultural goods each year, making them the top two export markets for U.S. farmers. Without the USMCA, both countries would immediately impose tariffs on U.S. corn, soybeans, pork, beef, and dairy. Buyers would quickly switch to cheaper suppliers in South America or Europe.
Family farms which are already operating on razor-thin margins, would face bankruptcy as products pile up unsold in silos and warehouses. Rural communities across the Midwest and Great Plains would feel the economic shock as the agricultural sector contracts.
The tech industry would also feel the pinch. Smartphones, laptops, and gaming systems would spike in price. Companies such as Apple, Samsung, and HP rely heavily on manufacturing and component sourcing in Mexico, made viable by tariff‑free trade. Pulling out of the USMCA would force companies to either pay 15–25% tariffs or spend billions relocating production. An iPhone or gaming laptop that costs US $1,000 today could jump to US $1,250 almost overnight. Product delays would follow as supply chains are reconfigured.
Pharmacies and hospitals depend on Mexico for roughly 25% of U.S. medical imports, including insulin, blood pressure medications, and critical hospital equipment. Ending the agreement would slow the flow of life‑saving goods as tariffs and border friction take hold. Patients with chronic conditions would face dangerous shortages and rising prices. Hospitals would struggle to obtain surgical supplies and diagnostic equipment essential for routine care.
Manufacturing jobs would likely disappear. Despite political claims, revoking trade agreements rarely saves American jobs. U.S. manufacturers rely on competitively priced parts from Canada and Mexico to remain viable globally. Once tariffs raise those costs, many companies would simply move their entire production to Asia rather than absorb higher North American expenses. Past trade wars show a clear pattern: tariffs typically destroy more U.S. manufacturing jobs than they protect. Industries like appliances, machinery, and consumer goods would see factories close as companies chase lower‑cost options overseas.
Housing construction would slow dramatically since about 30% of U.S. construction lumber comes from Canada, and the USMCA ensures that supply remains affordable. New tariffs would immediately raise the cost of building a single‑family home by $10,000–$15,000.
Homebuilders would complete fewer projects, worsening existing housing shortages. First‑time buyers would be pushed even further out of the market, and construction workers would lose jobs as projects stall.
Small businesses would struggle to survive. Local manufacturers, retailers, and restaurants that rely on Canadian or Mexican inputs would face sudden cost spikes. A craft brewery importing specialty hops from Canada or a furniture maker using Mexican hardwoods could see monthly expenses jump by thousands.
Unlike large corporations, small businesses can’t easily raise prices without losing customers, and many would shut down within a few quarters shrinking America’s entrepreneurial base.
Inflation would accelerate across all sectors because revoking the USMCA would trigger broad‑based inflation. Higher import costs would ripple through consumer prices, and U.S.‑made goods would also become more expensive due to reduced competition and higher production costs.
The Federal Reserve would likely raise interest rates to fight this inflation, increasing borrowing costs on mortgages, auto loans, and credit cards. Middle‑class families who are being squeezed by spiking grocery bills would see their purchasing power decline further.
Financial markets would experience major volatility. As we have seen with the Iran war, financial markets respond poorly to uncertainty and revoking the USMCA would create enormous uncertainty about corporate costs, supply chains, and the broader economic outlook.
Companies deeply integrated with Canadian and Mexican markets would see their stock prices plunge immediately. Retirement accounts, 401(k)s, and pensions would take a hit. Even after initial shockwaves, markets would remain unstable as businesses adjust to the new trade environment.
Border communities would face economic collapse. Cities like El Paso, San Diego, Laredo, Detroit, and Buffalo rely heavily on cross‑border commerce. Without the USMCA, warehouses would close, trucking firms would go under, and cross‑border travel would decline sharply.
Restaurants, hotels, and retail shops supported by trade and transit activity would see business evaporate. Property values would fall as workers relocate, leaving behind hollowed‑out communities.
Trade is never a one-way street. Mexico and Canada would retaliate strategically. Both countries would respond immediately with tariffs aimed at politically sensitive U.S. industries as they have done in past disputes. Canada might target products like bourbon or motorcycles, while Mexico could focus on agricultural goods from swing states. These retaliatory strikes would amplify the damage, pushing the situation toward a full‑scale trade war that harms all three economies and strains diplomatic relations.
China would become the biggest winner. As North America fractures its integrated economy, China would seize the opportunity. Beijing would deepen trade ties with Mexico and Canada, expand manufacturing investments, and strengthen its influence in the Western Hemisphere.
Meanwhile, U.S. firms would become less competitive globally due to higher production costs and fractured supply chains.
Long‑term economic growth would stall. Over time, revoking the USMCA would erode America’s attractiveness as a destination for global investment. Companies choosing where to build new factories would avoid the U.S. due to trade uncertainty, higher costs, and unstable supply networks.
Innovation would slow as businesses divert resources into navigating trade barriers instead of developing new products and technologies. Rebuilding the integrated North American market would take decades if it could be rebuilt at all.
Supply chains would need complete reconstruction. Every industry would face the monumental task of restructuring supply chains built over 30 years of tariff‑free continental trade. Companies would spend years and billions of dollars finding new suppliers, rewriting contracts, and redesigning logistics.
Smaller firms without the capital to withstand this transition would fail, further concentrating economic power in large multinational corporations.
American consumers would pay the ultimate price. In due course, ordinary Americans would bear the brunt of the disruption. Prices would rise across the board, job opportunities would shrink, and economic security would deteriorate.
The promise of protecting American interests would collapse under the reality of higher costs, fewer opportunities, and a weakened middle class which would negatively impact families for years.
COMBATINGTHE AGE OF RUIN IN RETIREMENT PLANNING
When we think about our long‑term goals, retirement planning usually ends up front and center. And for good reason. Planning for life after work doesn’t just affect the retiree, it can influence the entire next generation.
When someone reaches retirement without enough savings, the responsibility often shifts to adult children, siblings, or even nieces and nephews. To avoid placing that kind of weight on your family, it helps to think of retirement planning as the financial equivalent of packing for all seasons: you’re preparing for sunshine, rain, and the occasional storm.
Because retirement planning stretches across a long timeline, it can feel overwhelming and well… all‑encompassing. The good news is that during the accumulation phase of your financial life (the years when you’re focused on growing your portfolio), time is on your side. The longer your investment horizon, the more likely markets will deliver the expected returns.
But things shift once you transition into retirement and start drawing income from your portfolio. Suddenly, the rules flip. In the withdrawal phase, the biggest concern, which doesn’t get nearly enough attention, is something called the “Age of Ruin.” That’s the point when your savings run out and you no longer have the money to live the lifestyle you want. Not exactly the milestone anyone’s hoping to celebrate.
The Age of Ruin can emerge for a variety of reasons: living longer than anticipated, experiencing periods of market volatility, unexpected inflation, or needing to make unexpected withdrawals to cover unplanned expenses.
Unfortunately, a retirement portfolio is not an endless reservoir; it should be viewed in the same way as a pension. You wouldn’t request an extra‑large payout from the Canada Pension Plan, nor would you expect a private pension administrator to offer a lump‑sum withdrawal on demand. Pensions are structured to provide stable, predictable monthly income for life, built on actuarial assumptions designed to ensure sustainability.
In many ways, your retirement savings warrant the same treatment. Viewing your nest egg through the lens of a lifetime income source rather than a flexible pot of money can help safeguard it against premature depletion and extend its ability to support you throughout retirement.
Managing Retirement Portfolios
Having outlined the nuances of retirement planning, the next step is to focus on the specific factors that shape a successful retirement strategy. From an investment standpoint, the greatest Age‑of‑Ruin risk comes from what is known as the sequence risk.
Sequence risk refers to the danger that arises when the timing of investment returns collides with systematic withdrawals. Consider a retiree drawing monthly income from a portfolio: if the portfolio is not generating enough cash flow to support those withdrawals. In that scenario, the portfolio manager must sell securities to cover the shortfall. This becomes especially problematic when sales occur during market downturns. Ultimately, sequence risk underscores how crucial the order of returns is because poor performance early in retirement can have a more detrimental impact than similar losses occurring later.
Our approach is to frontload an income portfolio with low-beta blue-chip companies that distribute above-average dividends and that generate sufficient profits to comfortably maintain their current payout. The objective is to generate at least 70% of the retiree’s required income from the cash flow from the attendant securities in the portfolio.
The key component in this analysis is the dividend. Typically, one should look for companies that have steady income and above average dividend coverage. Dividend coverage which is typically expressed through the Dividend Coverage Ratio (DCR), measures how many times a company’s net income can cover the dividends it pays out. In other words, it answers the question: “Does this company earn enough to sustain its dividend?” What we are looking for is companies that can comfortably meet their dividend obligations without straining the finances.
Having a mix of secure dividend payers, we then focus on companies that typically increase those payouts over time which provide some limited inflation protection.
Richard N Croft, Chief Investment Officer