Tariff Relief & Strong Economy Boost Canada: 5 Top Stocks

On Mar 1, President Donald Trump said the United States will impose new tariffs on steel and aluminum imports. Following this announcement, fears of possible retaliation from countries like China and Canada and the European Union heightened. However, partial relief came for Canada on Mar 8, after President Trump signed proclamations on the two metals, but exempted neighbors Canada and Mexico from these tariffs.

Additionally, Canada witnessed steady jobs additions and decline in unemployment rate in February. Moreover, Bank of Canada said that the economy has shown considerable progress, despite trade-related uncertainty. Hence, investing in stocks exposed to a thriving Canada is an excellent option.

Trump’s Tariff Relief for Canadian Steelmakers

After weeks of market jitters, Trump finally signed the tariff plan into law on Mar 8, which slapped tariffs of 25% on steel imports and 10% on aluminum imports from other countries. Trump’s new tariff law, which has been imposed on steel and aluminum, will come into effect within 15 days. However, Canada was one of the two countries exempted from these new U.S. tariffs. This move on the part of the United States is expected to boost Canada as the country exports around 90% of its steel and 41% of its aluminum to the United States.

Trump said that the United States shares a “unique” relationship with both Mexico and Canada and for that reason the U.S. President has decided to “hold off the tariff for those two countries." Trump exempted these two countries saying that he was doing so with the hope thata deal could be reached with them on the North American Free Trade Agreement (NAFTA). In the event, that such an agreement could not be concluded he may reimpose the tariff.

Bank of Canada: Economy “Progressing Well”

On Mar 9, the Canadian economy created 15,400 new jobs in February after registering job loss of 88,000 positions in January, biggest such decline in nine years. Additionally, unemployment rate declined from 5.9% in January to 5.8% in February, its lowest level since its commencement in 1976.

Meanwhile, on Mar 8, Timothy Lane, Deputy Governor of the Bank of Canada, said that the country’s economy is “progressing well.” Canada posted strong economic growth of 3% for 2017 “as a whole.” The central bank expects “moderate to a more sustainable” growth pace this year, per the latest National Economic Accounts data.

Although Canada recorded Q4 GDP growth of only 1.7%, lower than the 2.5% target of Bank of Canada, Lane said that the “the underlying details” indicated that the economy is still improving. In fact, what supported the central bank’s expectation is “final domestic demand” that rose at nearly 4% pace for four straight quarters.

Moreover, Lane said that the U.S. decision to exempt Canada from its new tariff laws is “encouraging” news for the country.Additionally, Canada’s Foreign Affairs Minister Chrystia Freeland said that this move on the part of the United States is “a step forward.”

5 Canadian Stocks to Buy Now

Following Trump’s tariff exemption and the Canadian economy’s brighter prospects for this year, Canadian stocks are expected to garner investor attention. Additionally, job additions and decline in unemployment rate in February bode well for the Canadian economy.

In this context, we have selected five stocks that are expected to move north following these developments. These stocks also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see Original post

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Written By: Zacks Investment Research