With global trade careening towards “a more protectionist environment,” investors must increasingly factor in companies’ political and geographical contexts, and the U.S.–China rivalry in particular, a National Bank of Canada economic briefing advises.
Assessing a company’s balance sheet will remain essential, says geopolitical analyst Angelo Katsoras, but companies’ locations, sectors and scale will require increased scrutiny as the world responds and adapts to the U.S. government’s broad, deep tariff strategy.
“Investors must increasingly consider geopolitical fault lines, government priorities, and protectionist policies when making investment decisions, as these factors can impede market access or lead to higher operating costs,” Katsoras wrote.
The U.S. tariffs can be divided into three main categories, Katsoras says: tariffs connected to a renegotiation of the United States–Mexico–Canada Agreement (USMCA), in which Canada will likely end up with “substantial, albeit somewhat reduced” market access”; reciprocal tariffs with the rest of the world, which might eventually result in new deals and a partial lowering of rates; and tariffs related to China, where Katsoras says little progress is expected “anytime soon.”
Katsoras advises that investors need to understand evolving global divisions and how they might affect a business’ plans. They “should be cautious if a company is investing in regions influenced by major powers not allied with its home country,” he says. “This factor likely explains at least in part the recent challenges faced by some Canadian mining companies in Africa.”
China and the United States are also competing to impose their own industrial standards on the rest of the world.Angelo Katsoras, National Bank of Canada
Smaller companies — and companies based in smaller countries — may be at greater risk, the briefing says. As the U.S., China, the EU and India look to bring more production inside their borders, “smaller countries must strive to maintain the best possible access to the larger nations most vital to their economic future,” the briefing says. Furthermore, smaller companies, regardless of location, might not have the deep pockets required to establish operations in major markets, or even to “hire expensive lobbyists to champion their interests” in those markets.
The U.S.–China rivalry is a central consideration in the briefing. Bitter competition for dominance on all fronts, which has raged for years, means “Chinese and American companies in strategic sectors are seeing access to the other country’s market gradually restricted,” Katsoras says.
