Month: January 2025

2026: The “Year of Consequences” for Canadian Trade

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Back in January 2025, economists were already calling 2026 the “Year of Tariff Consequences” for Canada. Now that we are well into that year, we can see what actually happened — and what it means for your household budget.

What happened at the July review

The Canada–United States–Mexico Agreement (CUSMA) — the trade deal that replaced NAFTA — had a mandatory six-year joint review on July 1, 2026. Canada and Mexico both supported renewing it. The United States declined to renew it in its current form.

Here is the important part many headlines skipped: that decision did not cancel the deal. CUSMA remains in force until July 1, 2036. What changed is the rhythm — instead of a review every six years, the three countries must now review the deal every year. That means trade rules stay uncertain for longer, and businesses cannot plan the way they used to.

Tariffs went up again in the fall

Canada answered the non-renewal with counter-tariffs of its own, matching U.S. tariffs “dollar for dollar, rate for rate,” and suspended bilateral trade negotiations. Those Canadian counter-tariffs took effect on September 8, 2026.

Washington responded the same day with new measures under Section 338 of the U.S. Tariff Act, including a ban on importing certain Canadian products starting September 29, 2026. On top of that, 50% U.S. Section 338 tariffs on a range of Canadian goods — plastics, furniture, electronics, machinery, wood products, textiles and sporting goods — took effect on August 22, 2026, with no CUSMA exemption. These can stack on top of the existing sectoral tariffs on steel, aluminum, copper, vehicles, lumber and furniture.

One piece of good news, with a catch: the U.S. Supreme Court rejected the tariffs imposed under emergency-powers law, which opened a refund process for those duties. But that ruling did not remove the Section 232 or Section 338 tariffs, so for most Canadian exporters the pressure continues.

What this means for your household

Trade fights feel far away, but they land in your grocery cart and your travel plans:

  • Prices on imported goods stay under pressure. When tariffs hit electronics, furniture, clothing and food inputs, those costs tend to show up on store shelves.
  • The Canadian dollar stays jumpy. A volatile trade environment puts downward pressure on the loonie, which makes cross-border travel and anything priced in U.S. dollars more expensive.
  • Business investment stalls. When companies cannot predict the rules, they wait. That waiting slows job creation and wage growth.

The U.S. midterm elections this November will add more political noise, but noise is not a plan.

What you can control

You cannot fix a trade war from your kitchen table. You can do four practical things:

  1. Keep a cash cushion. In uncertain times, liquidity — money you can reach quickly — matters more than squeezing every last dollar of return.
  2. Stress-test your budget. Ask: if groceries and household goods cost 10% more for a year, where would that money come from? Finding the answer now beats finding it later.
  3. Diversify beyond Canada. Holding investments outside one country is no longer just a nice idea; it is a hedge against a trade shock hitting one region harder than others.
  4. Stay flexible, not fearful. Review your plan once or twice a year, not every time a headline flashes. The investors who do worst in volatile times are usually the ones who trade the most.

Trade uncertainty looks like it will be with us for a while. The households that come through it best will not be the ones who predicted every twist — they will be the ones whose budgets and portfolios were built to bend without breaking.

Want help stress-testing your own budget or portfolio for trade uncertainty? Visit kwicoaching.com and use the contact form to ask about coaching.

Disclaimer: This post is general education only. It is not financial advice, and it is not a recommendation to buy or sell any security.

TFSA CONTRIBUTION FOR 2026 HITS $7000

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Opening a Tax-Free Savings Account (TFSA) in Canada is one of the simplest ways to keep more of what your money earns. Here is why so many Canadians use one — and what to know for 2026.

1. Tax-free growth

Money inside a TFSA grows tax-free. Interest, dividends and capital gains earned in the account are never taxed, so your investment compounds faster without the yearly drag of taxes. Compounding means your earnings start earning their own earnings — and the longer money stays invested, the more that snowball grows.

2. Flexibility

You can withdraw from a TFSA at any time, for any reason, with no withholding tax taken off the withdrawal. And the room you free up by withdrawing comes back: withdrawals restore your contribution room on January 1 of the following year.

3. No age limit

There is no maximum age for a TFSA and no deadline forcing you to take money out. You can contribute for as long as you want to.

4. Any savings goal

A TFSA is not just for retirement. People use one to save for a car, for education, to buy a home, to set aside extra living expenses — or simply as a flexible rainy-day fund that still earns a return.

5. No impact on government benefits

Because TFSA withdrawals are not taxable income, they do not affect income-tested government benefits. That makes the TFSA especially useful as extra retirement savings alongside other income.

The 2026 numbers

For 2026, the Canada Revenue Agency (CRA) set the annual TFSA dollar limit at $7,000 — the same as 2024 and 2025. Unused room carries forward indefinitely, so someone who was eligible since the TFSA began in 2009 and never contributed has $109,000 of room as of January 1, 2026. New room opened on January 1, 2026, and your own exact room is shown in CRA My Account and on your Notice of Assessment — always check before you contribute, because over-contributing costs 1% per month on the excess.

Looking ahead to 2027

Good news for the new year: the 2027 TFSA limit is expected to rise to $7,500 — the first increase since 2024. That would bring total room to $116,500 for someone who was eligible since 2009 and never contributed. Two cautions: new room only arrives on January 1, 2027, so do not contribute the new amount early; and the CRA formally confirms the 2027 limit in November, so treat $7,500 as the indexed calculation and check your room in CRA My Account in January before you top up.

Remember: the sooner you contribute, the sooner your money compounds. As Warren Buffett put it, “Time is your friend, impulse is your enemy. Take advantage of compound interest…”

One caution from the original post still stands: while TFSAs offer many benefits, it is always worth talking the details through with a financial coach before making big moves.

Want help deciding how much TFSA room you have and how best to use it? Visit kwicoaching.com and use the contact form to ask about coaching.

Disclaimer: This post is general education only. It is not financial advice, and it is not a recommendation to buy or sell any security. Tax rules depend on your province and personal situation.

The Difference Between Dividend and Interest Income

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In Canada, not all investment income is taxed the same way. Two dollars of investment income can leave you with very different tax bills depending on whether those dollars arrived as interest or as dividends. Here is the difference, in plain language.

Interest income: fully taxable

Interest — from a savings account, a GIC, or a bond — is fully taxable. Every dollar of interest is added to your income and taxed at your marginal tax rate. Your marginal tax rate is simply the tax rate on your next dollar of income, and it depends on where you live and how much you already earn.

Dividend income: a tax credit softens the bill

Dividends from Canadian companies get special treatment through the dividend tax credit. Here is the rough idea: the company already paid tax on its profits before paying you a dividend, so the tax system gives you a credit to avoid taxing the same money twice.

There are two kinds, and the difference matters:

  • Eligible dividends — usually from large public companies. These get the bigger tax credit and the lower tax rate.
  • Non-eligible dividends — usually from small private companies, including many small businesses. These get a smaller credit and are taxed at a higher rate than eligible dividends.

What the difference looks like in dollars

Tax rates change by province and by income level, so any example has to name its province and year. Using Ontario’s top tax bracket on 2025 rates (Baker Tilly’s 2025 Ontario budget summary):

  • $1,000 of interest income would draw about $535 in tax.
  • $1,000 of eligible dividends would draw about $393 in tax.

That is a gap of roughly $142 on every $1,000 — simply because of how the income is classified. For comparison, non-eligible dividends in the same Ontario top bracket would draw about $477 per $1,000: still less than interest, but much closer to it.

For completeness, capital gains sit in their own category: only 50% of a capital gain counts as taxable income. (A proposed increase to that 50% inclusion rate was cancelled in 2025, so the 50% rule continues.)

So which is better?

Dividends are usually more tax-efficient than interest in a non-registered account — money held outside your TFSA or RRSP. But the “best” choice always depends on your own situation: your province, your income level, and your goals. Chasing the lowest tax rate is not a strategy on its own; the investment still has to be a good one.

And one thing that never changes: inside a TFSA or RRSP, this whole comparison disappears, because those accounts shelter your investment income from yearly tax entirely.

Want help figuring out which kind of income fits your situation best? Visit kwicoaching.com and use the contact form to ask about coaching.

Disclaimer: This post is general education only. It is not tax or financial advice, and it is not a recommendation to buy or sell any security. Tax rates vary by province and change over time — check the current rates for your province or speak with a qualified tax professional.