Weekend Reading – More Trump Tariffs
Welcome to a new Weekend Reading edition, this one about more Trump tariffs to navigate.
Just in case you missed last week’s edition and some other posts…
I contributed to a MoneySense article about the Best ETFs in Canada to own.
And a few months ago, a reader asked me if they can retire with $1 million invested in their RRSPs.
They can – since $1 million invested in your mid-60s is still quite a bit of money…
Weekend Reading – More Trump Tariffs
Leading off this Weekend Reading edition, these articles/headlines:
Trump threatens 50% tariffs on EU and 25% penalties on Apple
In that: President Donald Trump is threatening a 50% tax on all imports from the European Union as well a 25% tariff on Apple products unless iPhones are made in America.
Geez.
And…
Trump’s new bill threatens major tax increases for Canadian companies
With that article above (with thanks to The Globe and Mail (subscription)):
“On Thursday, the U.S. House of Representatives passed the Republican legislation, titled the One, Big, Beautiful Bill, with a narrow vote of 215-214. If it becomes law, it will override the Canadian-U.S. tax treaty that has been in place since 1942.
The 1,100-page document includes section 899, a tax proposal created as a retaliatory measure against what the U.S calls “discriminatory or unfair taxes” of foreign countries, including Canada’s digital services tax (DST), which was introduced in 2024.
The U.S legislation is still required to be passed by the Senate and receive presidential approval before it can become law. The White House expects the President to sign the final bill by July 4.
Canadian corporations that receive dividends from U.S. subsidiaries are currently subject to a 5-per-cent withholding rate under the tax treaty between the U.S. and Canada, much lower than the statutory rate of 30 per cent.
But under section 899, Canadian companies would see their tax rate increase by five percentage points each year until it reaches 20 percentage points above the statutory rate, or 50 per cent. It would remain in place until the “unfair tax” is removed.
Similarly, Canadian individuals who own U.S. securities directly are subject to a 15-per-cent withholding tax rate under the current treaty, reduced from the statutory rate of 30 per cent. Under section 899, the withholding rate could ultimately rise to 50 per cent.”
Yikes.
So, my understanding is if you own Canadian ETFs (like I do) that hold U.S. stocks or U.S. ETFs, well, your foreign withholding tax (FWT) bill will go up if this comes to pass.
We’ll see how this all shakes down to be honest.
Trump could change his mind a few dozen times before anything is passed on July 4th and even then, one might hope Canada drops the Digital Services Tax (DST) we implemented a year ago to reduce the possibility of more targeted attacks to annex us.
I’ve been on record to share that I don’t intend to change our portfolio very much with Trump in office.
That said, I might look into holding different ETFs (corporate class ETFs) if he doubles-down on Canada.
These ETFs are helpful and suitable for DIY investors who want total return exposure to the large-cap U.S. equity market (e.g., S&P 500) or other markets, but are not looking for regular distributions. This would be helpful in the case of getting taxed on any foreign withholding taxes (in my opinion).
As a primer / reminder from My ETFs page, here where foreign withholding taxes apply:
Source: BlackRock.
For other Weekend Reading beyond Trump Tariffs
It’s big bank earnings season in Canada. Some banks might raise dividends again this quarter, others might hold the line. We shall see over the coming week. A good reminder on that:
Source: https://x.com/CDInewsletter/status/1919354386934878352
Not that he needs the money of course, but my friend Dividend Growth Investor highlighted that Bill Gates could have been the world’s first trillionaire investor – could have – had he held his own company stock long enough…
Nice interview by a local friend of mine Kanwal Sarai with portfolio and wealth manager Jenny Harrington. Among other subjects, they discussed:
- Why dividends at all?
- Jenny believes dividends serve a need: as part of a pragmatic portfolio that grows at a higher rate of inflation.
- The notion that 100% growth is just not certain – which is a challenge in an uncertain world.
- Her belief that dividends are psychologically helpful because moreso than a total return strategy the biggest risk to your retirement plan is your bad behaviour; not being comfortable enough with waiting for growth and therefore selling something at the wrong time.
- Her recommendation for building a responsible diversified portfolio: consider 80% or so in a broad market fund and buy 20% stocks/dividend income stocks.
I read an impressive amount of dividend income earned by Dividend Hawk.
Reader Question of the Week (adapted for the site):
Hi Mark,
I have been a long time reader of your site and have learned lots from yourself and your community of DIY investors. Thank you for creating great educational content and congratulations on your recent transition to part-time work.
The struggle that I have is tracking the performance of my portfolio across multiple accounts and multiple institutions. My wife and I have a few self-directed accounts and business accounts. I have used some tools via Yahoo Finance and from The Measure Of A Plan, but I find that none of the portfolio values/performance figures are the same, even though I have doubled checked that all the transactions are the same across all platforms. I am curious to know what you, or your readers use to accurately track their portfolio performance and dividend payments?
Hopefully this is a subject that you feel has value to your readers and the responses will help your community!
Great question and thanks very much for your readership.
To be honest, I keep it very simple. In terms of tools, I know many Canadian brokerages like RBC, TD, Questrade, Interactive Brokers and more include portfolio performance tools. It’s much easier to figure out rates of return and monitor performance when everything is under one roof.
Here is a good listing for the Best Online Brokers in Canada.
When it comes to what I use to track rising dividend and distribution income, I use a spreadsheet. That’s it. Very simple. I use my spreadsheet to tally and contribute to these updates:
I can’t speak to the cybersecurity controls related to these tools below, I don’t use them and I’m not advocating for them per se but I do know of them and they seem well-suited to what you might be looking for – just do some due diligence on what they do with your data:
https://www.portseido.com/portfolio-tracker/canada
https://wealthica.com/how-it-works/
Readers, help for this reader? What tools might you use? Thanks to reader Mary from reminding me about Wealthica.
In case you missed this webinar below, I will link to the recording as soon as my partners at TD Direct Investing post it and I will also share some audience Q&A that I didn’t have time to answer with my debate partner Henry Mah in a future blogpost. Stay tuned for both of those items!
The DST should be something the US should do as well. These tech companies use our data 24/7 to reap billions in profits. But because they are US-based companies, the US administration cannot punish them or else they lose their vote of confidence. The unfortunate world of politics.
Section 899 though is a scary proposition for us Canadians who enjoy investing in the US market. Recently wrote a piece about this on my blog: https://divistockchronicles.substack.com/p/section-899-how-it-could-affect-canadians. Though for the most part, I focus on high growth, low yield US stocks so I am not as concerned as others.
Scary indeed. It might go ahead, we shall see. I hope not of course. Pensions in Canada would be severely impacted and require a total rethink.
I only have 3 USD stocks in my portfolio now (all low-yielders or not at all…) and low-cost ETF QQQ that barely pays any distributions at all. I have invested this way on purpose of course.
Canadian ETFs that hold U.S. stocks or U.S. ETFs will be an issue.
We’ll see where this goes…
Mark
Do you know how the ‘One, Big, Beautiful Bill Act’ affects US ETF distributions for non-US citizens? Believe a 5% tax (going up every year till it reaches 20%) on all outward dividends, interest, real estate revenue and even cash remittance is on the cards – which is HUGE if you’re earning USD distribution through ETFs or other assets. More importantly CRA has a clause in the tax code that does not allow dual tax avoidance (of withholding taxes) for such instances outside the original US-Can tax treaty (so only the baseline 15% US withholding will be exempted if holding assets in a non-reg account). Hopefully it stalls in the House before being passed as a bill but chances are slim, given Republican control of the House.
This is going to get messy if it goes through…huge implications to pension funds in particular.
We’ll see how it goes. I might have to rethink owning ANY USD stocks.
I only have three left in my portfolio now since I’ve sold many over the years and I was likely to sell them in the coming 5 years anyhow to fund my retirement income plans while keeping my existing, main low-cost ETFs for growth like XAW and QQQ intact.
What’s your thinking, Rick?
Mark
I hear you – Unfortunately for us Canadians though, the Big, Beautiful Bill Act is being driven by Republicans and not the administration per say and has large impacts on not just us individual stock/ETF investors but also pension funds like the CPP that is heavily (47%) weighted in the US.
VEQT/XEQT for example, has approx 43.6% of its assets invested in the US and on top of the 15% withholding drag within these ETFs which we already pay, we will be subject to another 5% progressively over 4 years (15+20=35% withheld tax wipes out all gains)!
This bill has the potential to sink millions and millions of Canadian family retirements.
We’ll see how it goes after House review. Fingers crossed.
Correct. If this passes, huge impacts to all pension plans based on what they invest in and size of assets. They would need to adjust for sure.
As for DIY investors, 100%, big impacts there too. Billions of dollars at stake. Cooler heads should prevail but many Republicans including those related to White House aren’t that bright.
Every VEQT, XAW, VXC, HEQT, VFV, etc. will be impacted huge.
I own QQQ, barely impacted given yield and designed for growth almost exclusively. It has done very well for me.
XAW is my biggest impact since it represents a large part of my portfolio so I have a few options:
– move XAW into a corporate class ETF/fund e.g., HXS potentially.
– sell some XAW and move into 90% of proceeds into CDN stocks and use 10% to increase cash/cash equivalents for future withdrawals.
We shall see. I’m not making any rash decisions now. No point. After House review, well, that could be very different.
Thoughts, Rick?
Mark
His pushback on DST is solely because it impacts the people who put him the WH. DST should be raised if anything, Meta, Google and the likes are nothing more than digital Cancer. A US made iPhone sold only in the US will cost 2x and be half the quality but hey if that’s what they want then great. I can live without Apple (or Ford, or GM or KitchenAid or any other made in Amurica product) I live without Meta, hardly use Google (try DuckDuckgo) and am allergic to X (Bluesky anyone). I definitely do not need/want to travel there. Simply unUSify your life and you’ll be better off I promise.
With that out the way (phew) I did look at some of my holdings (thanks for the heads up) and so far increased WHT would not be a big issue. I do not receive much dividend from Canadian ETF’s with US holdings most is ROC and has no WHT. For folks holding i.e. ZDY or XHD I can see the potential issue but frankly if you are investing for dividends the US is the wrong place to be.
My concerns would rather be with the US becoming less and less investable both for equities and treasuries plus the impact to Canadian companies with significant US holdings like some utilities (FTS,EMA). Things might change yes the bill has many horrendous items in it and only passed by one vote but it passed nonetheless.
Can you imagine 4 years of this garbage? A treaty is worthless, a contract is worthless, Law is worthless, your word is worthless. At some point the conclusion will be US? no thanks it’s simply not worth it.
i guess to be continued?
Good stuff and fair point, Ben.
re: “For folks holding i.e. ZDY or XHD I can see the potential issue but frankly if you are investing for dividends the US is the wrong place to be.”
I hold XAW and QQQ as my main ETFs for U.S. assets and down to just a few U.S. stocks that do not pay much if any dividends, so I am largely not impacted by this change. More of an annoyance.
We’ll see how this all shakes down in time.
“Can you imagine 4 years of this garbage?”
No, I can’t. He cannot be trusted and he is sociopath. Sigh.
Mark
I noticed on the March distribution from BIP.UN (in my TFSA) that there was a withholding tax of around $22. It used to be around a dollar or two. Not sure what changed or why but I decided to instigate transitioning it from the TFSA to my RRIF by selling it in the TFSA right after the March DRIP showed up and buying it back in the RRIF with a GIC maturing in the fall. Now I’m not sure I’ll even buy it back at all. My level of trust in our southern neighbour is close to zero. Sadly though there really is no way to escape their now negative influence on the world.
As to tracking performance…I can’t offer any advice, my tracking is and was rudimentary at best.
Oh, interesting… Have you considered just switching your BIP.UN to BIPC (corporation version) for your TFSA?
Right now, holding BIPC or as you might know U.S. stocks that pay dividends and distributions inside RRSP/RRIF = no foreign withholding taxes; but yet inside the TFSA those same U.S. foreign withholding taxes apply for TFSA holdings at 15%.
“My level of trust in our southern neighbour is close to zero.”
Mine might be negative!!
Stay well,
Mark
haha…didn’t even think of the C series Brookfield products. Talk about a failure to think objectively.
All good! Should be an easy switch if you want to do that…
I think I missed that boat. I already sold the BIP.UN and used those funds to buy more XDIV in the TFSA. The GIC in the RRIF matures in October so I will make a decision on what to do at that time. A lot can happen in 4 months so I’m not going to get too worked up about it in the near term.
XDIV is a great fund. Hard to argue with that decision.
I echo that: A lot can happen in 4 months so I’m not going to get too worked up about it in the near term.
I hold both BIPC and BIP.un in my TFSA. It used to be the with holding taxes on BIP.un were low, applying only to a portion of their distribution/dividends. As Lloyd says this has creeping up, over the past year (perhaps applies to a larger portion of distribution now?) and I’m now considering switching this to BIPC. Bip.un is very complicated with distributions, dividends, taxes, interest, return of capital etc. A lot of transactions at payment time. Hard to follow…Always decisions…..
Yes, yes, and yes. Brookfield doesn’t make it easy. Ha. I hope BIPC and BEPC in the RRSP but not anything in TFSA…more growthy stuff in TFSA like XAW but I also own CDN banks there too like NA, RY, TD, BMO and BNS + some CPX. Very boring with TFSA.
Ha, ya, not easy. My BIP.un has been a very growthy holding for me.
I’m definitely very boring with TFSA holdings, and all my investing for that matter!!
You are doing VERY well with your plan my friend!!
Mark
Thanks. And so are you!!!
Very kind!!
Hi Mark:
I’ve used Passiv for ~4 years.
https://passiv.com/
Great front end tool that integrates into multiple brokerage sites.
All kinds of features
https://passiv.com/features/
With Passiv I spend no time within my actual brokerage accounts other than to download tax receipts at the end of the year.
I use one Passive account to manage 14 different accounts (RRSP, TFSA, LIRA, FHSA…) across the 4 members of my family.
I’m in the accumulation phase, and can’t imagine doing this without a tool like Passiv.
If not Passiv, I would be doing a lot of calculations within excel to keep my allocations in line with desired model portfolios.
Great stuff, Dan. Excellent details and thanks for sharing that one. I recall I was on their newsletter for many years but I don’t need their services myself but I can appreciate your points and folks should consider them; including for up to 14 accounts! 🙂
Cheers,
Mark
“Readers, help for this reader? What tools might you use?”
I use a spreadsheet. It took me many hours to build, and it takes a few hours each month to keep updated. To accurately calculate my return, I need to account for every new contribution to each account and every withdrawal.
For example, when withdrawing from a RRIF and moving some of that money into another account, such as a TFSA, it counts as both a withdrawal and a contribution. To avoid distorting the investment return calculation, it also has to account for the withholding taxes. To know your return over time, you need to retain the history of each account, so a new row is added every month. Until 2013 my tracking was annually, so then it was one new row per year.
All of this is to say: it’s a lot of work to do manually. Including all of our closed accounts, I have tracking data for a total of 47 accounts. *Only* 25 are still active.
Honestly, I can’t recommend that anyone take it to the extreme that I have. I do know our portfolio’s return to two decimal places, and I have some wonderful looking charts, but if you can find a tool that gives you enough of the information you need, that’s probably your best option.
Sounds detailed, Bob!
I’ve got a spreadsheet like you and it’s pretty simple but hardly perfect since I don’t account for all the floating USD <> CDN conversion rates related to my dividends or distributions. I’m too lazy to update and monitor. LOL.
I’ve been tracking my dividend and distribution income from some key accounts (I don’t post everything on this site) since 2010.
Hopefully those links and tools helped out my reader!
How are things of late? Investing in anything?
Mark
Just tying up a loose end, Mark – you asked a question!
I’d recently shifted about 15% of our equity from broad index funds into XDG (iShares Core MSCI Global Quality Dividend Index ETF: 2.54% Canada, 57.98% US, 39.48% rest of developed markets). But with the looming risk of unpredictable US dividend withholding tax changes, I unbundled it. I replaced XDG with ZDY (US) and ZDI (international ex-North America), and in the process, gave us a stronger international tilt. For Canadian dividend income, I still hold XEI. This setup gives me more control over our US exposure, in case things shift.
I like both of those BMO funds: ZDY and ZDI. XEI is a good Canadian income fund that is likely to deliver 4% yield + some growth from the coming decades.
Based on some articles I’ve recently read, seems U.S. withholding tax changes are on pause and were not included in the Big Beautiful Bill but I can’t say for sure since I haven’t read it. 🙂 That said, the financial future is always very cloudy at best. I’ll stick with my main equity ETFs for now: XAW, QQQ and a small amount of HEQT in my LIRA.
Cheers,
Mark
“Canadian corporations that receive dividends from U.S. _subsidiaries_ are currently subject to a 5-per-cent withholding rate”
To me a Canadian corporation holding publicly traded US shares does not have a subsidiary relationship with those companies. But maybe I am misunderstanding the term.
In any case, increasing the withholding tax on dividends for Canadian individuals holding US shares to 50% would be brutal. Do you want to show how that would play out if the shares were held in nonregistered, TFSA, and RRSP accounts?
From memory, it would be worst in the TFSA whereas potentially you have some recourse in a nonregistered account when recording foreign tax paid in your income tax return and the RRSP may also be advantageous.
Good to hear from you, Stefan.
Well, right now, Canadian ETFs like VFV, ZSP, etc. that invest in the S&P 500 are subject to 15% U.S. FWT. So, that would move up to 50% under new rules. We’re a long ways away from having this permanent. We’ll see.
15% U.S. FWT applies in a RRSP/RRIF, TFSA in this case. Non-registered it applies but you can apply for the tax credit. I prefer to hold Canadian dividend paying stocks in my non-reg. account and then I don’t have to worry about any of this mess and those dividend tax credits are very favourable as well. 🙂
I’ve amended my post today with a table for reference. Let me know your thoughts!
Mark
In this case, what would you hold in your registered accounts? Any Canadian ETF investing in the US will be subject to more withholding tax and you wouldn’t be able to claim the tax credit. Dividend tax credits are favourable only up to a certain amount of income and the gross up may trigger benefits clawback (like OAS). In addition, changing investments in unregistered accounts may trigger capital gains which are taxable. It is a mess!
For now, I continue to own QQQ for tech growth in my registered accounts along with just a few remaining U.S. stocks that pay lower-dividends/low-yield and are more growth focused. I’ve simplified my portfolio since the “early days” of being a DIY investor. My sanity and returns and better for it. Very worse case, I sell some of those U.S. stocks and I’m “done” with U.S. investing beyond some XAW and QQQ.
I still own XAW for ex-Canada growth and yes, there would be some small impacts if this goes through, I would consider using a corporate class ETF for growth related to S&P 500. Say, something like HXS that pays no distributions at all.
We shall see.
I don’t own any U.S. stocks or U.S. ETFs in a taxable account. It’s all Canadian stocks for me there and always has been for almost 20 years as a hybrid investor.
Cheers!
Thanks, that table puts the tax implications into perspective.
Canada is not the only affected country. The UK and some EU countries are as well, for example. If the US wants to make its investment assets less attractive by imposing taxes on foreigners, then the market will factor that in. And this at a time when the dollar and US treasuries are having a moment. We live in interesting times…
I’ll keep an eye on the bill as it comes before the Senate. Thanks for bringing this up!
We live in very interesting times…sad times too. 🙁
Mark
Wealthica might very well be the answer to your reader’s question. It is great. You link all your accounts (Canadian & US), it tracks all your transactions daily for you, tallies your dividends, provides ACB and realized gains, your performance, balance sheet, income, etc., etc.
You get a nice dashboard, all your holdings consolidated in one screen, same for all your transactions. It has all sorts of filters, and add-ons for your various needs, including spreadsheets generation. And it’s free (with some paying add-ons) and secure! It’s a100% Canadian product. I been using it since 2018 and can’t live without it!
https://wealthica.com/how-it-works/
Excellent share, Mary. Thanks for that. Yes, I recall Wealthica. I will add this to the blogpost for future reference. 🙂
Mark
Hey there, your comment about maybe Trump backing down if we get rid of “the unfair tax” seems to ignore past behavior. Trump has shown repeatedly that he uses these things as justification for his choices but even if the issue is addressed or in a lot of cases is actually a non-issue, he plows ahead regardless. Just look at the beginning of this and his claims about fentanyl flooding in from Canada. When we did our due diligence and it was discovered that the amounts were negligible nothing changed. Unfortunately, Trump is and has always been a bully. Nothing we do will change his mind. The only thing that will stop him is if the changes start to hurt big business in the US.
Note that the withholding tax increase is gradual. Everything may change in 4 years or even earlier when the time comes for mid-elections.
Very true. Such a mess with Orange Man. Geez.
Take good care and stay positive – I will try and do the same!
Mark
Yes, I was being somewhat gracious but my comment is about him changing course – flipflopping his mind like a 5-year-old would.
I hardly support his behaviour and choices. It is my hope the Republican party implodes sooner than later.
Thanks for your comment Joe and have a great weekend,
Mark