The Canadian Stock I’d Buy if Tariffs Heat Up

Tariffs are back in the headlines, and Canadians can feel the edge in the conversation. In early February 2026, U.S. President Donald Trump threatened to block the opening of the Gordie Howe International Bridge and tied it to unresolved trade disputes, while U.S. officials signalled they would not simply drop tariffs even if Canada did.

That kind of talk lands like a stress test, because it raises the odds of sudden levies, retaliation, and higher costs moving across the border right when many households already feel stretched. A new Capital One Canada survey of more than 1,500 people shows two-thirds of Canadians say they can still prioritize well-being, but 43% feel that spending on wellness products and services strains their budget. The buffer just is not there for everyone, especially younger Canadians who already report delaying essentials or cutting subscriptions to make the math work. So, how can Canadians fight back?

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That’s why Loblaw Companies (TSX:L) is the Canadian stock I would buy if tariffs heat up. It sells essentials, not luxuries, and it has the scale to manage supplier shocks better than smaller competitors. If households feel squeezed, it can still win by capturing trade-down spending at discount banners and by pushing private label products.

Loblaw runs Canada’s largest grocery network through banners such as Loblaws, No Frills, and Real Canadian Superstore, and it owns Shoppers Drug Mart in pharmacy. Over the last year, the story has stayed practical rather than flashy. It kept investing in store upgrades, supply chain capacity, and digital tools that reduce friction at checkout and delivery. In a tariff-heavy environment, that operational focus can help protect margins.

Earnings support

Now to the most recent earnings snapshot. In the third quarter of 2025, Loblaw reported revenue of $19.4 billion, up 4.6% year over year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose to $2.1 billion, up 6.8%. Adjusted diluted net earnings per share increased to $0.69, up 11.3%. Those numbers suggest it still grew profits while customers stayed value-conscious, which is exactly the environment tariffs can amplify.

It also kept investing to defend the franchise. Net capital investments in that quarter were $682 million. Grocery is a grind, and better distribution, fresher stores, and faster checkout help it maintain its market share even when competitors chase traffic with discounts.

Valuation is the trade-off. Loblaw currently trades at 32 times earnings with a minimal 0.83% dividend yield, so this is not an income play. Instead, it’s a resilience-and-compounding play, and you pay up for that comfort. Looking out through 2026, I expect steady, not spectacular growth. Grocery volumes usually hold up, and pharmacy demand rarely fades. If tariffs lift prices, revenue can rise, but costs can rise too. Execution decides the spread for shareholders over time.

Foolish takeaway

If this is the mood heading into 2026, it explains why tariff chatter hits differently than it used to. When 31% of Canadians aged 25 to 34 say they have sometimes delayed or skipped an essential purchase, and about one-quarter of Canadians say they have been forced to change well-being subscriptions or memberships due to cost pressures, even a small price shock can feel personal.

That’s the uncomfortable collision Canadians are living through: the border economy can shift overnight, while personal budgets have already been squeezed into hard choices. When people cut back on what supports well-being because money feels tight, it affects daily life. That raises the need for practical tools that help Canadians keep their footing when the next headline hits.

The post The Canadian Stock I’d Buy if Tariffs Heat Up appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.