Rotating Out of MTY Food Group: Why Tariff Risks and Sector Vulnerabilities Call for a Tech Shift

The recent underperformance of MTY Food Group (MTY) underscores a growing dilemma for investors in the consumer discretionary sector: how to navigate the intersection of company-specific challenges and macroeconomic headwinds. With U.S. sales weakening, input costs rising due to tariff pressures, and broader consumer caution, the case for rotating out of Canada-exposed restaurant stocks like MTY is compelling. Instead, investors should pivot toward tariff-resistant sectors such as AI-driven technology (e.g., NVIDIA) and crypto ETFs (e.g., COIN), which have demonstrated resilience in volatile markets.
MTY's Q2 Decline: A Microcosm of Sector Vulnerabilities
MTY reported a 5% drop in normalized adjusted EBITDA to $70 million in Q2 2025, driven by a 3.8% decline in U.S. same-store sales. While the company cited “macroeconomic pressures” as a key factor, the data points to a deeper issue: structural vulnerabilities in the North American casual dining sector. U.S. corporate store margins fell to 9%, pressured by rising prime costs (food, labor) and cautious consumer spending. Meanwhile, Canada's 1.4% same-store sales growth highlights a geographic divide, with MTY's exposure to U.S. trade disputes—exacerbated by Trump's tariff threats—leaving it disproportionately exposed.

The broader restaurant sector is feeling the pinch. Input costs for ingredients (e.g., sugar, cocoa, dairy) and equipment are up 7–12% due to tariffs, squeezing margins for chains reliant on imported goods. Even MTY's “domestic sourcing strategy” offers only partial insulation: prime cost pressures and consumer caution remain unresolved.
Tariff Risks: A Catalyst for Sector Rotation
Trump's 2025 tariff threats—targeting Canadian imports with proposed levies of up to 35%—are compounding existing inflationary pressures. For restaurants, this means:
1. Input Cost Volatility: Rising prices for steel (used in equipment), agricultural commodities, and labor are eroding profit margins.
2. Consumer Caution: Diners are cutting discretionary spending, with QSR formats outperforming full-service restaurants.
3. Supply Chain Disruptions: Delays and higher logistics costs are forcing operators to delay expansion plans or cut costs.
MTY's decision to reduce its corporate store count—a tactical response—hints at the sector's broader struggles. Investors should ask: Will these challenges reverse soon? Unlikely. With retaliatory tariffs from trading partners and a fragile consumer backdrop, the path to recovery is unclear.
Shift to Tariff-Resistant Sectors: AI Tech and Crypto ETFs
In this environment, investors should pivot to sectors insulated from trade wars and inflation. Two stand out:
1. AI-Driven Technology (NVIDIA):
NVIDIA's Q2 2025 results were a masterclass in resilience. Despite $4.5 billion in inventory charges tied to export restrictions to China, the company posted record revenue ($30 billion) driven by AI infrastructure demand. Its Blackwell chip and data center dominance position it to capitalize on the $4 trillion AI hardware/software market.
Why invest now?
- Strategic agility: NVIDIA's Mexico manufacturing strategy (under USMCA) mitigates tariff risks.
- Defensive moat: AI adoption is a secular trend, immune to short-term trade disputes.
- Valuation: While pricey at $50 billion buyback, the stock offers a “wait-for-clarity” entry after August 2025 tariff decisions.
2. Crypto ETFs (e.g., COIN):
While direct data on COIN's performance is sparse, crypto ETFs broadly have shown volatility-resistant traits. As central banks grapple with stagflation risks, digital assets—often seen as inflation hedges—could gain traction.
Why consider them?
- Speculative upside: Institutional adoption and regulatory clarity (e.g.,
- Diversification: Low correlation to traditional equities makes them a hedge against sector-specific risks like MTY's.
Tactical Investment Shift: The Playbook
- Exit MTY: Given its geographic exposure to U.S.-Canada trade tensions and margin pressures, reduce holdings or close positions.
- Rotate into NVIDIA: Use dips post-August tariff clarity to build a core position in AI infrastructure leaders.
- Hedge with crypto ETFs: Allocate a small (5–10%) portion to crypto ETFs for volatility diversification.
Final Take: Avoid the Diners, Embrace the Disruptors
MTY's struggles are a symptom of a broader malaise in the restaurant sector. Tariffs, inflation, and consumer caution are unlikely to abate soon. Investors would be wise to shift toward sectors like AI tech, where innovation and strategic foresight—not just geographic luck—are the keys to resilience.

The message is clear: rotate out of vulnerability, and into disruption.
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