Ontario Teachers’ Pension Plan (OTPP) is closely monitoring the potential for higher tariffs to slow the global economy, but it thinks that “cooler heads are going to prevail” before that happens, OTPP chief executive Ron Mock said Tuesday.

Ontario Teachers’ core portfolio is well-diversified and in good shape to deal with unexpected developments, having ended 2017 with 9.7% return on investment and a fifth consecutive annual surplus, Mock said.

Referring specifically to the ongoing NAFTA talks between Canada, the United States and Mexico and the recent exchange of tariff threats between the United States and China, Mock said there’s a lot of “noise” in the news.

“While there’s a lot of blustering and negotiating that’s going on, we’re firmly convinced that cooler heads are going to prevail as we roll forward,” Mock said on a conference call with reporters.

If that doesn’t happen and there’s higher taxation on trade in the form of tariffs, there could be an economic slowdown that would cause central banks to take actions such as lowering interest rates.

But Mock said OTPP currently thinks “that it’s not going to get that far at this point in time.”

He added that OTPP’s investment team continues to look at deals on a case-by-case basis, he said.

“I cannot think of anything that has caused us to pause in here,” Mock said.

Mock’s comments came after the Ontario Teachers’ Pension Plan reported that it ended 2017 with net assets of $189.5 billion.

The plan said it was 105% funded as of Jan. 1.

The OTPP said the strength of the fund is allowing for a reduction of the contribution rates for the Ontario government and active teachers, which pay equally into the plan.

The new rate of 11% of pensionable earnings, which is down from 12%, will reduce the Ontario government’s costs by an estimated $150 million per year and an equal amount for employees.

Investment returns provide more than three-quarters of the plan’s funding, with the remainder provided by the Ontario government and contributions of working plan members.

The pension fund also reported Tuesday annualized five-year total net returns of 9.6% and annualized 10-year total net returns of 7.6%.

The OTPP serves Ontario’s 323,000 active and retired teachers.