“The only certainty in (fiscal, trade and monetary) policy, politics, in our capital markets, in our social lives and, even in sports, is the lack of certainty these days.” — Doug Kass
We published on tariffs on Monday. See https://kotokreport.com/tariffs/.
So far here’s a succinct summary of the result and an excellent explainer from PBS NewsHour:
“Trump’s 2.0 trade war is already ‘fundamentally different’ from 1.0,”
“A look at how tariffs work and the impact they have on the economy” (PBS NewsHour),
Tariffs on Mexico and Canada have been delayed, of course, given (prior) commitments made by those countries, as negotiations continue.
“In Mexico: Mexican President Claudia Sheinbaum said Mexico would send 10,000 troops to reinforce its border with the U.S. in return for the U.S. working to stem the flow of weapons to Mexico. The 30-day period allows for more negotiations.” (AP)
“In Canada: Prime Minister Justin Trudeau said Canada would appoint a fentanyl czar and spend $1.3 billion — money originally allocated last year — to add new technology, personnel and other resources to stop the cross-border flow of fentanyl.” (NBC News)
I am skipping China for now. Today we focus mostly on Canada.
DT 2.0 will avoid litigation over the issue of invoking “emergency authority” when there is no emergency involving Canada. Canada had 43 pounds of fentanyl confiscated last year; Mexico had over 20,000 pounds. Canada has net incoming migration of Americans.
Does anyone really believe Canada and Mexico are equivalent? Take out energy, and Canada has a trade deficit with the US. America needs that Canadian energy. No emergency there. By declaring Canada and Mexico equivalents in a tariff war, DT 2.0 took several steps backwards, IMO.
Here’s a pic sent to me by a Canadian economist friend who has described how Trump has energized Canada. “With a friend like the US, who needs enemies” is the slogan. “Buy Canadian” is another slogan.
Below is a sample.
Also below is the link to the entire list of what would have been 25% tariffs imposed on the US. It is detailed and it is long. I do not expect any reader to plod through it, but I am asking readers to skim a few items to see how detailed it is. Then think about what American business or investment you know that would be hurt by this list. And please remember: Canada didn’t invite the 25% tariff and doesn’t want a tariff war.
“Canada’s retaliatory tariffs: Here’s the list of targeted items,”
https://globalnews.ca/news/10993895/canada-counter-tariffs-full-list/
And remember that Canada is the single most important partner the US has when it comes to our national defense and to our policy regarding the Arctic. For those who are unfamiliar with state-specific investments, Canada has a huge investment deployed by various enterprises in Florida. And Canada provides much in the way of tourism dollars to Florida. Lastly, ask the folks at Central Command about the detailed and comprehensive working relationship between the military of America and that of Canada.
When Bloomberg’s John Authers called the tariff policy “dumb,” he was being polite, IMO.
So, we now have a 30-day cooling off period, a funding of items on the Canadian border that were already in the pipeline, and a border control that is already mostly in place. Our long and secure and safe border with our neighbor to the north of us is intact.
DT 2.0 will claim victory and do circular laps around the Oval Office.
Canadians in business with the US, and Americans in business with Canada, have already started to reexamine their investment and plans. They cannot depend on anything Trump 2.0 says. And they won’t invest as much as they might have done previously with such a high uncertainty premium as has been introduced by DT 2.0 when it comes to our most reliable and trusted neighbor and ally.
You wouldn’t. I wouldn’t. Why in the world should we expect any rational investor to be different?
A final note — this was all Trump, and he owns the outcomes. His skilled advisers inside his tent know the 25% tariff on Canada was a bullying act, and they knew it before it was announced. They knew it could only do harm. Now they are tasked with patching things up. Meanwhile, the Canadian elections loom, and Trump has given Canadian politicians a massive amount of fodder to consume.
My final rating of the Canada 25% tariff affair: We (America) “crapped in our hat.” Readers can figure out the color of the hat for themselves.
Note that this missive is my personal opinion and is focused only on the Canada part of the tariff war. What comes next with Mexico and China and elsewhere is a separate and distinct story to unfold, item by item, country by country, and region by region.
