On February 1 President Trump signed an executive order that imposes 25% tariffs on Canada and Mexico, effective February 4...outside of the terms of the existing tri-lateral USMCA trade agreement involving these countries.
This is odd, considering he bragged about renegotiating and signing this agreement on November 30, 2018, which replaced the prior prior NAFTA trade agreement.
The leaders of Canada and Mexico are retaliating with their own tariffs, as well as multiple measures by individual Canadian provinces (such as this), sparking a potential catastrophic trade war for all concerned.
At of the time of writing this post, President Trump has refused to take Canadian Prime Minister's phone calls placed to him since the date he was inaugurated.
The President is also imposing 10% tariffs on China, who are considering their reponse..and said he's also considering adding tariffs on Europe, the UK, and Taiwan, etc., as well as sanctions on, as yet, undefined entities. He is also dismantling USAID as described here and here....and has been busy taking other actions at home and abroad.
Tariffs and sanctions would spike already highish levels of inflation, as well as produce multiple job and industry losses worldwide...and create huge losses for foreign and domestic investors in a variety of sectors directly and indirectly impacted by his actions...potentially leading to a recession in some countries.
The Wall Street Journal has dubbed Trump's action as "The Dumbest Trade War in History."
As I write this article Sunday evening, U.S. futures markets (Dow, S&P 500 and Nasdaq) are tanking along with Chinese/Asian/Aussie/European markets, WTI Crude Oil is spiking, and the U.S. Dollar is spiking thereby tanking the Canadian Dollar and other world currencies.
N.B. Updated details on overnight trading can be found here.
The President's pretext (based on the text of the executive order) for the imposition of these tariffs is, at best, flimsy, and, at worst (based on his ever-changing rhetoric, outright factual lies and repeated taunts), unjustly punitive, bullying, hostile, nonsensical, reckless, and smacks of imperialism, as well as geopolitical and sovereign cannibalism. It also appears to be politically and personally motivated, in some cases.
We'll see how long this tariff warfare lasts, and the extent of unnecessary economic and political damage it causes around the world.
In the meantime, Canada needs to wise up and diversify its trade internationally and inter-provincially, as it cannot tolerate being subjected to irrational whims of belligerent, erratic foreign leaders who want to annex it via these legally-suspect tactics...especially those who verbally keep changing the goal posts of what it is they're actually after.
Markets hate uncertainty.
Buckle up!
* UPDATE February 3...
Both Canada and Mexico have been given a tariff reprieve of 30 days to enact a plan that (presumably) satisfies the President's concerns outlined in his executive order related to fentanyl and illegal migration along the northern and southern U.S. borders, as described in this article.
So, we'll see what happens.
However, it appears that there's more to this than meets the eye in that regard.
First off, President Trump will need to identify exactly what the "economic" problems are that, supposedly, need 'fixing,' to which he has alluded at the end of his latest post (below) on his social media platform. So far, his actions and rhetoric have all been theatrical megalomaniacal insanity...not based on a rational broad mutually-cohesive strategic economic plan!
So, who knows what would ever satisfy him regarding tariffs. Let's hope that common sense prevails.
But, don't hold your breath.
* UPDATE February 4...
President Trump's threat of tariffs on China became a reality today, with China retaliating with tariffs of its own against the U.S., as described below.
There is no hibernating this winter for the 'global bear who has been poked.'
BEWARE!
