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Trump’s Tariff Take‑Off: A Rough Ride Through North American and Asian Trade Wars
Yesterday’s calendar hit the “tariff” button for Canada, Mexico and China—30% on Canada, 25% on Mexico, and 10% on China. Trump’s former memo said the world couldn’t negotiate anymore, but Commerce Secretary Howard Lutnick so far whispered that a little leeway might still exist if the United States–Mexico–Canada Agreement (USMCA) rules are respected. Who knows, maybe a united front against China will finally materialize as a cost‑cutting concession for Canada and Mexico.
Canada’s Quick‑Fire Response
- Prime Minister Justin Trudeau blasted Trump’s move as “smart but dum‑bros” in front of the president, basically saying, “If you’re so slick, why wreck our price? We’re just not playing that game.”
- Trudeau even went as far as to hint that the tariff rollout might be a plot to pound Canada into a sale before a ‘big takeover’—talk of annexation got a little wild.
China’s Counter‑Tactics
China rolled out a new wave of tariffs: 15% on chicken, wheat, corn & cotton; 10% on soybeans, sorghum, beef, fish, fruit, veggies & dairy. The Ministry of Commerce quietly added 15 more U.S. firms to an export control list and sanctions‑style register, labeling them “unreliable.” Meanwhile, China declared a 2025 growth goal of just 5% and an inflation target of 2%. Along with a 4% fiscal deficit, it’s pushing a “moderately loose” monetary stance that’s been a first in the last 14 years.
Market And Fiscal Stress Index
On Wednesday, the Treasury curve was looking a bit beastly: 10‑year yields jumped +8.9 bps to 4.25%, while a 2‑year slipped +4.1 bps to 3.99%. Canadian sovereigns climbed even higher, European short‑end rates dipped, and the long‑end saw a mixed picture.
Trump’s Future Playbook
He promised triple‑cross tariffs starting 2 April: “Whatever the other side tariffs at us, we’ll strike back. If they tax, we tax. If they block market access, we do the same.” And by ramping up taxes he claims we’ll generate “jobs like never before.”
Yet the reality is far from a shiny feast.
Economic Forecast—No One’s Fooling
RBA Deputy Governor Andrew Hauser, formerly of the Bank of England, warned that U.S. GDP might dip in the first quarter. The Atlanta Fed’s cube model back‑ed a 2.8% contraction—a sharp drop from the 2.3% growth forecast back in February. “If everyone feels the trade shuffle feels random, they’ll hold tight to money and postpone big plans,” Hauser said. Less spending means a bone‑crushing effect on growth, according to The Economist’ recent editorial.
Jeremy Grantham’s Take
- He quoted John Maynard Keynes on “animal spirits.” “If everyone sits on their cash in cheery gloom, we’re toast,” he said.
- Are we seeing a slow wave of pessimism with U.S. stocks dropping into negative territory on‑year‑today? Possibly.
Mirroring Europe’s Shift
Europe floundered when Trump started stating the trade truth: they dropped a bit, while U.S. defence naming stocks got a lift after news the U.S. would halt arms to Ukraine.
European Defence Funding Boost
Ursula von der Leyen announced an €150 bn loan tool for EU defence projects (artillery, drones, etc.). She also promised a “defence spending” 1.5% of GDP escape clause. This can unlock up to €650 bn in four years.
Germany set up a new €500 bn fund for defence and infrastructure. Defence spending above 1% of GDP will bypass usual debt‑restrictions.
Zelenskyy’s Cold‑War Move
Ukrainian President Volodymyr Zelenskyy said he’s ready to “work under Trump’s strong leadership.” He hopes for a quick deal with the U.S. to finish the war. Together, Europe’s pledge is valuable, but real production—powerful weaponry—is what truly counts.
In short, tariffs have thrown the world a wrench; markets are jittery; trade battles might spark long‑term decline—yet a few nations, especially the U.S., might find themselves curious about staying within the bounds of the trade war, even if they’ve already gotten a brief taste of what happens when wages drop toward a monetary “I’m the boss.”