It Will Be A Miracle If We Avoid A Recession... Don't Bet On It
During a press conference after Trump’s tariffs kicked in yesterday, Justin Trudeau noted that Trump “has said repeatedly, what he wants is to see a total collapse of the Canadian economy. Because that will make it easier to annex us. First of all, that's never going to happen. We will never be the 51st state… He talked about banking again today in a tweet, which doesn't make any sense because 16 banks are currently active in Canada holding about $113 billion worth of assets in this country... what he wants is to see a total collapse of the Canadian economy, because that'll make it easier to annex us… Every country is very aware that if the American government is willing to do this to their own closest ally, neighbor, and friend, everyone is vulnerable to a trade war.”
He noted that Canadians are “probably gonna keep booing the American anthem. But let me tell Americans: we're not booing you... we're booing a policy that is designed to hurt us. And we're insulted... we're gonna fight. And we're gonna win. Canadians are not angry at the American people for this. We don't have anything against Americans. Americans are our neighbors, our friends, our partners. This is a policy decision by the American government.”
Mexico will announce its targeted, retaliatory tariffs Sunday. President Claudia Sheinbaum, who hopes to walk Trump back from his tariffs in a call tomorrow, called his reasoning “offensive, defamatory and without support” and said that “It’s inconceivable that they don’t think about the damage this is going to cause to United States citizens and businesses. No one wins with this decision.”
“Trump,” wrote the editors of the Wall Street Journal, “likes to cite the stock market when it’s rising as a sign of his policy success, so what does he think about Monday’s plunge? The Dow Jones Industrial Average took a 650-point header after he announced that he’ll hit Mexico and Canada on Tuesday with 25% tariffs. Trump said at the White House there was ‘no room left’ to negotiate with the two American trade treaty partners. Some of his smarter advisers have been hoping he’d start renegotiating the USMCA and delay the tariffs. But Trump wants tariffs for their own sake, which he says will usher in a new golden age… Trump is whacking friends, not adversaries. His taxes will hit every cross-border transaction, and the North American vehicle market is so interconnected that some cars cross a border as many as eight times as they’re assembled… [T]he 25% tariff will raise the cost of a full-sized SUV assembled in North America by $9,000 and a pickup truck by $8,000. Is this how the new Republican Party plans on helping working-class voters? Trump is volatile, and who knows how long he’ll keep the tariffs in place. Retaliation that hits certain states and businesses may also cause him to reconsider sooner than he imagines. Investors are trying to read this uncertainty as they also watch growing evidence of a slowing U.S. economy. Unbridled Tariff Man was always going to be a big economic risk in a second term, and here we are.”
Earlier in the week, Aaron Blake had written that “the taxes on imports could cripple the economies of our two neighboring allies and negatively impact the U.S. economy as well by exacerbating inflation… The big problem is the increasingly checkered U.S. economic picture. Despite Trump coming into office with high economic hopes, persistent inflation has cast a pall. And whatever stomach Americans had for tariffs, it appears to be shrinking. The big news Monday was that the Federal Reserve Bank of Atlanta adjusted its gross domestic product (GDP) forecast down to negative-2.8 percent for the first quarter. Just days ago, the same forecast predicted 2.3 percent of growth.
The tariffs are spooking the stock market and consumer sentiment, both of which are trending down, suggesting “that economists’ long-standing warnings about the tariffs causing inflation— something Trump has downplayed by falsely claiming the tariffs would be paid for by other countries— are starting to register. And that would track with plenty of other evidence. Americans have clearly soured on tariffs.”
Americans are also telling pollsters that Trump is ignoring inflation and failing his job as a steward of the economy. Daniel Desrochers and Grace Yarrow reported yesterday that congressional Republicans “have spent weeks dismissing concerns about Trump’s tariffs or arguing they’re just a negotiating tactic. But now with major tariffs kicking in on the country’s two largest trade partners, some are starting to publicly worry. ‘I’m concerned,’ Sen. Ron Johnson (R-WI) said of the 25 percent tariffs on Canada and Mexico that went into effect Tuesday after midnight. ‘Uneasy, I think, is a word,’ said Sen. Jerry Moran (R-KS). They and dozens of other GOP lawmakers represent states with major agriculture industries that are among the first targets of trade retaliation from Ottawa and Mexico City. The Canadian government has already disclosed more than $20 billion worth of U.S. goods it plans to slap with higher tariffs, including food products such as poultry, beef, fish and yogurt. The fallout for ag producers, a traditionally conservative-leaning industry, will be severe. And it’s prompting Republicans in those states to take on an uncomfortable position in the party right now— questioning, albeit quietly, a major plank of Trump’s agenda.”
Trump’s 10% increase on Chinese products bringing the total on some to 45 percent. China retaliated with “tariffs of up to 15 percent on a raft of U.S. farm products and blacklisted more than 20 U.S. companies, marking a major escalation in a brewing battle between the world’s two largest economies. The move targets some of the United States’ most important exports to China, including soybeans, meat and grains… China is the largest market for American farm products, accounting for 17 percent of total U.S. agricultural exports in 2023, according to data from the U.S. Department of Agriculture. China last year imported almost $20 billion in soybeans, corn, cotton and the other U.S. farm products that will be subject to the new tariffs, according to USDA data. Those products accounted for about 80 percent of all U.S. agricultural exports to China.”
In an interview Sunday, Warren Buffett reiterated that “Tariffs are actually— we’ve had a lot of experience with them— they’re an act of war, to some degree.” Investors, Main Street and the general public are rapidly losing confidence in Trump’s ability to guide the country— and he’s going to drag the Republican Party down with him… and do they ever deserve just that fate! This was how the DNC concluded their pre-State of the Union press release yesterday:
53% of Americans say the state of the union is “not very strong or not strong at all”
54% of adults believe the country is moving in the wrong direction
62% feel that Trump hasn’t done enough to lower inflation
57% of Americans think grocery prices will rise
46% of Americans believe the economy is changing “for the worse”
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