There may be a very muted, yet temporary sigh of relief this morning as Canada seems to have avoided the worst of Trumps tariff threats (for now at least). However, it’s the devil in the details, which are described below. While some countries were spared more than others, no trading nation will be immune from the onslaught of levies the president would like to impose to not only raise revenue, but to also punish the “bad actors” that he believes have proliferated under previous administrations (at America’s expense of course). It seemed clear yesterday that Trump showed his willingness to upend the fundamental strategies that have underpinned U.S. trade, after decades of mutual co-operation across the globe. Speaking of the globe, global stock markets reacted poorly to the tariff news and declined overnight as well as North American futures, which are getting pummelled this morning over concerns that Trump’s sweeping changes will impact growth. U.S. futures are currently down over -3% this morning, and should they hold at the open, it would put the S&P 500 within correction territory, i.e. -10% decline from its February high.
You may be wondering how nearly $1.7 trillion could be erased from the S&P 500 in one morning, and we’re here to tell you. Trump unveiled a sweeping tariff plan yesterday, imposing a baseline 10% levy on imports from 185 countries, with significantly higher rates for key trading partners. While Canadian goods compliant with the USMCA will remain exempt from the 10% baseline tariffs, non-compliant goods will continue to be levied 25%, with 10% applied to energy and potash. There were no exemptions on Canadian steel and aluminum tariffs Trump had previously applied and he is also not backing off the 25% tax on imported vehicles. China faces the steepest hike, with tariffs rising to 54% when combined with existing duties. Other notable increases include 20% on the EU, 46% on Vietnam, 32% on Taiwan, and 26% on India. Mexico and Canada remain exempt for now, though they are still subject to last month’s 25% tariffs. The move marks the highest U.S. tariff levels in over a century, sparking concerns about its economic impact. If you’re having trouble finding who is on the tariff list, don’t worry, Don made a handy board to keep track.
The Trump administration has confirmed that 25% tariffs on global car and truck imports will take effect as scheduled today, with tariffs on auto parts following on May 3. A Federal Register notice outlines the tariff details, allowing domestic producers to request additions to the list, which already includes engines, transmissions, and electrical components. Importers of vehicles meeting USMCA rules of origin will only be taxed on the non-U.S. content. The move signals a major escalation in trade policy, with potential impacts on automakers and supply chains.
The U.S. is heading toward a fiscal crisis due to its growing deficit spending. Right now, the government is spending $7 trillion a year while only bringing in $5 trillion in taxes. Public debt is set to hit 100% of GDP this year and climb to 118% by 2035. If the 2017 tax cuts are extended, they are looking at adding another $5 trillion to the national debt over the next decade. Economists are noting that the only real solution is a balanced approach, moderate tax increases and smart spending cuts, to bring deficits under control. Many are raising alarm bells saying that if the problem continues to be ignored, financial markets will be faced with higher interest rates and economic instability.
Massive federal job cuts have driven layoffs to near-record levels in March, second only to the pandemic. The Elon Musk-led Department of Government Efficiency (DOGE) has spearheaded a reduction of over 280,000 positions across 27 agencies in two months, with Veterans Affairs, IRS, and Treasury among the hardest hit. Federal layoffs rose 672% from last year, yet broader job market indicators remain stable, with U.S. private-sector payrolls adding 155,000 jobs in March, outpacing expectations. Growth was led by professional and business services, financial activities, and manufacturing, with businesses of all sizes contributing. Wage growth cooled, with job switchers seeing a 6.5% pay bump and those staying put getting 4.6%. Investors and policymakers will get a fuller picture when the government releases its official jobs report tomorrow.
Adding insult to injury. If the tariffs weren’t bad enough, the U.S. government has banned American personnel in China, including diplomats, contractors with security clearances, and their families, from engaging in romantic relationships with Chinese citizens. Implemented earlier this year, the policy aims to counter potential intelligence threats, echoing Cold War-era restrictions. Previously, personnel only had to report such relationships, but now violations result in immediate removal from China. The move follows congressional concerns about Chinese espionage tactics and aligns with Beijing’s own restrictions on officials’ foreign relationships, highlighting rising U.S.-China tensions. Feels like a modern-day Romeo and Juliet.
In non-tariff related news, Reese’s just dropped the PB&J Big Cup yesterday, on National PB&J Day (yes, such a day apparently exists), putting to rest what they say are requests to put this favourite duo together, covered in chocolate of course. The chocolate-covered nostalgia bite comes stuffed with peanut butter and a jelly of your choice, either grape or strawberry. This release follows previous limited-edition releases like the Caramel and Chocolate Lava Big Cups. Not sure if these goodies will be available in Canada. If not, that’s ok. Sticking to the classics is just fine.
Diversion: We’ve all had this urge
