Trump! Tariff! AAHHHH! Run for your lives….
Ok. So, he did it. On Saturday, the United States placed tariffs on goods coming from Mexico, Canada and China into the US. Canada and Mexico received 25% tariffs on selected goods and China received a 10% increase in the existing tariffs that were still in place from the first Trump administration. In a post on X, Trump said the duties had been imposed “because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl.” (Bishop, 2025) “In Donald Trump’s golden age,” a senior administration official said, “we will only have legal immigration and we will have zero Americans dying from Chinese slash Mexican slash Canadian fentanyl.” (Feldman, Duffy, & Morales, 2025) Canada and Mexico announced retaliatory tariffs, with Canadian Prime Minister Justin Trudeau implementing a 25% tariff against $155 billion in U.S. goods. Trudeau warned Trump that “the better path is to partner with Canada, not to punish us.” (Feldman, Duffy, & Morales, 2025)
Prices of a host of items are likely to rise, from cars to gas, smartphones, and fresh vegetables.
Since the U.S. buys billions of dollars of lumber from Canada, the cost of home construction might go up. The U.S. also relies to a significant degree on Canada to supply its frozen french fries. The cost of electronics and toys imported from China are expected to go up. And from Mexico, grocery goods from tequila, to avocados and tomatoes are also likely to get higher price tags, potentially
affecting millions of American households. (Deng, 2025)
| 1/31/2024 | 1/1/2025 | 1/31/2025 | 12 MO ROR | YTD ROR | |
| DOW | 38,150.30 | 42,544 | 44,544.66 | 15.75% | 4.7% |
| S&P 500 | 4,845.65 | 5,881.63 | 6,040.53 | 24.66% | 2.7% |
| NASDAQ | 15,164.01 | 19,310.79 | 19,627.44 | 25.58% | 1.6% |
President Trump will talk to leaders from Canada and Mexico today, a day before the 25% tariffs he imposed on the country’s top two trading partners go into effect. “I’m speaking with Prime Minister Trudeau tomorrow morning and I’m also speaking with Mexico
tomorrow morning,” Trump said Sunday, as he landed at Joint Base Andrews in Maryland, after flying back from his Florida home. “They owe us a lot of money, and I’m sure they’re going to pay.” (Ramaswamy, 2025) Trump said Americans could feel some “short-term pain” from the emerging trade war. “But long term, the United States has been ripped off by virtually every country in the world,” he said, adding that the U.S. had trade deficits with “almost” every country. “We’re going to change it,” Trump affirmed. “It’s been unfair.” (Ramaswamy, 2025)
My take is that this is as much bombast from all sides. Trump wants Canada and Mexico to secure their borders and stop the flow of fentanyl. See a problem? I don’t. My guess is that the discussions today bear more fruit than expected, and that the markets panicked reaction this morning is short lived. I don’t believe that Trump wants to harm the Canadian, Mexican or American economies, but the situation that currently exists is untenable.
U.S. Treasury
Bond Yields
| US1MO | 4.328% |
| US3MO | 4.29 |
| US6MO | 4.309 |
| US1Y | 4.269 |
| US2Y | 4.248 |
| US3Y | 4.275 |
| US5Y | 4.351 |
| US10Y | 4.515 |
| US30Y | 4.755 |
Drug overdose deaths in the US in 2021: 109,200, 2022: 111,000, 2023: 108,500 (according to Wikipedia) and in 2024: (estimated) 107,000 (Drug Enforcement Administration, 2024). That is 435,700 people in the last four years who died due to drug overdoses in our country. That is more Americans lost to overdose than died in WWII to all causes (according to Wikipedia): 407,000. I think it’s time to do something different.
Trump won quickly in Panama over the weekend. Just hours after US Secretary of State Marco Rubio landed in Panama for his first overseas visit, Panama President Raúl Mulino said his country would not renew the pact to join China’s Belt and Road initiative. (The Week, 2025) My suspicion is a fairly quick agreement between the US
and Canada, maybe a little longer but a quick deal between the US and Mexico as well.
The Chinese question, however, is more serious. It may take some time before the US and China get together. We’ll see how the Chinese react in coming days to the new increases and to the geopolitical pressure (particularly in the New World). In the short-term, I expect more bombast and retaliation. Volatility will necessarily follow.
Markets today are pivoting as the stock markets sell and bond markets buy. The US dollar is as strong as we’ve seen since 2022, but don’t assume any of these paradigms are permanent and don’t let the news convince you that the monsters have destroyed the city.
Sources:
- https://www.cnbc.com/2025/02/02/it-doesnt-have-to-be-this-way-canada-mexico-and-china-respond-to-trumps-tariffs.html
- https://www.wsj.com/economy/trade/how-the-u-s-canada-mexico-tariffs-will-workand-what-products-are-targeted-10c80f41
- https://www.dea.gov/press-releases/2024/12/16/overdose-deaths-decline-fentanyl-threat-looms
- https://www.nbcnews.com/news/weekend-rundown-feb-2-rcna190305
- https://www.usatoday.com/story/news/politics/2025/02/02/trump-canada-mexico-tariffs-china/78169171007/
- https://www.theweek.in/news/world/2025/02/03/why-panama-is-ending-belt-and-road-agreement-with-china-hours-after-us-top-diplomat-s-visit.html
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