Tariff Man

As the news hit last night the loonie swooned and greenbacks soared to $1.41. Gold and Canadian oil dropped. Bitcoin lost three hundred bucks.

If you ever doubted having a balanced investing approach, with a healthy hedge against our dollar, a limit on maple exposure, lots of S&P and broad diversification, well, days like this should spank you. All it took was one Trump social media post.

You know the news. The guy vows a 25% tariff on all Canadians (and Mexican) stuff on Day One of his vaunted ascendancy to the throne. It may be buster. It may be a ploy, tool or lever. Maybe he’s just a dick. At best, a bully. But this is what the MAGA fanboys on this site rooted for. Unpredictability. Aggression. Burn-it-down policies. Manliness.

If implemented, it would plunge Canada into a recession, since the economy is barely positive now. Unemployment would rise from mid-6% to eight, or higher. Interest rate cuts would slow or cease. The spring house rebound would be DOA. Millions of jobs depend on US trade, which accounts for almost 70% of all our exports. Meanwhile the romp against our dollar – now at 71 cents – makes imports more costly and rekindles Canadian inflation. That’s another reason interest rates will not fall. And may even reverse.

If you need evidence Trump is unfit to lead the world’s biggest economy, here she be. Since he controls the White House, the Senate, the House and the Supremes, with the power to legislate through executive orders, his incendiary Social Truth posts become de facto American policy. The magnitude of the mistake American voters made is already peaking under the door two months before he’s sworn in.

So, we told you to expect volatility. Here it is. We said Trump would be inflationary, and you can see why. We brought you professional economic opinion on how Trump could cause a recession in Canada, spike the jobless rate and reverse interest rates. And here it comes.

“This is what we should expect by way of the kind of volatility we’re going to be getting during Trump 2.0,” chief bank economist Derek Holt wrote this morning. “It seems clear that he intends to follow through on the full suite of policies he campaigned on.”

What could mitigate this looming Orange Guy disaster?

That he’s bluffing, posturing or exaggerating – maybe. “It’s a threat, but not a certainty, and it may be temporary if executed,” Holt adds. “This may be why the reaction across financial markets is not bigger; the ‘art of the deal’ is better understood in markets now which makes it potentially less useful as his strategy that involves a lot of hype followed by little action, but that may also drive Trump to be even more volatile and aggressive.”

Tariffs are taxes. Ones of this size on Canadian oil, car parts, steel, grain, financial services and Drake would increase US producer and household costs. It’s the opposite to what Trump promised – which was relief from inflation and the rising cost of running a family. Does he really care?

And, by the way, how much of this can we lay on TD?

Our green bank was fined massively – $3.09 billion – the largest penalty in American financial history after pleading guilty to drug money-laundering in the US. The bank allowed three money-laundering networks to process $670 million in fentanyl proceeds over six years, and failed to detect the criminal activities of employees. There was, Washington said, “a significant, systemic breakdowns in its transaction monitoring program… that allowed financial crime to flourish. By making its services convenient for criminals, it became one.”

Our guys made history. The first bankers in American history to plead guilt to conspiracy to commit money laundering. And it was all for the drug trade, which Trumo says tariffs will punish.

Is this enough reason for the American president to try and squish our entire national economy?

Nah. But he’s threatening just that. Plus he has the tools to do so. And he’s crazy enough to try.

Tariff Man has arrived. There are now no guardrails in Washington, as he controls all branches of government. Without unfettered access to the American market, we’re cooked. You can forget about $3 million semis in mid-Toronto and $2 million ugly Vancouver specials, or buyers able to buy. If it happens, interest rates, inflation and unemployment will go up, while the dollar and GDP will decline. This is exactly what bank economists warned of in April – which was dutifully reported here.

And still the fanboys poured on to praise Trump and promote MAGA.

Dear fellow citizens. The man is not our friend. This is not about Trudeau, left vs right or the war on woke.

It’s just war. Suit up.

About the picture: “My dog Gibson was fortunate enough to be on the front page on your blog twice now,” writes Paul. “Once as he was jumping up on the counter at the vets, and second while eating his annual cheeseburger on his birthday. Sadly, Gibson didn’t make it to his 16th birthday which was Friday, November 22nd. Now known as national cheeseburger day. I thought I’d share some pics of his last day, where we celebrated his birthday early.. one last cheeseburger. Thanks for all that you do.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2024/11/26/tariff-man/