Introduction
The following are copies of today’s BNN Bloomberg: The Daily Chase, by Pete Evans, and of today’s newsletter from Stock Analysis of insights into the impending trade war between the USA and Canada.
From: BNN Bloomberg The Daily Chase
Tuesday Update:
Standing down: After a tumultuous weekend and Monday, it seems the U.S. has agreed to delay the implementation of tariffs on Canadian goods for a month, as Canadian officials have reportedly agreed to beef up border security and address the problem that this whole debacle is allegedly about. Among the measures will be Canada naming a new fentanyl czar and adding numerous known drug cartels to the official government list of terrorist organizations. Those moves are on top of the $1.3 billion worth of border investments that Ottawa announced back in December, Trudeau said in a social media post. There’s similar progress on the Mexican side where 10,000 National Guardsmen will be added to border resources. Trump, as he is wont to do, declared victory and formally delayed implementation of the planned tariffs until March 1.
- Trade war – what is it good for? (Absolutely nothing): After weeks of escalating rhetoric, the first major skirmishes in U.S. President Donald Trump’s trade war have broken out this morning, with the U.S. slapping 25 per cent levies on imports from Canada as of tomorrow morning, and Canada responding with a targeted response of its own. It’s hard to downplay the significance of what is about to unfold, with RBC Economics describing the current situation as the biggest trade shock to hit Canada’s economy in more than a century. Whether or not you think he’s on the right path or not, Trump’s moves are nothing less than a wrecking ball battering the economic status quo in North America. We’re already seeing the price impacts in individual markets, with New Brunswick fuel provider Irving Oil already alerting its customers of higher prices as of midnight. Maine Senator Susan Collins is warning of a “significant burden” on her state, reminding the White House this morning that 95 per cent of the heating oil used in her state comes from Canada, along with significant amounts of jet fuel and diesel oil. Stock markets, meanwhile, are responding accordingly, with indices around the world plunging into the red.
- All Quiet on the Western (Canadian Select) Front: While far from the worst-case scenario, U.S. energy imports from Canada have not been spared, as Trump is implementing a 10 per cent tariff on them. That’s less than the 25 per cent levy that the industry had been bracing for, but still a significant amount of money that is likely to reduce demand and widen the gap between oilsands crude and other domestic U.S. blends. Canada ships about 4 million barrels a day to the U.S., a figure than seems destined to drift lower as U.S. refineries seek ways to avoid paying the tariff. Susan Bell, a Rystad Energy analyst, told Bloomberg she expects as much as 180,000 barrels a day that previously would have headed south to be diverted westward to export terminals and shipped to the global market.
- Guerilla warfare: Canada’s official tariff response starts with more than $30 billion of targeted U.S. goods and is set to quickly escalate as the days and weeks go on, but Canada is already fashioning other weapons to include in their arsenal. Ontario is flexing the muscles of its provincial alcohol regulator, the LCBO, moving to ban all sales of American beer wine and spirits as of tomorrow morning. Early Monday, the province also announced it is ripping up a $100 million deal signed as recently as November with Elon Musk’s space-based internet provider Starlink to provide internet to more than 15,000 customers in remote areas. Targeting a Musk firm seems particularly targeted, given the billionaire’s close relationship with Trump. It’s not hard to imagine other Musk firms like Tesla being targeted next.
- Loonie taking a swan dive: The loonie, as one might expect, is taking a lot of early collateral damage, with Canada’s currency dipping below its pandemic lows this morning and threatening to go below the 68-cent level. The loonie isn’t the only currency taking a beating, however – the peso is getting hammered, too. In a note to clients this morning, Kit Juckes, chief foreign exchange strategist with Societe Generale, said he is surprised the loonie is not down by even more, considering the knee jerk reaction has been to buy the U.S. dollar versus just about every currency in the world except the Yen. “There is now a very obvious near-term risk of an overshoot to the upside by the (U.S.) dollar, but this overshoot will be temporary as slower U.S. growth down the road rebalance global capital flows,” he said.
From: Stock Analysis
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| Market Bullets: Trade wars are back on the menu | |
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