As we wait for the inauguration of the President on Monday the 20th, there has been lots of speculation on when/what tariffs might be imposed on Canada.
I found this interesting chart which looks at it from the other perspective. Indeed the Canada-US relationship is in someways akin to a big brother-little brother dynamic. There is no doubt that the US can inflict a lot of pain on its much smaller partner if it wants to. We can only hope that in this case, the bigger brother comes to his senses. Sure, they will “win” but at what cost?
Look at this chart, from the US perspective. Canada is a very important trading partner to the US. For 39 States, Canada is that State’s largest customer. The US exports over $300 billion to Canada a year (which is more than double that of China).
It’s been speculated that Canada has drawn up an initial list of $150 billion of US-manufactured items that would be hit with tariffs. When Trump placed tariffs on Canadian steel and aluminum in 2018, Canada responded with levies on a variety of US-manufactured items, such as whiskey and washing machines — a pressure tactic that aimed to put the squeeze on factories in areas where Republican politicians had influence. This of course led to the United States-Mexico-Canada (USMCA) trade agreement that entered into force on July 1, 2020, and is set to expire in 2026.
So it's hard to know what is going to happen in the weeks ahead, but making rash investment decisions based on headlines is not going to lead to favorable outcomes in our investments.
Monday, the 20th is both the inauguration of the President and Martin Luther King day: so the US markets will be closed, but remain open in Canada. I predict a lot of people will be tuning into the inauguration, with various degrees on “interest”.
Have a great weekend,
Joshua Kingsmill