The report: CLICK HERE

 

RBC Economics has put out an excellent report on their views of the impact of the tariffs, definitely worth a read. A key point from the report is that these tariffs have so far had the primary effect of hurting US consumers by raising US producer prices (passed on to the end buyer). This should be intuitive: global supply chains are highly integrated, no more so than in North American under NAFTA, and they are too complicated to change overnight.

 

The tariffs, which the U.S. will also levy on allies including Mexico and the European Union, will likely have a moderately negative but manageable impact on all countries involved. The broader risk is that the U.S. tariffs, and the retaliatory trade measures they give rise to, will ultimately turn into a global trade war. Given the negative discourse floating around (see: Trudeau's response, as well as the various European countries' leaders responses), this is indeed more likely than it was last week.

 

RBC Economics believes the market is still a long way from that outcome, despite all the rhetoric. But the tariffs add to uncertainty about the future, and that’s not good for business investment. I tend to agree in the short run. All of this in the face of a sharply rising US deficit, a yield curve that is threatening to invert, and an inflation picture that hasn't solidified. Counter that with great jobs reports, great earnings reports, global trade strength (for now), and a generally accommodative geopolitical environment. The future has become a little murkier than it has been of late.