Tariff turmoil: Trade strategies under scrutiny

What’s going on here?

The US president-elect plans to impose hefty tariffs on goods from Mexico and Canada – 25%, to be precise – raising concerns about the future of trade agreements like USMCA.

What does this mean?

These aggressive tariff strategies seek to leverage US economic muscle to secure concessions from key trading partners. By targeting specific issues such as controlling the flow of fentanyl and managing unauthorized migration, these tariffs are a critical bargaining tool. The initial tariffs aim to extract improved terms from Mexico, Canada – countries that were net beneficiaries of the US-China trade war during the last Republican presidency.

Mexico and Canada were "winners" from the first US-China trade war. Source: US Census Bureau, abrdn.

Why should I care?

For markets: Impacts on global trade order.

The market's immediate reaction to these tariffs is rife with uncertainty. Investors may encounter volatility as sectors reliant on international trade throughout North America face potential disruptions. Companies might seek alternative supply routes, driving an overhaul in sourcing strategies, and thereby influencing stock valuations and sector performance.

The bigger picture: Navigating uncertain trade dynamics.

The news injects uncertainty into global trade markets just as Scott Bessent is nominated as Treasury Secretary – a figure who otherwise might have ushered in market confidence. While this combination of optimism for new leadership and trepidation about trade policies highlights the complexity of the Republican program, investors finds themselves navigating a path between hopeful outlooks and protectionist realities.

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