Oddly its Mexican tariffs that will have a bigger deterrent to Trump as his base is the red southern region of the US that take more Mexican imports.
Looks like inflation is back on the table for the US, and this time they've done it to themselves via higher prices from tariffs.
One other thing to watch is that this is currently weakening the Canadian dollar and Mexican peso, which means the USD is getting stronger which is the opposite of what Trump wants ultimately.
So far the markets in all countries just hate this news.
China has taken the following actions as well this morning
- China to Levy Tariffs on Some US Products Including Chicken
- China to Impose up to 15% Tariff on Some US Goods
- China to Levy Tariffs on Some US Products Including Soybean
- China Adds 10 US Firms to Unreliable Entity List
Smart as this targets the US farmers, so Trump is almost certainly going to do what he did last time and just print money and hand it out like candy to the US farmers.
The worst case outcome and one that analysts at all major sell site institutions are now considering to be a possibility is worldwide stagflation.
Normally the economy of one or two powerhouses is humming along while others are going through cyclical downturns which helps smooth things over.
The United States seems very determined to crash the entire worlds economy at the same time, which will mean all major economies will be printing and spending cash all at the same time in an effort to prop up their economies.
The US has just started their printing press, and Beijing has been doing so for a year to try and fix their already hurting economy.
The world is in for a lot of pain in the next 2 years.
If there was a lot of domestic suppliers and (more importantly) a lot of domestic competition, inflation might be avoided. But none of that exists, so expect consumers to pay for the tariffs directly and then more.
Despite not having concrete proof, I think there's a fairly plausible chain of events from tariffs to broader price increases. Trump's tariffs include a 10% tariff on Canadian oil and gas. If you're in a region that relies heavily on these things coming from Canada you're going to see prices go up on your monthly energy bills, fuel for your vehicle, etc. This also affects local businesses and directly increases their costs. Businesses can only absorb so much of an increase before they raise prices. Now you're able to buy even less between your increased monthly expenses and the higher prices in stores. This makes you go to your boss and ask for a raise just so you can keep up with what your purchasing power used to be. If your boss gives you that raise, the business sees their expenses go up again and may need to raise prices as a result.
In the scenario I described above, what step do you think won't happen that allows us to prevent higher energy prices from leading to inflation?
[0] https://carnegieendowment.org/china-financial-markets/2021/0...