Trump's crazy output hit the market hard, and the US stock market recorded the biggest drop this year

Source: Jinshi Data

President Trump said the United States will impose 25% tariffs on goods from Canada and Mexico from Tuesday, declaring that there is no room for negotiation with America's neighbors. It was a broad attack on America's two largest trading partners, dousing hopes of avoiding an all-out trade war and highlighting his determination to push for a reshaping of global trade.

"Tomorrow (Tuesday), 25% tariffs on Canada and 25% tariffs on Mexico, that will start tomorrow. So they will be subject to tariffs, and what they have to do is build auto plants in the United States, and frankly, other things. In this case, you have no tariffs," Trump said at the White House on Monday.

Earlier, Trump postponed the tariffs for a month after the countries agreed to help address fentanyl smuggling and immigration issues, but his team said he was not yet satisfied with progress on drug smuggling despite weeks of talks between the three governments.

Trump's announcement appeared to bring to an end a series of negotiations between North American governments on how to avoid tariffs.

Canadian officials met with U.S. "border czar" Tom Homan and members of Congress in Washington last week to make the case that Canada is strengthening border security in response to Trump's concerns about fentanyl and immigration. Canadian Immigration Minister Marc Miller said they left without a clear idea of ​​what Trump wanted. "It's a moving target, and it's frustrating," he said.

Trump is likely to use the International Emergency Economic Powers Act to impose tariffs on Canada and Mexico, a 1977 law that allows the president broad powers over tariffs and economic sanctions when he declares a national emergency.

Canada is preparing its own retaliatory tariffs. After Trump confirmed that he would impose tariffs on Canada and Mexico on the 4th, Canadian Foreign Minister Joly said Canada has prepared a series of retaliatory measures that can be countered immediately. Joly said Canada had previously announced that it was ready to impose retaliatory tariffs on U.S. goods worth C$155 billion. The first batch of retaliatory tariffs will involve US products worth 30 billion Canadian dollars. She said that US tariffs are an existential threat to Canada. Thousands of Canadian jobs are at risk. If the United States decides to launch a trade war, Canada is ready. It is reported that she will meet with other cabinet members that evening to discuss the country's next move in the face of the possibility of economic collapse.

On March 3, local time, Ford, the governor of Ontario, Canada, responded to the US tariff threat and said that if the United States imposes tariffs, Ontario will cut its electricity exports to US border states. He said, "They rely on our electricity and they need to feel the pain. They want to launch a fierce attack on us, and we will double our counterattack." It is reported that the United States is the main customer of Canadian electricity. Except for Texas, all US power grids are interconnected with Canadian provinces. New York, Michigan and Minnesota are the three major customers of Ontario electricity. In addition, Ford also said that Ontario's minerals are also key to the tariff struggle. He said that he would stop exporting nickel to the United States.

At a news conference on Monday, Mexican President Claudia Sheinbaum said her government would wait for Trump's final decision before taking retaliatory measures. Mexico did not immediately respond to Trump's remarks late Monday.

"We are on the cusp of a North American trade war," said Josh Lipsky, senior director of the Atlantic Council's Center for Geoeconomics. "The market has realized that Trump is serious about tariffs."

The long-promised tariffs would be among the broadest of the Trump era, applying to about $1.5 trillion in imports a year. The tariffs would impose a 25 percent tariff on all imports from Canada and Mexico, with the exception of Canadian energy, which would be taxed at 10 percent.

"Tariffs are simple, fast, efficient, and they bring fairness," Trump said. "If anyone wants to take advantage of this country, it's going to be very costly. They can't come in and steal our money, steal our jobs, take our factories, take our business and expect to not be punished. They will be punished by tariffs."

Ron Johnson, a Republican senator from Wisconsin, said on Monday that he was concerned that Trump's tariffs on Canada and Mexico would fuel inflation. "You disrupt all kinds of supply lines and supply chains, and it could increase costs for consumers. That's concerning," he told reporters at the Capitol.

Tariffs on Canada and Mexico have the potential to increase U.S. car prices by as much as $12,000, according to a new study from Anderson Economic Group, as auto companies are likely to pass on the increased costs to consumers.

After Trump's speech, U.S. stocks fell sharply, posting their biggest drop of the year, with the Dow Jones Industrial Average closing down 1.48%, the S&P 500 down 1.76%, and the Nasdaq down 2.6%. The S&P 500 is nearly 5% below its all-time high on February 19, and has fluctuated by at least 1.5% for three consecutive trading days, a sharp reversal not seen since March 2020. At the same time, the Canadian dollar and the Mexican peso plummeted. The VIX index of fear expanded its gains to 20%, reaching a new high since December 20 last year.

In addition to targeting Canada and Mexico, Trump said on Monday that the United States will take reciprocal tariffs from April 2, and will also impose tariffs on countries that take measures to devalue their currencies. The press conference, with reporters scrambling to ask questions, lasted about 30 minutes. Trump also revealed earlier that tariffs on agricultural products would be imposed on April 2. Regarding the Russia-Ukraine conflict, Trump said that despite his public dispute with Zelensky, the mineral deal with Ukraine has not fallen through, and there has been no talk of suspending military aid to Ukraine. Trump also hinted that Zelensky's presidency may be lost if he does not agree to sign a ceasefire agreement. He will update the progress of the mineral agreement on the evening of the 4th. In addition, in terms of US-Russia relations, there are reports that the United States is drafting a plan that may grant Russia sanctions relief.

Callie Cox of Ritholtz Wealth Management said: "Now is a time to be nervous. Not bearish, but nervous. Although there is not enough evidence that we are on the verge of a deep correction, the economy is changing rapidly. The headlines are so ruthless that people don't know what to do."

According to analysis, CTA (commodity trading advisor) will sell stocks in the near future under any circumstances. Specifically:

In the case of a stable market, CTA plans to sell $48 billion in global stocks this week (including $12 billion in US stocks) and a total of $68 billion in global stocks this month (including $8 billion in US stocks).

If the market falls, CTA will sell $69 billion in global stocks this week (including $24 billion in US stocks) and $181 billion in global stocks in the next month (including $46 billion in US stocks).