This week is indeed a week for history books. President Trump began his long-standing threatened tariff war on Tuesday, imposing a 25% tariff on all goods from Canada and Mexico.
The response of these countries was an attack on retaliatory tariffs on U.S. goods, promising to plunge all three into recession while soaring inflation, a tragic combination known as “stagnation” that we have never seen since the Great Depression of 1929.
Canadian Prime Minister Justin Trudeau said his country will exceed US$100 billion (USD) in US goods tariffs in 21 days.
“Today, the United States launched a trade war against Canada, with their closest partners and their closest friends and allies. Meanwhile, they are talking about actively working with Russia and comforting with lies, murdered dictator Vladimir Putin. It makes sense,” Trudeau said.
Trump’s trade war retaliates quickly through new tariffs from Mexico, Canada and China
This trade war is not only a terrible idea, as Canada, Mexico and the United States have been allies throughout history. It’s not even just a terrible idea, because we have a free trade agreement between all three countries, and Trump himself negotiated during his first term. This trade war is a terrible idea because all 3 of our economies are so tightly integrated that you don’t harm one economy and all 3 economies.
That’s why Trump was forced to postpone it to the automotive industry a day after shooting in this trade war and imposed a 30-day probation on the car. Then, tariffs on Canadian potash fertilizers are a key fertilizer that the U.S. agricultural industry relies on, reducing it to 10%. The entire tariff increase was then abandoned for another 30 days on Thursday.
Donald Trump imposed tariffs on many of Mexico’s many imports and some from Canada on Thursday, a month as people have a wider economic impact on the broader trade war.
Trump changes courses and delays some tariffs on Mexico and Canada, Associated Press
All of this caused chaos in the stock market as traders struggled to parse the head spin of this White House changing and contradictory action.
Wall Street’s Rock Week continued Thursday as investors met with further uncertainty about President Donald Trump’s tariffs.
U.S. stocks’ open rate has dropped sharply, but fluctuated in mixed news from the White House. Although Trump announced a nearly month delay in tariffs on all products in Mexico and Canada, all three major indexes have been closed.
As Trump tariffs are chaotic, U.S. stock slide and Nasdaq enter corrections, CNN
While the stock market is an indicator of economic health, the more shocking indicator is the flashing red, which is the confidence of American consumers.
The latest evidence comes from the February consumer confidence index released by the conference committee on Tuesday morning. The index fell to 98.3, a third month, marking a monthly decline since August 2021, which is expected for inflation in the coming year. This coincides with the trend reflected in the University of Michigan’s consumer survey in February.
Consumer confidence has registered the biggest monthly decline since August 2021, with inflation fears, CNN
Consumer confidence is a measure of the benefits of consumers to the economy, and it is a key leading indicator. This is because while the Canadian economy is based mainly on resources and exports, most of the U.S. economy is based on consumption. American consumers buy a lot of things, and spend about 70% of the total GDP. And if you are worried about your job, your own personal financial situation, or inflation, you are more likely to postpone large purchases, such as a new car or a home renovation.
In this way, consumers’ expectations of recession can be a self-fulfilling prophecy. If you think a recession is coming and you spend less, it can lead to the exact recession you are worried about. That’s why the Atlanta Fed now expects GDP to grow from a healthy 2-3% to 2-3% in Q1 shrink In Q1.
Remember that the recession is defined as two consecutive quarters of GDP contraction, so the U.S. economy has moved towards its first negative quarter. If President Trump’s policies do not change dramatically in the coming months, the United States will enter a recession.
So, with all this dazzling thing happening in the news, how does our portfolio react to all this turbulence?
Not surprisingly, all this turmoil caused the U.S. index to be hit. The Pioneer Total Market Index ETFs we used have enjoyed a strong start to the year of optimistic excitement for President Trump’s inauguration, which has abandoned all their earnings and is now sitting in the red, accounting for -2.23% of the YTD. The fact that the White House has been acting with tariffs has not helped and promises to keep the uncertainty of this trade war in the market for the foreseeable future.
But hey, at least not poor old Canada now. Given the relative scale differences between the two countries, the trade war must have hurt Canada’s economy even worse, right?
…Um.
So…Canadian stock market…now surpasses the United States? How is that possible?
Some views are orderly.
In the cold north, this trade war is what we are talking about. It permeates our national dialogue, it occupies our news cycle, and has no other problem in recent memory that has infected our politics. But this trade war isn’t the only thing Trump has to do.
We must remember that for Americans, this trade war is just one of many things Trump has done, and that has had an impact on their economy. Don’t forget all the other things like…
- The ongoing mass deportation of illegal immigrants threatens the entire U.S. food supply chain, as undocumented workers power everything from picking produce to storing shelves. If this continues, food costs will increase, resulting in inflation.
- Elon Musk and his government’s efficiency ministry on federal workers. Not only will this help unemployment and reduce spending, as government workers spend less money, but these cuts threaten key government programs such as social security, which could put millions of older people in poverty
- The public’s opposition to the Trump administration’s opposition efforts have sparked boycotts within the United States against companies such as Target and Amazon. In response to the trade war, these domestic boycotts were added to the international boycotts of Canadians and Mexicans, while much less money was flowing into the inventory of U.S. companies.
All of this adds up to the extra weight of the US economy that Canada doesn’t have to face My own The economic mode is worse.
This is what happened on this side of the pond, which means it is not very good. But this begs the question: What is the situation in Europe? Excellently…
Oh my God.
So, obviously, the EAFE index grows up to 11.2%!
Well, I think we know where all the investment funds that flee the United States and Canada went.
Although the United States and Canada have been slamming each other’s economies (again, there is no good reason), the economies in Europe, Australia and the Far East have been benefiting from our infighting.
This makes a lot of sense. The largest economy in the EAFE index is Japan, and its largest trading partner is China, not the United States. The EAFE index also covers the EU, with the EU’s population and economic size roughly the same as the US, but no Have a trade war with allies, so if you are an investor, then it starts to look good now.
Capital hates uncertainty, and North America is now a breeding ground for uncertainty.
Plus everything, Europe is kicking our ass. This may be the year when Eafe exploded a lot. Maybe Maga should change its name to Mega: Make Europe great again.
Anyway, that’s how our overall portfolio has performed so far this year.
This year has indeed shown the power of global diversity. The performance of the U.S. over the past few years has left people with questions that don’t include international markets at all, if they’re underperforming, the S&P 500 index. Well, now we know why. Because occasionally, the United States is disconnected from the depths for reasons no one understands and destroys its own economy.
If you overlooked all the news and just looked at the performance of a global diversified portfolio like we did, you might conclude that nothing interesting happens right now. Of course, we know that the exact opposite is true, so the power of diversity cannot be exaggerated. No one can predict this news, but we do know that disasters rarely hit the entire world immediately (Covid-19 is a rare exception).
I don’t know what will happen in the next few months and years. So that’s why the best defense in these uncertain times is to spread our bets all over the world.
How do you hold your investment? How do you deal with this news that comes to us from all directions? Let’s hear it in the comments below!
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