Today, after an one-month delay, the 25% tariffs imposed by President Trump on Mexico and Canada took effect.
Mexico and Canada announced their plans for retaliation: Canada is imposing a 25% tax on US imports worth around $100 billion, while Mexico shares its plan on Sunday.
Trump has also levied another 10% on Chinese imports. China is responding by charging an extra 15% on a wide range of US products, such as chicken, cotton and wheat. The tariffs will increase by 10% on products such as soybeans, fish and seafood.
China has also brought a case against the US at the World Trade Organization.
As expected, the markets have reacted: stocks are lower and VIX is higher. As of this afternoon, the S&P 500 and Nasdaq Composite had both nearly erased all gains since Election Day. The S&P 500 is now down 1.2% year to date while the tech-heavy Nasdaq has lost more than 5% since the start of the year.
VIX spiked above 26 this morning shortly after opening, the highest level volatility seen in this year. Investors are feeling the effects of uncertainty over tariff policies and rate decisions.
The Canadian dollar and the Mexican peso have dropped, perhaps surprising, indicating that investors believe these tariff increases will only last a short time. This is a wishful thought. We’ll be seeing a selloff on both currencies the longer the new fees remain in place.
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