Without being inaugurated as president and with a simple message in social networks, Trump is already shaping the next 4 years of his presidency. Yesterday, he published a short message where he committed to enact 25% tariffs on Canada and Mexico until both countries stop illegal immigration and drug smuggling into the U.S. The loony tumbled to 0.706 and the Mexican Peso jumped to 20.49. Additionally he announced a 10% additional tariff on Chinese products imported into the US, on top of the existing tariffs. In the case of Mexico, as you can see below, both the expected gdp growth and the investment growth expectations have been going down, despite the fact that the U.S. government is also favoring nearshoring and friendshoring where Mexico can absorb an important percentage of the manufacturing done in China and South East Asia. Expect retaliation and escalation from China in this trade war. For Trump, this may be a negotiation tactic, and perhaps a valid one, but Canada, Mexico and China are the three most important trade partners for the US ($900Bn/year) and the impact on their economies can be substantial. Let’s also remember that some of those exports into the U.S. where being recicled into U.S. Treasuries.
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