What the eve of economic hostilities looks like

Mexican reprieves aside, here's what the eve of economic hostilities with Canada looks like.

25% tariffs tomorrow, unless Trump stops his trade war.

This 22-minute interview with Doug Ford (Canada's Premier) is definitely worth a watch.

Interestingly, Ford talks about the inflationary impact of tariffs, but he doesn't quite join the dots of what comes next, i.e., it turns into deflation if and once items become too expensive and consumers stop consuming.

Hence, the longer a tariff war goes, the more deflation and recession gets baked into forecasts.

That leads to layoffs, high unemployment and recession.

And the trade flows are not trivial, with $500 billion in two-way trade between the U.S. and Ontario, alone ($250 billion going each way). Overall, the U.S. buys huge amounts of the following from Canada.

  • BC—Critical Minerals

  • Alberta—1.2 billion barrels of Oil

  • Saskatchewan—Uranium, potash

  • Ontario—High grade Nickel and Steel

  • Quebec—Aluminium

  • Country wide—Lumber

That's why equities continue to puke, even after DeepSeek has been priced in.

It's also what might ultimately become the catalyst for more U.S. interest rate cuts.

Tap on the CBS image to watch the video.

See you in the market.

Mike

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Michael Ganon