Here we go

Stock markets laid an egg. Then they had a cow. Gone is the entirety of the ‘Trump trade’ since it’s now patently clear Americans screwed up. This listened to, believed, and elected a liar. The president is hurting his country and trying to gut ours at the same time.

If you were a maple MAGA, hang your head. One bad dude is about to disrupt world trade, risk a global recession and at the same time utterly shatter faith in the power and prestige of the USA. He threw Ukraine under the bus (Zelensky just gave up). He asked Putin to broker a deal with Iran (seriously). He’s pissing off the three main trading partners, and disrespecting long-time allies who may now never forget this insolence.

Inexcusable and irredeemable. A craven grifter, con artist, junk economist and blowhard who should never have gained elected office. Now his sycophants head every major agency and department. He controls Congress, the Supreme Court and large swaths of the judicial system, as well as the military while his unelected oligarch henchman rids the civil service of independents and professionals. God help America. It’s on the path poochedness.

So what now for us?

Trump’s revealed what we’ve said for a while. It was never about drugs, migrants or the border. A ruse. In reality he wants to force companies – like those making cars – to relocate to the US. He wants US banks to invade Canada. He wishes to have ‘external revenue’ finance his own domestic tax cuts. And he’s said he will use “economic coercion” to force Canada into the American fold.

The tariffs in place since midnight could also worsen. Trump’s executive order says if we retaliate (we are, bigtime) the rate of tax could increase. And more is coming. Another 25% on steel and aluminum next week. Then sectoral tariffs in April. Then potential new actions against our lumber. Economists are telling us today the situation will not be temporary. Expect a year at least. Maybe longer. Enough time to hollow out our manufacturing base and increase unemployment in this nation by up to a million people. For nothing.

“The US has declared economic war on Canada, Mexico and China. Friends, allies and economic partners no more, the gloves are off with this administration that demands respect but gives none whatsoever,” says Scotia chief economist Derek Holt. “It is clear that Trump prefers tariffs and that everything about border controls is absolute rubbish; this means negotiation won’t work, hitting back twice as hard might be the only option. Clearly this is a pugilistic bunch of bullies in the US administration with the tone set by Trump’s litigious, divisive and extraordinarily dishonest ways.”

Says BMO’s Doug Porter: “In yesterday’s announcement that tariffs were indeed proceeding, the President suggested that auto plants and others should relocate production to the U.S. to avoid tariffs, revealing the true rationale behind the measures…. tariffs on Canada and other countries could be around for a while, and could go potentially higher. In fact, ‘reciprocal’ tariffs or industry-specific tariffs may be ‘stackable’ on top of the initial 25% levy.”

This is why markets shed value, as the threat to corporate profitable is real. Trump is trying to reorder the world. Distracted, disinformed and deceived voters got us here. The way out is unclear.

Here’s what to expect:

On the economy: a recession developing in 2025, lasting an indeterminate period of time. A recession is two or more quarters, back-to-back, of negative growth. For the year as a whole BMO Economics estimates we will barely break even.

Unemployment: Likely to rise from the current 6% range to 8%, economists say. Two hundred thousand auto workers may be the first to feel the sting. Potentially, as mentioned above, a million families will be affected.

Rates: the Bank of Canada will respond next week by cutting its policy rate. A quarter point, maybe more. It’s now expected the current CB rate of 3% will tumble all the way down to 2% by the autumn. Mortgage costs will follow. “The net risk,” says Porter, “is that we eventually go even lower.”

Real estate: so much for the mortgage tsunami of renewals at nosebleed rates which would have toppled the market. People refinancing their loans – now at an average of 2.89% – may find little change or pain as the central bank tries to rescue the economy. But will mortgages at 3% or a less result in a flood of buyers also taking advantage of generous new mortgage rules? Or will the spectre of job loss and an air of doom keep them idle, while sellers are forced to drop their asks? Stay tuned.

The dollar: it already got whacked in the lead-up to tariffs, so the additional drop this week is muted. But it’s not over. As the BoC drops fades, and the US Fed holds firm (because of inflation’s Trumpian return) the spread between the two countries will widen – bad news for the loonie. It looks like an American dollar will be worth $1.50 Canadian, or close to it, by September.

“The US President is drastically harming respect for Americans,” says Holt. “Trump humiliated Canada while Americans did little to nothing about it and that will never be forgotten. Friends no more.”

And so it begins. A few weeks into Tariff Man’s reign, and chaos is his copilot.

Recall the advice here. Don’t panic. Don’t jerk, flinch or fail. You should still not bet against America, because America will turn against Trump.

About the picture: “I have been a long time (12 years!) reader of your blog.” writes Lisa. “Here’s a pic of my Pom , Baron. He’s adjusting to the new member of the family but likes to hide out during the day!”

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Source: https://www.greaterfool.ca/2025/03/04/here-we-go-8/