Market Musings 2/5/2025
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
Canada & Mexico tariffs delayed, but China retaliates back
Markets recovered from the weekend’s #Tariffs shock after Canada & Mexico make a deal. So where are we at now?
The White House announced #Tariffs on Canada, Mexico and China over the weekend. It led to a steep market decline to open the week on Monday.
However, in the morning, Mexico quickly negotiated a deal with the White House to delay the #Tariffs until March. Canada followed suit promising to negotiate a deal to delay their #Tariffs later in that afternoon. Markets pared early Monday losses and almost fully recovered the initial drop by the end of Tuesday.
Markets would have likely even turned higher over the two-day period if China followed suit. However, China retaliated with #Tariffs of its own on US goods and likely muted any further market gains.
So where are we at now with #Tariffs?
Well, for Canada and Mexico, #Tariffs were just delayed and not resolved yet. So, we expect negotiation and action this month setting up for another deadline in early March.
While they could be resolved within a month, we think it’s more likely to be another showdown to pressure for more concessions from Canada and Mexico.
With China, the situation is more in flux…
Unlike Canada and Mexico, China has taken a more combative approach. China retaliated by imposing 10 to 15% #Tariffs on certain energy, agricultural machinery and vehicles. In addition, China appears to be going after large US companies in particular Big Tech by opening investigations into Google, Apple and Nvidia.
The US hasn’t responded back yet despite language in the initial #Tariffs promising harsher penalties if tariffs were imposed in return－like what China did. However, it seems like tensions are increasing with a White House call with China subsequently canceled.
We could potentially see more #Tariffs levied by either side in the next few weeks－likely leading to market volatility.
The other wild card is the EU.
While left out of the weekend #Tariffs, the White House did indicate that the EU might be next. Similar to China, the EU has more leverage than Canada or Mexico and likely won’t concede as easily. However, the relationship is also more friendly, so we do see more room for negotiation.
Should the EU be targeted, we could see another source of angst for investors and driving additional market volatility as well.
We’ll see how things play out over the next few weeks…
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Original Photo by Pixabay.