| | | | Wow, where to start. On Friday afternoon, Trump announced the first round of tariffs on China, Mexico, and Canada. The market responded with a massive late-hours sell off.
But that was just a warm up. Over the weekend, crypto underwent the most massive liquidation event in history, even bigger than the FTX blowup. Over $800 billion of crypto market cap was wiped off the map in a few hours. So much for crypto being a flight to safety asset, right?
Then to top it off, the S&P opened 2% lower today, and is still dropping. So, what can we gather from all this? Well, for one, the tariffs will impact China and Mexico far more than the U.S.. 75% of Canadian exports come to the U.S. — only 12% of our imports come from Canada. 80% of Mexican exports go to the U.S. — only 14% of our imports come from Mexico.
So, as you can see, America is in a much stronger position than either country. And we can weather the blows far better than Canada. Not to mention, Canadian environmental activists successfully stopped the west-to-east oil pipeline from being built. This means that the only way Canada can transport oil from the fields in the west, to the population centers in the east is via an American pipeline.
So, they have very literal leverage. The base case for Mexico and Canada is a recession in the next couple months. Maybe worse. However, let’s zoom out a little bit. The stock market — after the recent fall — is exactly where it was a month ago. So, even though this recent tumble was severe, the market is still ok.
Meanwhile, gold is rising on the back of all this chaos. Proving that in reality, it is still the king of flight-to-safety assets.
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