Tag: Canada

Canada Strikes Back: $21 Billion in Retaliatory Tariffs on U.S. Goods

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Canada imposes 25% tariffs on $21 billion of U.S. goods in response to Trump’s steel and aluminum duties.
– The tariffs target steel, aluminum, computers, sports equipment, and cast iron products.
– The European Union has also announced its own tariffs on U.S. goods, signaling broader economic consequences.

The ongoing trade tensions between the United States and Canada reached a new peak as Canada announced a fresh wave of retaliatory tariffs on more than $21 billion worth of American goods. The move comes in response to the Trump administration’s 25% duties on Canadian steel and aluminum, which took effect overnight. Canadian Finance Minister Dominic LeBlanc confirmed that these new tariffs, which will take effect immediately, add to the 25% counter-tariffs Ottawa imposed on $30 billion of U.S. goods earlier this month.

This latest round of tariffs escalates a trade conflict that has rattled markets and raised concerns among economists about supply chain disruptions. The affected goods include a broad range of industries, from steel and aluminum to computers, sports equipment, and cast iron products. As one of America’s largest trading partners, Canada’s decision underscores its commitment to defending its economy while further complicating trade relations with the U.S.

“This is much more than about our economy. It is about the future of our country,” said Melanie Joly, Canada’s foreign affairs minister. “Canadians have had enough, and we are a strong country.” The Canadian government’s firm stance reflects growing frustration with what it sees as aggressive economic tactics by the Trump administration.

The fallout from these tariffs is expected to ripple through multiple sectors. For businesses relying on U.S.-Canadian trade, the increased costs may lead to higher prices for consumers and disruptions in supply chains. Manufacturers, particularly in the auto and technology industries, will feel the strain as component costs rise. Meanwhile, small businesses on both sides of the border could struggle with the added burden of tariffs, limiting their competitiveness in an already volatile economic environment.

The trade dispute has also extended beyond North America. Following the U.S. steel and aluminum tariffs, the European Union announced it would impose tariffs on over $28 billion worth of U.S. goods starting in April. The global economic implications of these trade policies are becoming increasingly difficult to ignore, as countries respond with their own countermeasures, creating an environment of heightened uncertainty for businesses and investors alike.

Meanwhile, political tensions are also heating up. President Trump, a vocal advocate for tariffs, initially threatened to double the levies on Canadian steel and aluminum to 50% but later backed down after Ontario Premier Doug Ford threatened a retaliatory surcharge on electricity exports to the U.S. The back-and-forth illustrates the unpredictability of the current trade landscape and the challenges businesses face in navigating these policy shifts.

While the Trump administration argues that tariffs protect domestic industries and jobs, many economists warn that these measures can have the opposite effect. Higher costs for imported goods, potential job losses in export-dependent industries, and increased uncertainty on Wall Street are just some of the potential repercussions. As the situation continues to unfold, investors and businesses will be watching closely for signs of de-escalation or further trade confrontations.

Trump’s Trade Tsunami: Stocks Plummet as Tariffs Hit Global Markets

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Trump implements 25% tariffs on Canada and Mexico, 10% on China
– Retaliatory measures from trading partners already in motion
– Multiple industries expected to face significant price increases

Wall Street experienced a seismic shock as President Trump’s aggressive tariff strategy sent financial markets into a tailspin, with major indexes suffering significant losses and investors bracing for potential economic repercussions. The Nasdaq Composite plummeted over 2%, while the S&P 500 spiraled 1.6% and the Dow Jones Industrial Average tumbled more than 550 points.

The sweeping tariffs, set to take effect on Tuesday, include 25% duties on Canada and Mexico, and 10% on China, with energy imports from Canada receiving a slightly lower 10% rate. Trump’s announcement has sent shockwaves through global markets, with the president already hinting at potential future tariffs on the European Union.

Goldman Sachs strategists warn that these tariffs could potentially reduce S&P 500 earnings forecasts by 2-3%, with a potential market value decline of approximately 5%. The move has caught many investors off guard, who had previously expected tariffs would only be imposed after failed trade negotiations.

The tariffs’ impact extended dramatically into the energy sector, with oil prices experiencing significant volatility. West Texas Intermediate crude futures jumped as much as 3.7%, outpacing global benchmarks and highlighting potential supply chain disruptions. The 10% levy on Canadian energy imports and 25% tariff on Mexican crude supplies threaten to reshape North American energy dynamics.

Refineries in the Midwest, which heavily rely on Canadian heavy crude, are particularly vulnerable. The tariffs are expected to cause immediate price increases, with refiners like Irving Oil already signaling potential fuel price hikes. The strategic oil storage hub in Cushing, Oklahoma, and Gulf Coast refineries will feel the most immediate effects of these trade barriers.

Commodities experts warn that while the tariffs might provide a short-term boost to oil prices, they raise substantial concerns about global economic growth. The complex energy supply chain could face significant restructuring, potentially increasing fuel costs for American consumers and challenging the intricate economic relationships between the United States, Canada, and Mexico.

Retaliatory measures were swift, with Canadian Prime Minister Justin Trudeau announcing 25% counter-tariffs on approximately $107 billion of American-made products. The tit-for-tat escalation threatens to create a complex web of economic challenges for multiple nations.

Consumer discretionary stocks bore the brunt of the market reaction, with automakers and tech companies experiencing significant downturns. Tech giants like Nvidia and Apple saw substantial share price declines, reflecting broader market anxieties about the potential long-term economic implications of these tariffs.

The Federal Reserve remains cautious, with interest rates held steady due to concerns about potential inflationary pressures. The tariffs are expected to directly impact consumers across multiple industries, with potential price increases anticipated for automobiles, auto parts, clothing, computers, and various other goods.

Noble Capital Markets’ Research Analyst Joe Gomes suggests that while the full implications of these tariffs remain uncertain, companies have been proactively preparing for potential trade barriers. Over the past few months, many businesses have been developing contingency strategies to mitigate the immediate economic impact, implementing supply chain adjustments and financial buffers to minimize potential disruptions from the new tariff regime.

The global economic landscape now appears increasingly uncertain, with trade tensions threatening to disrupt carefully established international economic relationships. Technology and manufacturing sectors seem particularly vulnerable to these protectionist measures.

Will Europe’s Natural Gas Dilemma Permanently Bring Manufacturing to the U.S.?

Posted on by cpatches
Image Credit: Kateryna Babaieva (Flickr)

Natural Gas Intensive Manufacturing’s Latest Move from Europe to the U.S. is a “No-Brainer”

Is Europe moving manufacturing jobs to the U.S.?

As Russia’s Nord Stream 1 pipeline gas shipments have been curtailed by 89%, and European countries have agreed to sweeping cuts in natural gas consumption, some manufacturing in Europe has had to make difficult decisions. For them to stay in business or to protect profitability, moving to where the supply chain flows more freely may be a choice forced on companies.

The industries most impacted by unpredictable supply and skyrocketing gas prices are those that make steel, fertilizer, chemicals, and other feedstocks. Many of these same industries have been (unintentionally) incentivized to relocate operations to the U.S. by Washington’s growing menu of incentives for manufacturing and green energy. This government support, if their operations comply with certain standards, and the need for stable energy availability has already caused some businesses to cross over to the U.S.

Some economists have suggested that this could bring a new era of deindustrialization to Europe, and industrial jobs to the U.S.

The Decision to Make the Move

This month Ahmed El-Hoshy, chief executive of Amsterdam-based chemical firm OCI NV announced an expansion of an ammonia plant in Texas. “It’s a no-brainer to go and do that in the United States,” El-Hoshy told the Wall Street Journal.

Luxembourg-based ArcelorMittal SA, said this month it would cut production at two German plants, then reported better-than-expected performance by an investment earlier this year in a Texas facility. ArcelorMittal makes hot briquetted iron, a raw material for steel production. In their July earnings call, Chief Executive Aditya Mittal attributed the facility’s value in part to being in a “region that offers highly competitive energy and, ultimately, competitive hydrogen.” The facility that Mr. Mittal moved operations to has plenty of room for growth, Mr. Mittal explained to shareholders they own 100% of expansion rights.

Pandora A/S the Danish Jewelry maker, and Volkswagen AG announced U.S. expansions earlier in 2022. Even U.S. headquartered companies are making changes. Last week, The Wall Street Journal reported Tesla is pausing its plans to make battery cells in Germany as it reviews qualifying for tax credits under a new act  signed by President Biden in August.

“We are increasing our investments [in the U.S.] also in order to stay with all of our partners who are investing,” said Stefan Borgas, chief executive of RHI Magnesita NV. The company, which makes materials used by factories such as steelmakers that must withstand intense heat, is spending $8 million on its European plants so that certain processes run on alternative fuel, such as coal or oil meet European guidelines. Borgas has said that they are also very positive about steel demand in the U.S., where incentives have helped pave the way for green-energy changes. Manufacturers like RHI Magnesita see hydrogen as the key to replacing fossil fuels and reducing emissions in plants.  Promised spending on projects by Washington is expected to boost the production of hydrogen and eventually lower its price.

Many companies remain cautious about changing their strategies because of the cost, difficulty, and time involved in building projects such as smelters for aluminum production. But they are also realistic about the potential for natural gas to never again flow through the Nord Stream pipeline at levels previously experienced. Those that have decided to relocate are likely not moving operations back, it just wouldn’t be practical. This would lead to a permanent increase in North America for manufacturing requiring energy from natural gas and blue hydrogen produced by natural gas.

Take Away

Industries that rely heavily on natural gas or other products derived from natural gas are having a tough time in Europe. Some have moved operations to North America, and many more are considering the move. Helping to make the decision to locate manufacturing operations in the U.S. comes from the recently signed Inflation Reduction Act, which incentivizes building greener processes. These incentives would hep reduce the cost of building a new plant or factory in the U.S.

Paul Hoffman

Managing Editor, Channelchek

Sources:

https://www.wsj.com/articles/high-natural-gas-prices-push-european-manufacturers-to-shift-to-the-u-s-11663707594?mod=hp_lead_pos3

https://www.wsj.com/articles/europe-checks-its-thermostats-as-russia-crimps-natural-gas-supplies-11658827804?mod=series_europeenergyshortage

https://www.pbs.org/newshour/world/europe-is-facing-an-energy-crisis-as-russia-cuts-gas-heres-why#:~:text=DID%20RUSSIA%20CUT%20OFF%20GAS,a%20pillar%20of%20the%20economy.

https://corporate.exxonmobil.com/climate-solutions/hydrogen#:~:text=What%20is%20blue%20hydrogen%3F,that%20produces%20no%20CO2.