It appears that Donald Trump’s strategy is maximum short-term disruption.

 

US importers are feeling the brunt of the tariff implementation. Just take a look at Restoration Hardware [RH–US], its stock has fallen from $400 at the end of January to $140 at the time of writing. It fell more than $100 on Thursday alone, which caught the CEO off guard during a live interview and made for some colourful language! These companies get most of their products from Asia, which now has 50-60% tariffs. They either have to pass these costs on to the consumers or make less money. Either way, it's not good for the consumer or the companies.

 

Both Canada and Mexico were spared from the list of reciprocal tariffs. USMCA-compliant goods will continue to have no tariffs, but non-compliant goods will be levelled at 25% (except for oil and potash, which will be at 10%).

 

Obviously, the administration wants to reset global trade. What the market wants is clarity. What do countries have to do to negate the tariffs? When the Trump administration does their first tariff (re)negotiation, it is likely that the market will jump significantly. Until then, uncertainty will drive everyone's investment thesis.

 

If you feel like you're experiencing déjà-vu, you may not be wrong. Below is a chart of what happened when Donald Trump was elected to his first term in 2016 and started implementing tariffs (2018). Unfortunately, we've been here before. I guess it's true what they say – history repeats itself!

 

We are navigating this uncertain environment and making changes as we see fit. While we are comfortable with our model asset allocations we did raise more money again this week in our models.

 

 

I have also included some commentary from our CIBC Economics team entitled “Humpty Dumpty had a great fall”.

 

As always, if you have any questions, please feel free to give us a call.

 

Have a great weekend.

 

Milan