CIBC Private Wealth
February 14, 2025
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Thursday brought with it more talk about tariffs. US President Donald Trump ordered his team to consider implementing reciprocal tariffs on many of its trade partners. These tariffs would apply to nations that have a higher average tariff rate than the US. While not expected to be implemented for some time yet, trade tensions are escalating, which could negatively impact global economic conditions.
- President Trump has ordered his administration to look at reciprocal tariffs. He hopes this will help balance trade activity between the US and several of its key trading partners. The tariffs would be customized based on the amount of duties each economy imposes on US goods.
- Earlier this week, the US announced a 25% tariff on all imports of aluminum and steel. No trade partner is excluded, including Canada and Mexico. A team of Canadian federal and provincial government officials are working with the US to try to avoid the tariffs.
- Trade tensions could hinder already soft global economic conditions. The UK economy, one of the largest in the world, rose by only 0.1% in the fourth quarter of 2024, according to a preliminary estimate released yesterday. Higher government spending and services sector activity offset weak consumer spending.
- Europe’s leaders are also concerned about the impact of tariffs. This could hinder Europe’s already struggling manufacturing sector. In December, industrial production in Europe dropped by 1.1% over the previous month.
The threat of tariffs is real. In many cases, it is not a question of if but rather when. Tariffs are expected to negatively impact the global economy, which is already struggling under the weight of tight financial conditions. Leaders from the Canadian federal and provincial governments are in negotiations with trade representatives from the US to avoid trade tensions with our largest trade partner.
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