Late yesterday, a report from the Toronto Star said Canada would be at the bottom end of tariffs. Mexico is presumably in the same boat, given it's on the same trade agreement. In addition, Trump said this week there has been a lot of progress on fentanyl, which is another good sign.
Given all this, you can make the argument that tariffs on Mexico and Canada should be near nil. Despite some of the misinformation on the internet, the effective tariff on US goods entering Canada is just 1.1%. Mexico isn't much higher.
Does it mean Canada/Mexico would accept 5%? 10%? The Washington Post described Trump's foreign policy doctrine as 'escalate to de-escalate' and that looks like the doctrine on trade as well.
I think that would ultimately be good news because much of the US trade or the corporate level is with Mexico/Canada. China meanwhile remains thorny because that's the ultimate target and Trump has teed up some Venezuelan tariffs, which are probably a fresh excuse to tariff China. But surveys have China tariff expectations at 50%, which highlight a heavy dose of fear already priced in.
Also see: What's priced in for Trump tariffs
This article was written by Adam Button at www.forexlive.com. Read More Details
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