Posthaste: Four things that would be 'kryptonite' to Donald Trump's tariff threats
Donald Trump doubled down on threats to impose punishing tariffs on Canada and Mexico Monday, saying the 25-per-cent levies were “on schedule” to go ahead March 4.
The prospect is a daunting one for Canada with economists warning that a protracted trade war could throw the economy into recession.
Yet as unstoppable as Trump seems these days, even he has his “kryptonite,” points out Benjamin Tal, deputy chief economist at CIBC World Markets Inc.
One of his biggest vulnerabilities is the stock market, an indicator Trump has long used to measure success. Any negative reaction here might cause the president to reconsider his actions.
U.S. stocks swooned on Feb. 3, the original deadline for the tariffs, only to recover when Trump announced the month-long reprieve.
“It’s not a surprise that Canada and Mexico were granted 30-day extensions on the 25 per cent tariff shortly after the stock market reacted negatively to the news,” said Tal in a note last week.
The stock market has performed well since then, not because investors believe tariffs are good for the U.S. economy, said Tal, but because they believe the president won’t enact measures that will damage market sentiment.
Gas prices are another vulnerability. Trump with his “drill, baby, drill” mantra has made it clear that one of his priorities is lowering fuel costs for Americans.
With no easy substitute for oil coming from Canada, the 10 per cent tariff Trump threatens to put on Canadian crude would immediately raise prices at the pump, said Tal.
“We doubt that even a 10 per cent tariff on energy will be imposed,” he said.
Oddly enough, Trump renewed his push on Monday to get the Keystone XL pipeline built “NOW!” The long-abandoned pipeline was meant to carry oil from
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