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It’s never a dull moment with Trump.

• Nothing can be done by China, Mexico and Canada right now to forestall tariffs
• We have big deficits and tariffs are something we’re doing
• We may increase tariffs
• Canada has treated the US very unfairly
• Not looking for concessions
• Will put tariffs on chips, oil and gas
• Oil and gas tariffs by Feb 18
• Will put tariffs on Steel, aluminum and copper
• Says he wants to bring pharmaceuticals back to America with tariffs
• We are going to take back the Panama canal
• Bringing tomorrow’s tariffs down to 10% on Canadian oil and gas
• Tariff costs are sometimes passed onto consumers
• Tariffs may cause short-term disruption
• Not concerned about market reaction to tariffs
• We’ll be doing something very substantial on tariffs with European Union

“The way you bring [manufacturing] back to the country is by putting up a wall – and the wall is a tariff wall,” he said.

Alright, enough talk, let’s see what comes on the weekend. Oil rallied late on these comments and the euro ticked modestly lower. The Canadian dollar was little changed.

Separately, a report says Trump and Nvidia’s CEO discussed AI chip export controls and DeepSeek.

This article was written by Adam Button at www.forexlive.com.

• Trump expected to issue tariffs against Canada and Mexico starting March 1
• White House: The report is false. The Feb 1 deadline still holds
• White House: Trump has not made up his mind on the tariff timeline for the European Union
• Mexico’s Sheinbaum: If the US imposes tariffs, this puts aside the USMCA trade pact
• Fed’s Goolsbee: I have comfort we are on the path to 2% inflation
• Fed’s Bowman: Inflation risks remain, rate cuts expected but data-dependent
• US December PCE core +2.8% vs +2.8% expected
• US Q4 employment costs 0.9% versus 0.9% estimate
• Canada November GDP -0.2% vs -0.1% expected
• Canada April-Nov budget balance -22.72 billion vs -19.14 billion a year ago
• ECB’s Villeroy: We should be sustainably around 2% inflation target by summer
• Bill Gates says prior macro-economic analogies don’t apply to AI
• Bakers Hughes oil rigs +7 in the current week
• Germany January preliminary CPI +2.3% vs +2.6% y/y expected

Markets:

• Gold up $3 to $2796
• US 10-year yields up 7 bps to 4.58%
• WTI crude oil down 27-cents to $72.46
• S&P 500 down 30 points to 6039
• USD leads, JPY lags

January comes to an end and it was certainly a dramatic one, which is no surprise given the new President.

The PCE report was a good one for inflation, though only when you’re rounding to the second decimal or digging deep in the numbers. It was a reminder that the Fed won’t be threatening rate hikes any time soon, even if the pace of cuts could slow or stop. The dollar took the report in stride and in the early going it was mostly month-end flows bouncing around the market.

That led to some choppy moves that were tough to explain but the market certainly got something more-tangible to chew on later.

It started with a Reuters report saying Trump might announce tariffs but they wouldn’t go into place until March 1, allowing time for exemptions and negotiations. The market liked the sound of that and the US dollar fell with USD/CAD dropping 100 pips to 1.4375. It wasn’t limited to CAD and MXN either as EUR/USD rose 60 pips in a consistent move across FX.

Of course, the White House denied that report about 90 minutes later and reiterated that the White House would be putting tariffs on Mexico and Canada on Saturday, as planned. That reversed the move and in some cases more. USD/CAD ran to 1.4225 while other moves were also erased. The net was that most things ended up back where they started the US afternoon.

However stocks soured particularly hard. The S&P 500 had been up nearly 50 points at the highs and was down 40 points at last look, or 0.6%. Apple was particularly hard hit in an ugly reversal after a strong open.

The weekend will be an interesting one and virtually guarantees some fireworks when markets reopen. In the meantime, enjoy the weekend!

See: February 1. March 1. It doesn’t matter because it’s all a bluff

This article was written by Adam Button at www.forexlive.com.

Treasury yields have been creeping higher today as the White House re-iterated a threat to slap tariffs on Mexico, Canada and China. We will see how it shakes out but it’s a decent reversal given a benign PCE inflation report today.

It’s increasingly clear how the Treasury market views tariffs:

1) They’re inflationary

Some Fed officials dismiss them as a one-off effect but there are many permutations, including retaliation and growth knock-ons. This is straight-forward thinking as raising the prices of things to consumers is the point of tariffs.

2) Trade war spending

If we do end up in some real trade wars, it’s clear that responses from governments will be like covid: Spending money. I find it troubling that Canada is so quick to lay out that playbook given the inflationary disaster that unfolded last time. But that’s the political kneejerk reaction everywhere and more spending isn’t what the bond market anywhere wants to see right now.

On net, we saw yields rise on Trump’s election win and have fallen since inauguration when the didn’t implement the big promised tariffs — especially on China. Now the market is hanging on every report about tariffs.

This article was written by Adam Button at www.forexlive.com.

The S&P 500 is now down 30 points to 6047.

One chart that stands out today after earnings is Apple. Shares opened 4% higher but they have turned around in a big way and are down 1.6% now.

This article was written by Adam Button at www.forexlive.com.

If the latest Reuters report is to be believed, Trump’s ‘promise’ yesterday to enact immediate tariffs on Saturday was a bluff. However if the White House is to be believed, the tariffs will be announced on Saturday.

The Reuters report still says Trump will announce tariffs but that they won’t begin until March 1 and there will be a process for exemptions, which perhaps means that both can be true.

In any case, it’s all theatre. There won’t be any universal tariffs.

Why? Quite simply, Trump doesn’t have the power.

The US Constitution couldn’t be more clear:

“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.”

Mexico and Canada have a ratified trade agreement with the US Congress.

Now Trump does have some powers. He used a set of laws called Section 232 to apply tariffs on aluminum and steel imports in his first term. However that law is quite limited, usually to a specific industry and that’s how it was used. It’s also a cumbersome procedural process that took nearly a year to implement by Trump in 2017-2018.

This time, Trumps threatening to use the International Emergency Economic Powers Act (IEEPA), which is a 1977 law what was designed for blocking bank accounts, prohibiting certain transactions, or freezing property of individuals, entities, or countries considered a threat to US national security.

Examples of its use include:

• The Iranian assets freeze in 1979
• Trade restrictions on South Africa during apartheid
• Sanctions against Russia following the Ukraine war
• Restrictions on Chinese tech companies

The law says it must be an “unusual and extraordinary threat”. Stretching that to fentanyl or immigration — especially in the case of Canada — is far fetched, especially when the supposed Presidential remedy is to tariff every good crossing the border.

When Trump was threatening Mexico with broad tariffs in 2019 around immigration, there was considerable talk about this a strong consensus that it wasn’t legal. Somehow that’s been lost in the latest debate.

Now your counter-argument can be ‘laws don’t matter’ and the Supreme Court ‘will let Trump do whatever he wants’ but we’ve already seen executive orders blocked by the courts.

So what now?

The latest report extends the timeline for Trump to impose the tariffs to March 1, whether he announces them on Saturday or not. It’s a pressure tactic. He is squeezing Mexican and Canadian politicians to try and find out what he can get. In some cases he’s finding cracks in national strategy, weakening leaders and exposing faults that can be exploited now or later.

That’s working so he’s keeping the pressure on.

So the question is ‘what does he really want’ because 25% tariffs aren’t going to happen and if he asks too much, someone will call his bluff and the courts will take away the threat of broad IEEPA tariffs for other countries (particularly allies) he wants to negotiate with.

It’s tempting to take some of the threats at face value. Maybe he just wants an end to fentanyl and illegal immigration. Now Mexico and Canada are powerless to stop that completely but there has been some action already from both. Maybe there’s more to come, as one report highlighted earlier. Maybe that’s the end of it.

However he’s also talked extensively about trade deficits and that points back to the USMCA, and it’s why I think that the ultimate ask is to move up the renegotiation of that trade deal to this summer. I believe Mexico and Canada will cave on that demand but time will tell.

This article was written by Adam Button at www.forexlive.com.

After Canada and Mexico, it will be onto someone else.

I suppose the big question is whether the promised 60% tariffs on China are coming and why they’ve been delayed thus far.

This article was written by Adam Button at www.forexlive.com.

Easy come, easy go.

A 50-point gain in the S&P 500 has been wiped out as the market wrestles with tariffs.

The market has been on track to close near an all-time high.

This article was written by Adam Button at www.forexlive.com.

The White House says the Reuters report is “false”.

The White House says Trump will implement 25% tariffs on Mexico and Canada plus 10% tariffs on China on Saturday as Trump has said many times.

They said the tariffs “will be up for public consumption on Saturday” and that there is no update on exemptions. Though the White House also said they’re not seeing the start of a trade war with Canada and that Trump will respond to Trudeau’s comments in due time.

In immediate reaction the Canadian dollar has given back its gains.

A few points:

• Welcome to Trump-trading. If you weren’t around for the first go-round, get used to it. Leaks, counter-leaks, threats, denials.
• You better have high conviction if you’re holding anything that can get bounced around on these kinds of headlines
• The signal-to-noise ratio is brutal
• Sources from places like Reuters, Bloomberg, the WSJ and other top media are impeccable. They don’t make things up but the administration may have rival factions and things can be leaked for many purposes

This article was written by Adam Button at www.forexlive.com.

• Oil rigs up 7 to 479
• Gas rigs down -1 to 98
• Total rigs up 6 to 582

The price of crude oil is down $0.56 to $72.18. The price low today reached $71.94 which was the lowest level since January 2. The price is also below the 100 hour MA at $73.19.

For the year, the price is still up 0.70% (price closed 2024 near $71. 72. However, it is down -10.6% from the high reached on January 15 at $80.77.

This article was written by Greg Michalowski at www.forexlive.com.

• Trump expected to issue tariffs against Canada and Mexico starting March 1, according to sources familiar with the plan.
• Trump expected to announce a process for countries to seek exemptions for certain imports, sources say.
• US administration official says Trump is reviewing tariff plans, which may allow some exemptions, but they will be “few and far between.”

Note this is not confirmed by the administration. So caution is warranted.

This article was written by Greg Michalowski at www.forexlive.com.