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Canada was one of the ‘winners’ yesterday but that ignores auto tariffs, steel, aluminum and products not covered under USMCA. So while the news could have been worse, there is still plenty of pain to come.

With that in mind, Carney isn’t in the mood to back down:

• Canada will impose 25% tariffs on all vehicles imported from the US that are not compliant with USMCA
• Will develop framework for auto producers to avoid counter-tariffs, as long as they maintain their production and investment in Canada
• Tariffs will not affect auto parts and will not affect vehicle content from Mexico
• Every single dollar raised — about $8 billion — will go to auto workers and affected companies

The bolded part is an interesting strategy. It’s a threat to hit companies who move factories out of Canada and into the US.

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

Deutsche Bank is out with a note today that’s getting attention. It highlights the drop in the US dollar across the board in the aftermath of the US tariff announcements.

They highlight that the calculation of US tariff rates is particularly problematic, something I also wrote about. This is a diplomatic way of saying ‘the clowns are running the circus’:

There is a very large disconnect between
communication in recent weeks of an in-depth policy assessment of bilateral
trade relationships with different countries versus the reality of the policy
outcome. We worry this risks lowering the policy credibility of the
administration on a forward-looking basis. The market may question the extent
to which a sufficiently structured planning process for major economic
decisions is taking place. After all, this is the biggest
trade policy shift from the US in a century

They make one other great point in that other countries can’t negotiate with this. The high numbers on countries with virtually no tariffs or barriers leave no room for negotiations. What’s the ask for a country that already has no tariffs or minimal tariffs?

Looking ahead, DB remains bearish on the dollar and is now looking at the growth implications:

We argued that a sharp
retaliatory move
higher in USD/CNY is the most material risk to a dollar bearish view.
Outside of that however, we are squarely focused on the market’s perception of
the relative
growth and fiscal policy outlook between the US and rest of the world
and broader perception of relative policy credibility. Our assessment of the
newsflow so far is dollar bearish. The policy reaction from China and
Europe in coming weeks will be critical in an ongoing assessment of this view.

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

• All instruments are on the table to respond
• Perceived trade imbalances do not take into account digital services
• Indirect consequences of tariffs may lead other countries in Asia to boost exports to Europe
• The US economy and consumers will become poorer and weaker
• We will react in organised and unified manner
• Response to Wednesday’s announcement of US tariffs will be more massive than previous response
• If Europeans work together in their response to US tariffs, we will succeed in dismantling US tariffs
• Europe must react to tariffs industry by industry
  US diagnosis is correct but tariffs are wrong answer, Western economies need to be more productive
• Decarbonisation of economy will contribute to reducing Europe trade deficit

The goal here appears to be ‘dismantling’ tariffs but I’m not sure that’s a possibility anymore.

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

CNBC’s Megan Cassella was talking about tariffs and indicated that the messaging from the White House is that there won’t be negotiations on tariffs. The line from the top is that ‘countries had 70 years to negotiate’.

I think she is basing this on comments that have been on CNN and elsewhere but it’s a troubling development if true. It argues that these tariffs aren’t going away, even if other countries drop their tariffs. She specifically mentioned Israel, which dropped all US tariffs to zero earlier this week and still got a 17% rate.

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

• Prior was 53.5

Data:

• Employment 46.2 vs 53.9 prior
• New orders 50.4 vs 52.2 prior
• Prices paid 60.9 vs 62.6 prior
• Business activity 55.9 vs 54.4 prior
• Supplier deliveries 50.6 vs 53.4 prior
• Inventories 50.3 vs 50.6 prior
• Backlog of orders 47.4 vs 51.7 prior
• New export orders 45.8 vs 52.1 prior
• Imports 52.6 vs 49.6 prior
• Inventory sentiment 56.6 vs 54.7 prior

Comments in the report:

• “Restaurant sales and traffic have improved in the past month
  overall. Valentine’s Day typically starts an improved seasonal trend
  that was consistent this year. We remain optimistic about the coming
  months, despite recent news of possible recession and tariffs that have
  not played out yet.” [Accommodation & Food Services]
• “Starting to see effect of aluminum tariff. These costs will be passed on to customers.” [Construction]
• “Patient volumes continue to exceed forecast, leading to increased
  revenues and an improved financial outlook. Supply chains continue to
  operate effectively and few categories — including IV solutions — are
  showing signs of duress. Labor outlook is improving, with reliance on
  travel staff continuing to recede. Outlook for the duration of the
  quarter is favorable.” [Health Care & Social Assistance]
• “The tariffs have caused issues in the groundwood paper market
  especially. With a large amount of groundwood imported from Canada to
  the U.S., the tariffs and resulting delays have caused havoc with the
  supply chain and deliveries. U.S. mills are getting backlogged and late
  from the additional tonnage they’ve taken on.” [Information]
• “New equipment purchases have slowed down over the last month due to
  the uncertainty of the new administration and cancellation of certain
  aspects of the Inflation Reduction Act.” [Other Services]
• “We are seeing some loosening in the U.S. economy related to hiring
  and people retention. Quality candidates are available, and employee
  turnover is decreasing. Competitive pressure for goods and services is
  increasing as suppliers seek organic increases in revenue.”
  [Professional, Scientific & Technical Services]
• “Government budget cuts and layoffs are negatively impacting our operations.” [Public Administration]
• “We are still holding back some money for emergency use in case the
  new administration targets grant usage and puts a hold on current
  spending.” [Transportation & Warehousing]
• “We’re expecting price increases in the near future due to tariffs
  on several commodity-based contracts, including waterworks items.”
  [Utilities]
• “Tariff confusion and the variety of ways that suppliers are
  responding have had a strong effect on our purchasing decisions this
  month, causing us to shift spend and in some cases buy in advance of
  reported tariffs.” [Wholesale Trade]

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

• Prelim was 54.3
• Prior was 51.0

The ISM services index is due at the top of the hour.

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

Dear Client,

As part of our commitment to providing the best trading experience to our clients, we want to inform you there will be an adjustment in the trading schedule due to the Australia ending Daylight Savings on Sunday, 6 April 2025.

While trading, most products will remain unaffected; however, there will be a change in the trading hours of some products.

All times mentioned below are expressed as Platform time (GMT +3) except for cTrader (GMT+0).

MT4/5:

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For any further assistance, please contact our Support Team.

Kind regards,

IC Markets Global.

The post Australian Daylight Savings: Updated Trading Schedule 2025 first appeared on IC Markets | Official Blog.

S&P 500 future are down 3.7% today.

It could be worse.

One of the biggest decliners is Nike, which is down 14% after tariffs hit almost every country it manufactures in. The company reportedly has 150 factories in Vietnam and a half-million workers. No one was expecting a 46% tariff on Vietnam and it will be catastrophic to margins for the company.

There is some thinking that it can’t last. Apple is similar as with China tariffs, the cost of an iPhone would have to go to $1500 from $1000 to maintain margins.

As Dario Perkins writes:

talking to investors this morning, the tariffs were so bats*** crazy, nobody really believes them. Maybe there is a sort of Laffer curve. Very low tariffs OK, bats*** crazy tariffs also OK

Tech equity analyst Dan Ives took a similar line:

The reason we are saying this is over: in the coming 24 hours the world will quickly realize these tariff rates will never stay as they are shown otherwise it would be a self-inflicted Economic Armageddon that Trump would send the US and world through over the coming year. We have to assume this is the start of a negotiation and these rates will not hold…stocks will sell-off massively but ultimately our view is these numbers would throw the US into a clear recession and cause stagflation almost immediately…if they hold (and they will not for long, in our view).

Place your bets but my inclination based on comments from Lutnick and Trump is that they’re not considering a big U-turn.

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

The Atlantic leak last week was a sign that the people running foreign policy in the United States were making it up as they go along.

The reasoning behind the tariff rates today may be even worse.

Here are some examples:

These numbers were purported to be some kind of well-thought-out number to represent the sum of tariffs and non-tariff barriers on the US. They’re framed as ‘reciprocal’.

The whole exercise is a farce.

The “tariffs charge to the US” numbers are simply the US trade deficit with that country divided by total imports. South Korea, for instance, has been hit with a 25% tariff rate that is a halving of the 50% ‘calculated’ rate. How did the US do that calculation?

Imports were $131.5 Billion, exports were $65.5 billion. That leaves a trade deficit in goods of $66 billion. Take that $66 billion and divide by total imports and you get almost exactly 50%.

Another example: The trade deficit with China ($295.4 billion) / US imports from China ($438.9 billion) = 67%

That same exercise was done on every country and that’s how those numbers were calculated. If you had a deficit with the US or a number below 10%, you did no better than 10%. Critically, services trade was also left out of the equation (the US has a large services surplus).

Once that number was arrived upon it was then cut in half in some kind of ‘deal-making’ PR strategy but the implication here is that if you happened to sell your oil or computer chips to the US (sorry Taiwan) instead of China, you get smoked by tariffs. Also, it means that your dollar figure has nothing to do with non-tariff barriers.

The USTR even tried to pretend it had used a complex mathematical formula, but it’s a complete smokescreen, presumably because it didn’t give the President the number he wanted.

Shockingly, the administration might have just asked ChatGPT to do its homework. If that wasn’t bad enough, uninhabited islands were also singled out for tariffs. Even worse, they may have asked ChatGPT to generate a list of ISO country codes and that’s why Svalbard and Jan Mayen (they share a code) were listed together, even though they’re administered separately by Norway.

Another critical example is the UK and EU. The EU has a 39% rate and the UK 10%. Before Brexit, both these areas had the exact same trade and non-tariff barriers with the US. Since Brexit, very little has changed but they ended up with vastly different rates.

There is no logic here and the whole thing reeks of a slapped-together plan rolled out by unserious people.

Other troubling signs

In today’s post-announcement interview with Bloomberg, Treasury Secretary Scott Bessent was rattled and didn’t know what the tariff rates were on Mexico/Canada and was also unsure about China policy.

That suggests he could have been sidelined from tariff discussions or decision-making. He is seen as one of the people in the administration that markets trust to curb Trump’s worst instincts. Instead, it looks like he could be kicked to the curb.

What’s next

Naturally, there is time to right the ship. Someone convinced Trump not to implement the extra tariff rates until April 9, so there is time for negotiations.

Even with that, I believe the Trump Put is in deep jeopardy. This isn’t the same guy who ran the White House from 2016-2020 and bragged about every move in the Dow Jones Industrial Average. He doesn’t seem to care about pain in the markets anymore, or at least a 10% decline hasn’t been enough to get his attention. Will it take 20%? 30%?

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

A key variable in the next leg in markets is how the Federal Reserve reacts to all this. I’ve seen some research today showing this will push US inflation to 5% and that’s a big headache for Powell.

The market is pricing in a very high likelihood of a rate cut in June and about 104 bps in easing by this time next year. That all assumes the Fed looks through tariffs but some Fed officials aren’t on board with that thinking.

Powell is scheduled to speak at 11:25 am ET on Friday.

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

Fitch picked a heckuva day to downgrade a major economy.

• We forecast China’s general government deficit to rise to 8.4% of GDP in 2025, from 6.5% in 2024
• We forecast China GDP to increase by 4.4% in 2025 from 5.0% in 2024
• Tariff rise has been much more drastic and China will still be affected by a broader tariff-induced global slowdown

China’s finance ministry responded saying the downgrade is biased and cannot fully and objectively reflect the actual situation in China.

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

Trump posted on Truth Social and he seems to think this is the worst of it. We’ll see:

THE OPERATION IS OVER! THE PATIENT LIVED, AND IS HEALING. THE PROGNOSIS IS THAT THE PATIENT WILL BE FAR STRONGER, BIGGER, BETTER, AND MORE RESILIENT THAN EVER BEFORE. MAKE AMERICA GREAT AGAIN!!!

Maybe I’m reading too much into this but the indication here isn’t that he’s considering walking back anything.

Maybe if they put a large tariff on the CAPS LOCK button he would change his mind.

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