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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

May 31, 2018 | The Draggers

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Given next Thursday’s slugfest in Ontario, plus BC’s latest witch hunt, this blog post was supposed to tell you why landlords are about to be broiled on a spit. But, alas, events have overtaken things. Let’s save the weenie roast for tomorrow.

So, how do you like the Trumpster now?

The American president on Thursday went all bully and slapped big tariffs on metals from Canada, Mexico and Europe. In immediate reaction these allies retaliated. Now we have a trade war. Good work, Don.

Stock markets in the US fell because this makes imports more expensive, hurts companies and costs jobs. The Canadian dollar swooned on the news and never recovered. Bonds went up and investors despaired just a day after the Italian thing toppled equities.

Incredibly, Trump’s White House says erecting trade barriers to its North American allies (to block stuff the US also produces) is a ‘national security’ issue. It’s not, of course. This is designed to blow up NAFTA – which now has a zero chance of being ratified in 2018 – and plays to the alt right Republican base of knuckle-draggers who think protectionism will bring back 1966. That’s not going to happen, either. Just ask Harley, an iconic American manufacturer that this week punted thousands of workers – in part because of the rising price of imported materials.

Protectionism flows from nationalism and jingoism. From there it’s a short trip to  intolerance and the sentiment that makes Trump defenders want to build a Mexican wall, ban Muslim immigrants and leave post-hurricane Puerto Rico in desperate shape. Most of all, it’s bad economics. Trade barriers make things more expensive to produce and buy. Consumers have less buying power so when 70% of the US economy is based on consumer spending, this is some dumb. Meanwhile there’s no evidence taxing Ontario steel or Quebec aluminum will create a single job in Michigan or Ohio. But Trump says otherwise. And the rabble cheers. So Canadian ‘retaliation’ is pointless. The president cares not.

Ottawa’s response is not strategic, unlike that of Mexico. Those guys targeted products in US electoral districts where Republicans have a fight on their hands this November. We didn’t. We also blew the NAFTA talks by making gender equality our big demand. You can imagine how that went over.

Meanwhile, consider the growing divide between the nations. We’ve raised taxes and created a new super tax bracket for the wealthiest (who, by US standards, aren’t rich at all). The US dropped personal tax rates. We raised taxes on corporations. They reduced them. We just nationalized a pipeline company. The US reduced regs covering the oil and gas business. We’re adding a carbon tax to everything. They punted the Paris Accord. Household debt in Canada is going up, while in the US it’s been falling. Soon we may have two-thirds of our economy controlled by socialist governments. Their governing party eats nails.

So, what next?

This will not deter the Bank of Canada from raising rates. In fact, it makes that event more likely since the dollar will now be under continual pressure and needs the juice. Second, tariffs, barriers and numbnuts foreign leaders are inflationary – these things increase the cost of goods and services and reduce productivity. Central bankers hate that.

Second, NAFTA is kaput. Now. Maybe forever – until populism and protectionist drain away in Washington. Bad news for Hamilton and the Sault, along with Sept-Iles, and the real estate markets surrounding them as steel and aluminum are hit. In the Trump crosshairs also is vehicle production with another 25% proposed tariff.. Yup, Oshawa and Windsor. Brampton, Barrie and Woodstock. Bye-bye.

Those people who come here to praise the American leader as a visionary, iconoclastic and an everyman propelled by common sense and courage are backing a myopic bully. No wonder he likes Putin and Kim, hates a free and inquisitive media and can’t keep employees. The danger he now poses to global growth – just recently struggling back from its knees – is palpable. Ironically, he’s not helping America either by whacking Canada.

Go, Stormy.

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May 31st, 2018

Posted In: The Greater Fool

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