|
President-Elect Donald Trump used his Truth Social media late Monday to announce that he would use his executive order powers on day one of his second term in office to impose 25% tariffs on Canada and Mexico and 10% tariffs on all goods coming from China until the flow of illegal immigrants and drugs across the U.S. border stopped. Monday’s announcement shows that securing the border is one of Trump’s top priorities when he takes office, keeping a promise that he made during the campaign. The markets are assuming that the tariffs will immediately be inflationary for the U.S. consumer, and that is a possibility. But that position also assumes that the tariffs will immediately trigger a trade war when the opposite is also possible. The U.S. is the largest consumer market in the world. Trump is betting that Canada, China and Mexico will not want to lose the U.S. market, and that they will take the desired actions to avoid a trade war. For Canada and Mexico, that means closing the borders again against drugs and migrants coming into the United States. There continues to be cautious optimism within China that a trade agreement will be reached with the United States that could include increased purchases of U.S. agricultural commodities in return for easing tariff pressure on consumer goods flowing into the United States. As such, Brazil could be a loser in this negotiation if it loses the recent gains in market share in any U.S. trade agreement with China. That's all speculation of course, but one that the world will be watching.
In a holiday week, this tariff headline consumed much of the attention of the trade, a trade that is especially volatile due to low-volume activity this week. Most commodities are now trading below simple moving averages, begging for a fundamental story so that we can stop trading chart levels and moving along the path of least resistance.
Funds were thought to have been mixed today with corn a seller, beans neutral and wheat a buyer.
| 
