Goldman Sachs: We think Canada and Mexico tariffs are likely to be short-lived

What next?

The main thing is Tuesday, which is the deadline for tariffs to actually go into effect. The fact that they’re not immediate suggests time to negotiate (though not much).

Goldman Sachs is out with a note saying they expect the tariffs to be short-lived. There is also this note from the Retail Industry Leaders Association, which includes Wal Mart, Target, Home Depot and the biggest US retailers. You wonder if someone gave them a tap on the shoulder.

On the less-optimistic side, here is Canada Finance Minister Dominic LeBlanc on CTV this morning:

“I’m very pessimistic that by Tuesday we can get out. My conversations with Howard Lutnick and others in the administration tell me that perhaps in March there’s a window again. But most of this is so unpredictable.”

The ‘official reason’ for the tariffs on Canada is fentanyl but here a chart showing that’s obviously a ruse.

Mexico is also taking a hard line on drugs, saying the problem is American demand and a lack of enforcement there, along with the invention and authorization of oxycontin that really kicked it all off.

Also notable is that Trump doesn’t even mention drugs in a post this morning.

We pay hundreds of Billions of Dollars to SUBSIDIZE Canada. Why? There
is no reason. We don’t need anything they have. We have unlimited
Energy, should make our own Cars, and have more Lumber than we can ever
use. Without this massive subsidy, Canada ceases to exist as a viable
Country. Harsh but true! Therefore, Canada should become our Cherished
51st State. Much lower taxes, and far better military protection for the
people of Canada — AND NO TARIFFS!

That all begs the question: What’s the real ‘ask’ here? Annexation? I think it’s an earlier renegotiation of USMCA but it could be something else.

I believe it’s all a bluff and there is a good graphic from Marko Papic at BCA Research.

He also ranted against the Wall Street Journal after this editorial.

Of course, it’s still early.

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