President Donald Trump's tariffs on Canada and other countries will backfire, and Americans will fume when their 401(k) accounts drop as a result, according to Greg Valliere, chief U.S. policy strategist at AGF Investments.
In his Monday morning newsletter, titled "Donald Trump Miscalculates," Valliere states that "an enduring theme for decades in Washington has been politicians over-playing their hands, acting without consulting, needlessly making enemies for life. It’s happened again."
On Monday morning, Trump announced that a 25% tariff on Mexican goods would be delayed until March after President Claudia Sheinbaum agreed to send 10,000 Mexican troops to the U.S. border. Later in the day, Trump agreed to pause a 25% tariff on Canadian goods for a month, while a 10% levy on Chinese imports took effect Tuesday.
Valliere also states that the "incredible intrusion into the Treasury Department’s inner operations" by Trump's Department of Government Efficiency is sure to be litigated.
Says Valliere: "It's impossible to over-state the anger in Canada, which Trump considered an easy target to intimidate with tariffs, setting an example to other countries."
Even most Republicans agree that Trump will "have to find an exit strategy by summer as rank-and-file Republicans, already worried about the next elections, tell him to cease and desist," Valliere stated.
401(k) Impact
While most Americans "don't understand arcane trade disputes," Valliere writes, "they understand when their 401(k) accounts slide — and they definitely understand when the price of food spikes in the U.S. and Canada, which seems likely."
Trump's trade war will backfire, Valliere states, noting that 80% of Democrats oppose Trump's tariffs, "and well over 50% of Republicans agree in private. At least 90% of economists agree with the conservative Wall Street Journal, which calls this the 'dumbest trade war in history.'”
"Our dear friends in Canada cannot be intimidated," Valliere states. "They are incredulous. Canadians aided California fire victims, and supported the U.S. in dozens of crises, and now they are furious."
Democrats finally have an issue, "a self-inflicted wound by Trump, leading to higher prices stemming from a dispute with one of the closest U.S. allies," according to Valliere.
The backlash, Valliere continues, "has been furious in Canada (hockey fans are booing the U.S. national anthem). Trump said this weekend that he would talk with Canadian and Mexican leaders, but the damage has been done."
The financial markets "will have to grapple with persistent uncertainty as tariff retaliation continues," Valliere states. "But this isn’t just about trade — it’s about Trump’s desire to punish countries that have disrespected him. Yes, it’s mostly about him; Canada has virtually no fentanyl problem."
Bottom line: The trade war "will produce an uproar — there’s now a very real threat of more inflation, weaker growth and a deep rift between old friends," Valliere said.
Credit: The White House via Wikimedia Commons
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