Impact will be less than expected: Trump’s tariff threat ‘should be taken seriously but not literally’, equity strategist says

One equity strategist says that U.S. President-elect Donald Trump’s threat to impose sweeping tariffs on goods from Canada on his first day in office next month would immediately hurt American consumers and is unlikely to happen without major carveouts.

 

“The way I think of (Trump) is that he should be taken seriously but not literally,” Ian de Verteuil, equity strategist with CIBC Capital Markets, told BNN Bloomberg in a Wednesday interview.

 

“Historically, he’s quite extreme and uses a lot of rhetoric, but at the end of the day… we need to think it through in terms of what he’s trying to achieve, and let’s go back to first principles: MAGA.”

 

He said Trump’s Make America Great Again (MAGA) slogan would be tested if Trump followed through on his threat to impose a 25 per cent tariff on Mexican and Canadian goods entering the U.S. unless both countries address the incoming president’s border concerns.

 

“The concept of a 25 per cent across-the-board tariff on everything from fossil fuels to auto parts to a variety of things like that, I think would almost immediately impact the U.S. consumer negatively,” he said.

“So, I think that’s unlikely, but let’s be absolutely clear; we are predicting what a relatively mercurial incoming U.S. president will do, but our view is for sure that the impact will be less than the market currently expects.”

 

His assumption, de Verteuil noted, is that U.S. tariffs, in whatever form they end up taking, would not apply to Canadian fossil fuels of auto parts entering the U.S., as the American economy still heavily depends on those imports.

 

But companies that export discretionary items to the U.S. such as clothing maker Gildan Activewear Inc. or powersport vehicle manufacturer BRP Inc. are more likely to be at risk, he said.

 

He added that in his view, Mexico-based companies that export goods to the U.S. are more in danger of being negatively impacted by tariffs than Canadian firms, as Trump’s border concerns mainly involve the U.S.’s southern neighbour.

 

“At the end of the day, the fight isn’t with Canada, the fight is largely with Mexico and it’s with Mexico for three reasons,” de Verteuil explained.

“One is immigration coming across the border from Mexico into the U.S., second is the movement of drugs into the U.S. from Mexico, and third, there has been a massive investment by Chinese companies in Mexico under the guise that products will flow south as opposed to flowing north.”

 

He said the U.S. has “far less” of an issue with its northern border when it comes to immigration and trade, but he also acknowledged that there appears to be “some animosity” between Trump and Justin Trudeau’s Liberal government at the moment.

 

“It does appear as if there are some issues with that, but I would broadly say that Canada has been an outstanding trade partner for the U.S.,” he said.

 

“We’re not immune, but I would say the likelihood of us having major problems in 2025… is quite low.”

 

 

 

This article was first reported by BNN Bloomberg