I'm sure you've been seeing these stats, but I’ll mention them here just in case. In 2024, the US imported about $413 billion worth of goods from Canada, $505 billion from Mexico, and $440 billion from China, including iPhones. I'm hopeful, as we all are, that these Canadian and Mexico tariffs are quickly removed in some sort of announced “deal,” observes Peter Boockvar, editor of The Boock Report.
Why? From what I've seen so far, in terms of retaliation against the US, it looks like the American farmer has been specifically targeted again with tariffs on US soybeans, sorghum, pork, beef, chicken, wheat, corn, and cotton by China.
US farmers, by the way, also import about 85% of their potash needs from Canada. That just got 25% more expensive. They were also targeted in the Trump 1.0 tariffs in 2018 and 2019, which led to a financial package being given to them.
As the US consumer still has PTSD from the 2022 inflation spike, even-higher food prices are going to come quickly as they are VERY short-cycle items. In three weeks, Canadian tariffs will come on its imports of US cars, trucks, steel, and aluminum.
Real 10-Year TIPS Yield Pointing to Stagflation Beliefs
The recent interest rate drop across the yield curve is, I believe, a stagflationary response to the tariffs and the expected slowing growth. And with regards to the Federal Reserve and the roughly 2.5 25-basis point rate cuts now priced in this year, how can they have any confidence on anything?
Imagine if they start cutting, but then tariffs are taken off right after? What happens if they start cutting as the tariffs stay on and the dollar weakens in response? And no longer becomes a mitigating factor for US importers?
What happens if the Fed does nothing and economic growth continues to weaken? Will we just see a repeat of 2019, when they started cutting rates because inflation was then tame? Jay Powell, I'm sure May 2026 can't come soon enough for you.
