3 min de lectureTrade tariffs prompt global growth scare
Late on February 1, President Trump signed three executive orders imposing new tariffs on Canada, Mexico, and China. The measures include a 25% tariff on imports from Canada and Mexico and a 10% tariff on Chinese goods. Notably, Canadian energy products, vital for U.S. crude oil imports, are also affected, albeit at a lower 10% rate.
This decision marks a significant departure from established trade norms, directly violating agreements such as the United States-Mexico-Canada Agreement (USMCA) and World Trade Organization (WTO) rules. The move underscores the administration’s aggressive stance on trade policy, effectively unraveling long-standing frameworks in pursuit of domestic economic gains.
However, the simultaneous targeting of three of the U.S.’s largest trading partners—with a fourth likely to follow—raises the stakes considerably. Should Mexico, Canada, and China follow through on their promised retaliatory measures, global trade tensions could escalate to unprecedented levels. From an economic standpoint, such a scenario is a lose-lose proposition for all parties involved.
Despite not being entirely unexpected, the tariffs have triggered a global growth scare, prompting risk-off sentiment across markets. While Trump’s tariff rhetoric is often a strategic opening gambit for better trade terms, the prospect of a full-scale trade conflict remains a major concern.
Bitcoin, which trades 24/7, has already reflected these fears over the weekend, and equities have followed suit. The reaction is unsurprising—heightened trade tensions could fuel inflationary pressures, but of the wrong kind.
The combination of tariff-induced inflation and mounting immigration pressures could push overall inflation higher—but not from economic expansion. Instead, the increase would stem from rising costs of imported goods and forced wage hikes due to labor shortages. This stagflationary environment would place central banks in a precarious position, limiting their ability to stimulate growth effectively.
Strategic Bitcoin reserve: lack of details
As a result of stagflationary fears, investors are likely to seek refuge in alternative stores of value, such as gold and Bitcoin, mirroring historical patterns observed during periods of macroeconomic distress.
Markets had high expectations for David Sacks, President Trump’s Crypto Czar, who held a press conference addressing crypto policy. However, the event largely consisted of self-congratulatory remarks, with little substantive information regarding the Strategic Bitcoin Reserve (SBR).
When pressed by journalists, Sacks confirmed that discussions are ongoing regarding the establishment of an SBR. Despite this, markets reacted negatively, likely due to the lack of concrete details. However, in our view, this reaction was overdone, as the event was not the appropriate forum for an in-depth policy announcement.
Labor Market & Inflation Outlook
Job Openings
Data from Indeed shows a decline in job openings over the past three months, suggesting that the September-to-November surge in the JOLTS measure is now unwinding.
Payrolls
January’s nonfarm payroll gains at 143k were well below the 175k estimate. Heavy snowfall and colder-than-usual temperatures likely dampened employment growth in the construction sector being the likely cause. In the same release, average hourly earnings were well above expectations at 4.1% year-on-year stoking stagflationary fears.
CPI & Inflation Risks
Next week’s CPI print may surprise to the upside, driven by:
Front-running of purchases (e.g., increased demand in sectors like auto manufacturing—BMW as an example).
Rising labor costs, which could further pressure inflation expectations.
The combination of tariffs, labor shortages, and supply-chain constraints reinforces the case for inflationary pressures remaining persistent, adding complexity to central bank policy decisions in the months ahead.
