Tariffs Loom as Uncertainty Weighs on Businesses
A self-imposed February 1 deadline by President Trump for tariffs on Canada, Mexico, and China approaches, leaving economic observers and world leaders grappling with uncertainty.
Trump's recent comments and those of his commerce secretary nominee have provided little clarity. Kevin Gordon of Charles Schwab warns that uncertainty could already hinder business decisions, citing the impact of a brief trade war with Colombia last weekend.
President Trump's previous trade confrontations in 2018 and 2019 also led to a slowdown in business spending.
Leaders in Canada and Mexico express confusion and frustration, as Trump threatens 25% tariffs over migration and fentanyl issues. China could also face 10% duties.
The Trump administration's statements have been closely scrutinized, with conflicting signals. Commerce secretary nominee Howard Lutnick initially endorsed broad-based tariffs but later acknowledged a potential "off-ramp" if Mexico addresses migration and drug issues.
Treasury Secretary Scott Bessent's reported plan for gradual tariff increases was dismissed by Trump.
The lack of clarity has left many in "wait-and-see mode," including Fed Chairman Jerome Powell and Mexican President Claudia Sheinbaum.
Economists suggest that full-scale tariffs could push Canada and Mexico into recession. Deutsche Bank's Matthew Luzzetti anticipates a dampening of growth and inflationary pressures in the U.S. economy.
Wolfe Research's Tobin Marcus emphasizes the potential duration of tariffs, particularly in the case of Canada and Mexico. He believes that Trump is less likely to tolerate prolonged economic pain in these negotiations. However, he remains uncertain about the exact outcome this weekend.