US Tariffs on Canada, Mexico, and China Spark Commodities Market Volatility
President Trump has implemented tariffs of 25% on Canada and Mexico and 10% on China, citing the need to curb illegal immigration and drug trafficking. In response, Canada and Mexico have pledged retaliatory actions, while China has announced plans to challenge the tariffs at the WTO and implement countermeasures.
Market Reactions
The tariffs have triggered significant volatility in the commodities market:
Goldman Sachs:
* Canadian oil producers to bear the majority of the burden with a $3-$4/barrel discount on Canadian crude.
* US consumers of refined products may face a $2-$3/barrel increase in costs.
* Modest decline in Canadian natural gas exports to the US, with minimal impact on US gas prices.
Barclays:
* All stakeholders in the supply chain (producers, refiners, consumers) will likely share the increased costs.
* Tariffs could negatively affect oil demand and strengthen the US dollar, suggesting a narrower Brent-WTI spread.
Citi:
* Tariffs bullish for gold ($3,000/oz), silver ($36/oz) in 6-12 months.
* Bearish for copper ($8,500/ton) in the next three months.
JP Morgan:
* Negative outlook for base metals in the short term.
* Copper prices at risk of falling towards $8,500/mt.
* Industrial sentiment and automotive sector concerns could create a greater divergence between gold and other precious metals in the near term.
RBC Capital Markets:
* Tariffs unlikely to reduce US gas prices.
* Potential for slightly higher gas prices in the near and medium term.
* Tariffs on broader goods would increase the cost of gold in the US.