Tariff Warning on March 1, 2025

The one-month reprieve from U.S. President Trump’s tariffs on Mexico and Canada is nearing an end. Despite Mexico committing 10,000 troops to prevent illegal immigrant crossing, the President repeated yesterday that the tariffs are ‘on time.’Tariffs will harm exporting nations more than the country that imports more. Still, Americans will face higher import prices once Canada and Mexico retaliate. Furthermore, relations between Canada and the U.S. worsened since tariff threats started. Canadians cut back on buying American goods, reduced their travel, or canceled trips to states like Florida. This could hurt airline stocks like American Airlines (AAL). AAL stock peaked in January at around $19.00 and closed at $15.31. Beware of United Airlines (UAL) and Southwest Airlines (LUV) underperforming as well.The automobile sector will likely sink lower in the month ahead if tariffs proceed. Ford Motor (F), General Motors (GM), and Stellantis (STLA) risk trading at multi-year lows. Japanese auto firms like Toyota (TM) and Honda (HMC) are diversified away from North American markets but will still face higher costs. Auto parts move back and forth among the countries in USMCA.After the Canadian dollar (FXC) plunged below $68, it rallied back to $69. Markets thought that tariff risks dissipated but were wrong. In addition, the USD-CAD could fall below $0.67, taking the FXC ETF to new decade lows.