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Implications of NAFTA meltdown etc.
March 8, 2018
9:58 am
AltaRed
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To add another wrinkle I heard yesterday, and it could make sense from a WH perspective. Put on a blanket tariff and then invite US businesses to make a case for why it should not apply to them (e.g. case exemption). For Trump, that would be a perfect answer. Protect certain US businesses, while not hurting/penalizing others. For example, for the beverage and aircraft industry, rebate the tariffs on their aluminum purchases. Same with the auto industry on steel.

But what an administrative nightmare though.... and it would still invite retaliation on a 'tit for tat' basis. The Europeans would put tariffs on certain American imports. Any exemption for Canada and Mexico would be temporary... a threat to get them to capitulate on NAFTA negotiations. It's not over until it's over, but I would agree with Gicjunkie.... Stay the course with 'business as usual'.

March 8, 2018
10:54 am
Wayno
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Loonie said
It's common knowledge that Trump has issued all kinds of threats against NAFTA and various specific imports from Canada. While his blustering may be a negotiating tactic and his understanding of economics may be sketchy, it seems likely that he will create problems for both us and his own people by erecting trade barriers. We don't know the extent of it yet, but clearly he wants something final before the mid-term elections in November.

I am trying to figure out what this will look like. I am guessing that our interest rates will go up significantly as our dollar will be considered more risky on international markets, that the purchasing power of our dollar will go down, and that inflation will go up significantly due to retaliatory import taxes here and lower value of our dollar. However, I have no expertise in this area.
Would inflation keep pace with interest rates or would one outpace the other?

What do others think will happen?
And what are you doing to prepare for it?  

What do others think will happen?
And what are you doing to prepare for it?

Since 2008, the Global economy has slowly been recovering. In the last couple of years, as part of that recovery, the central banks have carefully started to decreased the money supply/increased interest rates .. their long term aim is to normalize back to pre2008 levels to build a "buffer" for future mini recessions.

Last year, the Canadian GDP has shown good solid growth plus signs of longer term improvements in Canada, so the BOC has stepped up interest rates by 0.75%. Unfortunately, last year, the US had very significant growth, and further accelerated that growth with a 1.5 B tax cut at YE . Combined with the uncertainty of NAFTA, large investment dollars have recently moved or are currently moving to the US.
Current LOUD Trade Threats cause more uncertainty for Canada ..

What do I think will happen? - I currently won't guess ... I will wait and see!

I am sticking to my current investment strategy and pushing for higher yield on my investments because of the possibility of increased future inflation.

I would be interested in what other people are planning !

regards,
Wayno

March 8, 2018
11:23 am
Bill
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Wayno, I agree with your point that in an increasingly uncertain picture that investment money has been flowing into USA - whether correctly or not it's still perceived as the safest place for capitalism when things are looking shaky. I'd made a fair bit of money on my USA ETFs over the last few years and sold them all a few weeks ago just before the recent market drops (very uncharacteristically my timing was almost perfect). My intention was to take a breather and go back in when the market is lower but I've not been following what's been happening recently so I'm still out. (P.S. Yes, I know market timing is a bad strategy but I couldn't resists cashing out my gains, and my USA investments are only a (lose-able) portion of my wealth.)

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