The lie is the narrative that what's happening with the tariffs is new. It is not and we only need to refer to the 1930s, 90 years ago to understand.
So what will happen then?
In some, relatively few sectors, tariffs are indeed inflationary because there is no replacement, the goods are essential and the added costs are therefore passed on to the price, i.e. generating inflation. But this is not the case overall. In most cases, thanks to competition, the exporters are obliged to absorb the costs for a while, otherwise they lose their market share as explained here for Japanese automakers:
Japanese Automakers Losing $20 Million Per Day To U.S. Tariffs
Or worse as eventually in the example below, if the tariffs are too high which is the case for Canadian exporters, they may be completely evicted from the market:
Canadian Steel CEO Warns: U.S. Tariffs Could Lock Us Out Completely
But this period cannot last very long. Soon enough, lower demand will generate a recession. Mildly in the US, the initiator of the tariffs thanks to higher prices, but much more harshly for commercial partners which are hammered by extra competition killing off domestic producers.
This is not sustainable, as the recession quickly morph into a depression when jobs starts being lost by the millions thanks to extra capacity being redirected to the few "still open" markets. Within months, not years, all the former commercial partners of the US will have to take retaliatory measures to protect their markets AND devalue their currencies to stay competitive.
In such an environment, "free" trade cannot last a year. All the countries without exception will need to close their markets and do the same as the US. A phenomenon which is as predictable as it will accelerate thanks to the coming recession which could quickly transform into a depression as prices are hammered.
Thankfully, we know one solution to this problem; Printing money with abandon! Since this is what almost every country has been doing for the last few years, the habit will not be hard to kick in. Except that this time will not be different and most currencies will accelerate their fall relative to each other in what is called; competitive devaluation, justifying more tariffs.
What could be different this time is that countries like China, Russia, India and Brazil, the BRICS will be less affected since their markets are larger and reliance on exports consequently lower.
Conversely, former US "friends" in Europe, America (Mexico and Canada) and Asia (mostly Japan and Korea) will be severely hammered and should be in a deep recession by early 2026. (Of which we will see little at first since the Nikkei for example will skyrocket from 40,000 to 100,000. No country will repeat the mistake of the 1930s of reducing the money supply in the midst of a recession!)
But all this will be to no avail, the recession will bite, the masses will become restless and incompetent governments will take mostly ineffective measures to mitigate the crisis.
It could have been different but for that to happen we should have chosen a more difficult path earlier. And what wasn't possible when it was easy will most certainly prove impossible when harder.
This is of course the best case scenario. It could also go very wrong quickly. Nobody is ready for war, but then again neither was the US or Russia in 1940. All this raises the ante further for the meeting in Alaska...
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Canadian steelmakers may need to overhaul their operations as steep U.S. tariffs threaten to block access to their largest export market, says Algoma Steel Inc. chief executive Michael Garcia. He made the comments to Financial Post last week.
“We’ll have little to no business in the U.S. if the 50 per cent tariff continues,” Garcia told the Financial Post’s Larysa Harapyn. “Once the full effect of (the tariffs) plays out, it will effectively lock out Algoma and frankly other Canadian steel producers from the U.S. market.”
Algoma, based in Sault Ste. Marie, Ont., is Canada’s only plate steel producer. While it still has contractual obligations in the United States, Garcia said those will wind down within the year if the tariff remains. “There really are no practical foreign markets for Canadian steel other than the U.S. market,” he said.
The company has asked Ottawa for a $500-million enterprise tariff loan facility, not due to immediate liquidity concerns, but to safeguard operations as it adjusts to the loss of U.S. sales and navigates an uncertain Canadian market.
Financial Post writes that if U.S. access remains blocked, Garcia said producers will have to pivot to the domestic market, which in recent years has been supplied about two-thirds by foreign steel. “Much of that steel is unfairly traded and dumped into the Canadian market,” he said. “That’s accelerated now that the U.S. has 50 per cent tariffs on all foreign steel coming into the U.S.”
Algoma sees potential in infrastructure and defence projects under Prime Minister Mark Carney’s nation-building agenda, but Garcia noted that significant demand from those projects has yet to materialize. “Our challenge is to bridge the company into the future,” he said. “Make sure we’re making the right type of products, that are demanded by Canadian customers, and be there when that demand appears.”
Meeting domestic needs would require investment and time, Garcia said, with steelmakers shifting away from coil production and toward products such as plates for shipbuilding, energy, and defence. “There has to be an environment where Canadian steelmakers are making the … type of steel that is consumed in Canada and have a free-trade environment to win that business.”
Algoma has already signed agreements with shipbuilders, including B.C.-based Seaspan, and is positioning itself to supply marine plates if domestic shipbuilding expands. Garcia said the company has a history in the sector and is ready to rejoin the supply chain if projects are awarded and dormant shipyards return to activity.
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