Canada Preparing for Potential Trade Challenges Following Trump’s Tariff Threat

News/Markets/Policy Updates: Jan. 7, 2025

Some other topics in today’s dispatch: (1) Trump vows to reverse Biden’s offshore drilling ban; (2) China’s central bank buys more gold; (3) Barr resigns as Fed Vice Chair for Supervision; (4) Indonesia joins BRICS; (5) USDA boosts specialty crop support; (6) Trump to meet Senate Republicans amid policy strategy debate; (7) FDA finalizes guidance on animal food ingredients; (8) FDA issues draft guidance on labeling plant-based alternatives to animal-derived foods; and (9) East Coast port labor talks resume today in New Jersey.

— Justin Trudeau to resign as Canada’s prime minister amid party rebellion. As expected, Prime Minister Justin Trudeau announced his resignation after more than nine years in office, citing declining approval ratings and internal party discord. Trudeau, currently the longest-serving leader among G7 nations, plans to step down as head of the Liberal Party within months but will remain prime minister until a successor is chosen. Parliament is suspended until March 24 as the leadership transition unfolds. “Canadians deserve a real choice in the next election, and it has become obvious to me, with the internal battles, that I cannot be the one to carry the Liberal standard,” Trudeau said. The incoming Liberal leader will become Canada’s 24th prime minister but faces an uphill battle, with the Conservative Party currently favored to win the next election. Meanwhile, Mark Carney, the former governor of the Bank of Canada and Bank of England, said he’s considering entering the race to replace Justin Trudeau as Canada’s prime minister. Canada’s currency strengthened after Trudeau said he plans to resign. Bottom line: Trudeau’s resignation reflects a culmination of long-standing issues, including declining popularity, internal party dissent, and external political pressures. Conservative leader Pierre Poilievre amplified demands for Trudeau’s resignation and early elections. — Canada gears up for potential trade tensions with incoming U.S. administration. As President-elect Donald Trump’s inauguration nears, Canada is preparing for potential trade challenges following Trump’s threat of a 25% tariff on Canadian imports. The Canadian government is considering a proactive approach, including the possible early release of a retaliatory tariff list. A report from The Globe and Mail reveals that Canada might unveil a list of American goods subject to retaliatory tariffs ahead of time. This strategy was deliberated during a Canada/U.S. cabinet committee meeting on Jan. 6, 2025, though no final decision has been made. Outgoing Prime Minister Justin Trudeau and his cabinet have been holding strategic meetings, emphasizing the importance of the issue. Canadian officials, including Trudeau, have engaged with Trump’s team to mitigate tensions. Ontario Premier Doug Ford proposed restricting energy supplies to certain U.S. states as a retaliatory option. Says a Canadian contact: “This retaliatory list idea is very similar to past Canadian strategies and will likely strategically target certain states to influence reaction.” (Getty images) — Rollins’ confirmation hearing scheduled for Jan. 15; Klippenstein, Fischer part of USDA transition team. The Senate Ag Committee will hold a confirmation hearing for Brooke Rollins, President-elect Donald Trump’s nominee for USDA Secretary, on Jan. 15, according to sources cited by Politico. Rollins is expected to face a smooth process, having garnered bipartisan support, including praise from Sen. John Fetterman (D-Pa.). Meanwhile, USDA’s transition team is adding key members. Brian Klippenstein, who is leading the USDA landing team, is joined by Bart Fischer, a Texas A&M associate professor and former Republican House Ag Committee staffer, according to Politico. Other notable additions include Carrie Castille, former leader of the National Institute of Food and Agriculture under Sonny Perdue, and Carly Miller, chief of staff to Rep. Harriet Hageman (R-Wyo.). — Trump vows to reverse Biden’s offshore drilling ban. President-elect Donald Trump pledged to swiftly overturn President Joe Biden’s recent move to ban oil and gas drilling along most of the U.S. coast. In an interview with radio host Hugh Hewitt, Trump criticized the policy, which Biden announced just two weeks before leaving office, and vowed to undo it “immediately” upon taking office later this month. However, reversing the ban may require congressional action. — Some 54% of U.S. adults believe President Biden will be remembered as a “below average” or “poor” U.S. president, according to new figures from Gallup (link). — Trump revives Greenland speculation with son’s planned visit. Last month, former President Donald Trump reignited interest in U.S. control of Greenland, suggesting a renewed curiosity about acquiring the Danish territory. Following his remarks, Denmark announced initiatives to bolster its defense of the island. Yesterday, Trump added to the intrigue by revealing that his son, Donald Trump Jr., would visit Greenland, further fueling speculation about his intentions.

— Equities today: Asian and European stock indexes were mixed to firmer overnight. U.S. stock indexes are pointed toward mixed openings. In Asia, Japan +2%. Hong Kong -1.2%. China +0.7%. India +0.3%. In Europe, at midday, London -0.2%. Paris +0.7%. Frankfurt +0.4%.

Equities yesterday: U.S. stock indices opened the week mixed, with the tech heavy Nasdaq ending with solid gains while the S&P 500 posted a modest rise and the Dow down slightly. All three gave up gains late in the session which resulted in the negative finish for the Dow. The Dow was down 25.57 points, 0.06%, at 42,706.56. The Nasdaq gained 243.30 points, 1.24%, at 19,864.98. The S&P 500 rose 32.91 points, 0.55%, at 5,975.38.

— McDonald’s adjusts DEI strategy, drops set targets. McDonald’s announced it is discontinuing set diversity, equity, and inclusion (DEI) targets for employees and suppliers. While the company will no longer establish new representation goals, it plans to continue reporting diversity data and discussing inclusion with suppliers during business reviews.

The fast-food giant emphasized its commitment to inclusion, citing progress made since tying executive pay to increasing representation of women and racial minorities in leadership roles. Currently, over 30% of its U.S. leaders come from underrepresented groups, and 25% of its spending goes to diverse suppliers.

This move follows a broader trend among major corporations, including Walmart and Ford, scaling back DEI initiatives amid growing criticism from conservative activists who argue such programs create unfair advantages.

— Dollar rebounds after initial slide amid tariff speculation. The U.S. dollar regained some ground Monday after President Trump denied a Washington Post report suggesting his tariff plans would be narrower than initially promised. The Bloomberg Dollar Spot Index, which had dropped over 1% — marking its steepest intraday decline in more than a year — trimmed losses to close down 0.6%. The euro surged as much as 1.2% against the dollar, its largest gain since August, while the pound rose as much as 1%. Citigroup strategists, including Daniel Tobon, commented, “The Trump ‘bark’ on tariffs may ultimately be worse than the ‘bite,’ but we expect that bark will get louder in coming weeks.”

(Bloomberg)

— China’s central bank buys more gold amid elevated prices. China’s central bank increased its gold reserves for the second consecutive month in December, signaling a renewed interest in diversifying its holdings. The People’s Bank of China (PBOC) raised its bullion holdings to 73.29 million fine troy ounces, up from 72.96 million in November, following a six-month pause earlier in the year.

This purchase underscores the PBOC’s strategy to expand its reserves despite gold’s near-record prices, bolstered by global central bank demand and U.S. monetary easing. However, the rally slowed after Donald Trump’s U.S. election victory strengthened the dollar. Goldman Sachs recently revised its projection for gold reaching $3,000 an ounce, citing fewer expected Federal Reserve rate cuts in 2025.

— Michael S. Barr resigns as Fed Vice Chair for Supervision, paving way for regulatory shifts. Barr, an Elizabeth Warren protégé, will resign by Feb. 28, but remain a Federal Reserve Board governor until 2032. His continued service avoids immediate disruption during the transition. Barr’s resignation pre-empts a potential legal clash with the incoming Trump administration, which had been speculated to seek his removal or demotion. He cited the risk of a dispute over his role becoming a distraction and emphasized his effectiveness in serving the public from his position as governor. Trump’s presidency is expected to usher in a more lenient regulatory approach, reminiscent of his first term’s banking policies.

Impacts: The Fed will delay major rulemakings, including Basel III reforms, until a new Vice Chair for Supervision is confirmed. Meanwhile, bank stocks rose on the Barr news.

Potential successor: Governor Michelle Bowman, a critic of stricter bank regulations, is a leading candidate for the role. She has been the sole dissenting voice on the Fed Board when it comes to decisions on interest rates and bank capital rules. Bowman in November criticized what she saw as the board’s too-steep rate cut decision ahead of a presidential election, and has cautioned against heavier bank regulation, including the proposed Basel III “endgame” reforms that would raise capital requirements for the biggest U.S. lenders. Bowman is scheduled to speak on monetary policy and “lessons for banking regulation” on Thursday.

Barr is one of four Democrats on the Fed’s board. President-elect Donald Trump can appoint a new governor if an existing one leaves or their term expires, but the next time that happens is January 2026. And Trump has to nominate a new vice chair from among the current governors, the Wall Street Journal reported.

— Indonesia joins BRICS to bolster Global South cooperation. Indonesia, Southeast Asia’s largest economy, has officially joined the BRICS bloc, marking a significant step in strengthening the Global South’s influence in global decision-making. The announcement was made by Brazil, the current president of BRICS, following unanimous approval by member nations.

Indonesia’s Ministry of Foreign Affairs emphasized the country’s commitment to South-South cooperation and its dedication to fostering a “just, peaceful, and prosperous world.” The inclusion further solidifies BRICS’ position as an alternative to the U.S.-led global order, following its recent expansion to include Iran, Egypt, Ethiopia, and the UAE.

With the largest population and economy in Southeast Asia, Indonesia’s BRICS membership is expected to enhance collaboration among developing nations and open new trade and investment opportunities. Thailand and Malaysia have also expressed interest in joining the bloc.

The move comes as developing nations prepare for potential trade challenges under Donald Trump’s upcoming presidency, including protectionist policies and sanctions on dealings with Chinese firms. Indonesia’s Chamber of Commerce and Industry lauded the decision, highlighting its potential to boost the country’s global economic standing.

— Ag markets today:

• Corn and beans weaker, wheat mostly firmer early this morning. Corn and soybeans faced price pressure throughout the overnight session, while wheat rebounded from earlier weakness to trade mostly firmer. As of 7:30 a.m. ET, corn futures were trading a penny to 2 cents lower, soybeans were 6 to 8 cents lower, SRW wheat was steady to fractionally lower, HRW wheat was 2 to 3 cents higher and HRS wheat was steady to 2 cents higher. The U.S. dollar index is around 110 points lower, and front-month crude oil futures are about 60 cents higher.
• Cash cattle surge to new high. Cash cattle averaged a record $198.93 last week, up $4.12 from the previous week and the seventh straight gain. During that span, cash prices jumped more than $14.00, despite packer margins being deeply in the red.
• Cash hog downtrend accelerates. The CME lean hog index is down another $1.11 to $82.01 as of Jan. 3, marking the sixth straight daily decline and the biggest drop since August. The pork cutout fell $1.71 on Monday to $87.83, as all cuts except bellies posted sharp losses.

— Agriculture markets yesterday:
• Corn: March corn rose 7 cents to $4.57 3/4 and closed nearer the session high.
• Soy complex: March soybeans climbed 6 cents to $9.97 3/4 though settled nearer session lows. March meal futures fell $1.30 to $307.30 and settled near session lows. March bean oil rallied 40 points to 40.33 cents.
• Wheat: March SRW wheat rose 11 1/4 cents to $5.40 1/2, nearer the daily high. March HRW wheat rose 14 1/4 cents to $5.53 1/4 and nearer the session high.
• Cotton: March cotton rallied 102 points to 68.68 cents, near the session high.
• Cattle: February live cattle rose $1.15 to $195.20, near mid-range and hit a nine-month high early on. March feeder cattle rose $1.375 to $265.55 and near mid-range.
• Hogs: February lean hog futures sunk $1.125 to $79.65 and near session lows, while deferred contracts posted modest gains.

— Key questions for 2025 beef cattle market. Kenny Burdine, Extension Professor of Livestock Economics, Univ. of Kentucky, writes that as 2025 begins, cattle prices remain strong despite lingering uncertainties on the demand side. Tight cattle supplies will likely be the dominant market driver this year, with weather playing a pivotal role in feed and forage availability.

Below are four critical questions shaping the cattle market in 2025, according to Burdine writing in Southern Ag Today (link):

Will heifer retention increase significantly?
Favorable market conditions and cooperative weather could finally lead to the long-anticipated heifer retention, tightening cattle supplies further and marking the start of herd growth from historically low levels.

Can slaughter weights keep rising?
Despite tight supplies, 2024 saw steady beef production due to higher slaughter weights. Similar dynamics—high beef prices and relatively low feed costs—could persist, but it’s unclear how much further weights can increase.

Will competing meat production outpace expectations?
Lower feed prices could spur pork and poultry production, which can rapidly expand compared to cattle. Increased supplies of these meats could influence beef prices by intensifying competition in the protein market.

What impact will trade policy changes have?
Beef exports remain significant, though high prices and tight supplies have dampened volumes. Trade policies and relationships with key partners like Mexico, Canada, Japan, South Korea, and China could play a crucial role in shaping the market this year.

— USDA boosts specialty crop support with $650 million funding increase, raising MASC program total to $2.65 billion. Farm-state lawmakers welcomed USDA’s announcement of an additional $650 million for the Marketing Assistance for Specialty Crops (MASC) program, increasing total funding to $2.65 billion. Key updates include a raised payment limit of $900,000 per producer (from $125,000) and an extended application deadline to Jan. 10, 2025. The funding aims to help specialty crop producers manage costs and expand markets. The decision follows calls from the Specialty Crop Farm Bill Alliance for greater support, emphasizing the role of specialty crops, which account for nearly 30% of U.S. crop cash receipts.

— Oil rebounds toward 3-month high. WTI crude oil futures climbed above $74 per barrel on Tuesday, nearing three-month highs. Prices were bolstered by tighter supply concerns tied to Western sanctions on Russian and Iranian oil. Middle Eastern oil demand surged, evidenced by Saudi Arabia’s first price hike for Asian markets in three months. China’s Shandong Port Group banned U.S.-sanctioned vessels, potentially limiting access to key terminals. Meanwhile, colder weather in the U.S. and Europe increased heating oil demand. Gains were tempered by economic pressures, including a forecasted rise in Eurozone inflation. Brent crude oil prices are also higher, at 76.86.

— Energy markets yesterday: Oil prices dip amid mixed global signals; Brent at $76.30, WTI at $73.56. Oil prices declined on Monday as weak U.S. manufacturing data and higher German inflation weighed against a weaker dollar and increased heating demand from a winter storm. Brent crude fell 0.3% to $76.30 per barrel, and WTI dropped 0.5% to $73.56. Despite the drop, recent gains driven by China stimulus hopes keep both benchmarks overbought. Analysts warn of low demand growth amid rising U.S. and OPEC supply, with geopolitical tensions adding market uncertainty.

— First U.S. death from bird flu reported in Louisiana. A Louisiana resident over 65 with underlying health conditions has become the first confirmed fatality from bird flu (H5N1) in the United States, state health officials announced Monday (link). The patient contracted the virus after exposure to a backyard flock and wild birds. Health experts emphasize that the risk of person-to-person transmission remains low. Dr. Diego Diel of Cornell University advises avoiding contact with sick animals and wild birds.

CDC statement. The Centers for Disease Control and Prevention (CDC) said in a statement that the event, while tragic, does not change its position on the current risk posed by the virus. “CDC has carefully studied the available information about the person who died in Louisiana and continues to assess that the risk to the general public remains low,” the CDC said in a statement.

The CDC noted mutations in the virus samples from the patient, raising concerns about the virus’s potential to adapt for human transmission. These changes were not seen in viruses from the birds in the person’s backyard flock, a fact that the CDC said likely means they developed in the individual, during the course of the infection.

The virus that sickened the Louisiana patient is related to a version of bird flu recently found in wild birds and poultry in the United States and in people in British Columbia, Canada and Washington state, according to the CDC. It is different from the version of the virus associated with a widespread outbreak in dairy cows, some poultry outbreaks and a few other human cases in the United States.

The outbreak, which has also impacted wild birds and livestock, continues to pose public health challenges. Experts warn of heightened risks during the current severe flu season, particularly if individuals contract both bird flu and seasonal flu simultaneously.

The fatality follows a year in which 66 cases of H5N1 were reported in the U.S., primarily among farmworkers. Most cases have been mild, primarily affecting farmworkers exposed to sick poultry or dairy cows. Globally, about 500 deaths from the virus have been recorded in the past two decades. Since the start of 2020 through Nov. 1, 78 confirmed human cases of H5N1 had been reported globally to the World Health Organization, resulting in nine deaths.

Currently, bird flu vaccines for humans are not available to the public but are being stockpiled as a precaution. The U.S. government has asked CSL Seqirus to produce 4.8 million doses, adding to an existing stockpile. However, experts caution that if the virus mutates to spread between humans, a new vaccine would likely be needed. The CDC does not recommend immunizing farmworkers, as infections so far have been mild, according to Nirav Shah, the agency’s principal deputy director.

USDA is looking into a potential H5N1 vaccine for cows, said Eric Deeble, acting senior adviser for H5N1 response. The agency has approved several field safety trials for vaccines designed to protect cows from the bird flu.

As of Jan. 6, 917 cow herds across 16 states have tested positive for bird flu. California, the biggest U.S. milk producer, declared a state of emergency to help expedite a response as the outbreak sweeps through its dairy herds.

— Trump to meet Senate Republicans amid policy strategy debate. President-elect Trump’s meeting with Senate Republicans on Wednesday highlights the GOP’s challenge in aligning priorities as they prepare for significant policy decisions. Senate Republicans are divided over whether to package Trump’s sweeping legislative goals into one comprehensive bill or split them into two separate packages, addressing border security and tax legislation independently. Trump, while initially advocating for a single “beautiful bill,” has shown flexibility, suggesting in a recent Hugh Hewitt interview he is open to either approach.

The meeting, hosted by Sen. Shelley Moore Capito (R-W.Va.), is a standing invitation for Trump to engage with Senate GOP leadership. The timing coincides with Trump’s visit to Washington for President Jimmy Carter’s funeral.

Trump is also set to meet with House Republicans at Mar-a-Lago this week, including Freedom Caucus members and key committee chairs, as both chambers weigh their strategies.

— GOP pushes Laken Riley Act as first vote of 119th Congress. Congressional Republicans are prioritizing the Laken Riley Act as the first bill for a vote in the 119th Congress. Action in both chambers is expected this week, with the House voting today and the Senate likely taking it up Friday. The bill mandates the detention of undocumented immigrants who commit specific nonviolent crimes, such as theft. Named after Laken Riley, a nursing student murdered by an undocumented immigrant previously arrested on theft charges.

The legislation passed the House with bipartisan support in 2024 but requires a new vote in the current Congress. Sen. Jon Ossoff (D-Ga.), representing Riley’s home state and up for re-election in 2026, remains undecided but promises a thorough review. While some Senate Democrats may back the bill, including former House members Ruben Gallego (D-Ariz.) and Elissa Slotkin (D-Mich.), the legislation faces an uphill battle to secure the 60 votes needed to overcome a filibuster.

— Tyson Foods resumes operations at Georgia meat plant after deadly fire. Tyson Foods Inc. has fully resumed operations at its poultry processing plant in Camilla, Georgia, following a fire late last year that claimed one life and injured several others. The facility, employing over 1,500 workers, was restarted in phases, with full functionality achieved this week. The company, the largest meat packer in the U.S., continues to investigate the cause of the fire.

— Smithfield Foods aims for $5.38 billion valuation in U.S. IPO. Smithfield Foods Inc., the world’s largest pork producer, has filed for a U.S. initial public offering, signaling a potential resurgence in IPO market activity. Its owner, WH Group Ltd., plans to sell 20% of Smithfield’s shares, valuing the company at $5.38 billion or more. WH Group, which acquired Smithfield in 2013 for $4.7 billion, will retain control after the listing.

Smithfield reported $581 million in net income on $10.2 billion in revenue for the first nine months of 2024. The IPO, led by Morgan Stanley, Bank of America, and Goldman Sachs, will raise funds for infrastructure and capacity expansion. Smithfield plans to list on the Nasdaq under the symbol “SFD.”

— FDA finalizes guidance on animal food ingredients. The Food and Drug Administration (FDA) released its final guidance on the “Animal Food Ingredient Consultation (AFIC)” process, published in the Federal Register (link). This guidance offers an alternative pathway for industry engagement with the FDA on animal food ingredients, following the expiration of the Memorandum of Understanding (MOU) with the Association of American Feed Control Officials (AAFCO) on Oct. 1, 2024.

The AFIC process replaces elements of the AAFCO ingredient definition process and outlines how companies can consult with the FDA on new animal food ingredients. After a draft release on Aug. 9, 2024, and a 30-day comment period, FDA clarified several points, including the inclusion of proposed ingredient names in consultations and the removal of a recommendation for environmental risk statements.

As a Level 1 guidance, it reflects the FDA’s current thinking on animal food ingredient regulation.

— FDA issues draft guidance on labeling plant-based alternatives to animal-derived foods. FDA released a draft guidance titled Labeling of Plant-Based Alternatives to Animal-Derived Foods (link), providing recommendations for naming and labeling plant-based foods marketed as alternatives to animal-derived products. The guidance covers products such as plant-based alternatives to eggs, seafood, poultry, meat, and dairy (excluding plant-based milk alternatives), all under FDA jurisdiction.

The agency invites public comments on the information collection by March 10 and on the draft guidance itself by May 7. This draft guidance, initiated under the Trump administration, remains subject to finalization, with potential changes still uncertain.

— Understanding ultra-processed foods: Risks and healthier options. While diets high in ultra-processed foods have been linked to increased health risks, emerging research highlights that not all ultra-processed foods are equally harmful. Their health impact depends on their composition and role in an overall diet.

Key factors influencing health impact:

• Energy density: Many ultra-processed foods, like frozen pizzas and chips, have high calorie densities, increasing the risk of overeating and weight gain.
• Nutrient composition: These foods often combine salt, fat, sugar, and refined carbs in ways that trigger cravings.
• Ingredient lists: The presence of additives like high-fructose corn syrup or emulsifiers often defines ultra-processed foods.

Healthier ultra-processed options:

• Canned fruits and vegetables: Minimal overeating risks.
• Low-fat flavored yogurt: A lower-calorie alternative within this category.

Strategies for healthier choices:

• Read labels: Choose products with fewer additives and simpler ingredient lists.
• Calorie density awareness: Opt for foods with approximately 1 calorie per gram.
• Combine foods: Pair calorie-dense processed items with low-calorie, nutrient-rich options like salads.

Of note: Preliminary findings from the NIH and FDA suggest the way foods are processed, and their overall composition are critical to their health effects. As noted, incorporating select ultra-processed foods into a balanced diet is possible with careful choices and moderation, focusing on overall diet quality and informed decisions.

— High-stakes port negotiations resume amid automation dispute. Negotiations between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) restart today, Jan. 7, in New Jersey, after breaking down in early November. With the current contract extension expiring on Jan. 15, both sides face significant pressure to avoid a strike that could cost the U.S. economy an estimated $3.78 billion to $4.5 billion per week.

The primary dispute centers on automation at ports, with the ILA opposing it as a threat to jobs, while the USMX insists on its necessity for efficiency and competitiveness. Key stakeholders include dock workers, shipping companies, industries reliant on deliveries, and the broader U.S. economy, which could experience inflationary pressures if an agreement isn’t reached.

A group of USMX representatives met with ILA leaders on Sunday to draw up language on automation ahead of this week’s formal negotiations, CNBC reported. The resulting proposal would give the union the right to create human jobs to complement technology implemented at ILA-operated ports.

Both parties are under intense pressure to find a compromise and prevent a potentially crippling disruption to U.S. supply chains.

— Ripple effect of tariff uncertainty on the global economy. The uncertainty surrounding potential U.S. tariffs is already exerting significant pressure on the global economy, according to a Bloomberg Economics model. Even before new tariffs are implemented, this uncertainty is impacting stock markets, trade, and production.

Economic impact of tariff uncertainty

• Stock market pressure: Global stock prices are expected to decline as investors react to fears about trade tensions affecting corporate profits and economic growth.
• Trade disruption: Businesses face a challenging environment for international transactions, with hesitation stemming from the unpredictable trade landscape.
• Production slowdown: A cautious approach to investment and expansion could lead to reduced global production soon.

Broader economic context

• Trump’s tariff stance: President-elect Donald Trump has reinforced his commitment to a broad tariff policy, contradicting earlier reports of a potential scaling back, heightening market concerns.
• Historical context: Past tariffs imposed during Trump’s first term negatively impacted the U.S. economy, as noted by the Federal Reserve Bank of New York.
• Weaponizing uncertainty: Adam Posen of the Peterson Institute for International Economics describes the strategy as “weaponizing uncertainty,” potentially amplifying the economic strain.
• Global growth risks: A UBS study warns that extreme tariff scenarios, such as a 60% tariff on Chinese exports, could significantly harm global growth, particularly for China.

Bottom line: This analysis highlights how trade policy uncertainty alone can create tangible economic effects, including market volatility and cautious behavior across sectors. With potential U.S. trade policy shifts looming, the global economy is bracing for continued challenges.

— Treasury cybersecurity breach by China state-sponsored hackers sparks congressional and diplomatic tensions. The recent cybersecurity breach at the U.S. Treasury Department, attributed to Chinese state-sponsored hackers, has heightened scrutiny and spurred demands for action. Lawmakers and federal agencies are investigating the breach, which highlights a broader pattern of cyber threats targeting U.S. institutions.

Rep. Raja Krishnamoorthi (D-Ill.), the top Democrat on the House select committee on China, has requested a briefing from Treasury Secretary Janet Yellen by Jan.15, citing potential national security risks. The breach has raised alarms about the exposure of sensitive, albeit unclassified, information.

The attack targeted the Office of Foreign Assets Control (OFAC) and the Office of the Treasury Secretary, sparking fears about the compromise of sensitive economic policy and sanctions data.

The Treasury Dept. has briefed Congress and is working with the FBI, CISA, and other agencies to assess the breach’s impact. CISA is the Cybersecurity and Infrastructure Security Agency.

This breach is part of a series of China-linked cyberattacks, including:

• Telecommunications company breaches in late 2024.
• Compromises of two U.S. presidential campaigns earlier in 2024.
• Charges against seven Chinese nationals for long-term hacking activities.

The incident has exacerbated U.S./China tensions. Yellen conveyed “serious concern” during a recent meeting with China’s vice premier, adding strain to already fragile diplomatic ties.

Of note: CISA continues to monitor and investigate the breach, ensuring no other federal agencies have been affected. This event underscores the escalating cybersecurity challenges faced by the U.S., likely prompting stronger measures and influencing future policies toward China.

— U.S. blacklists China’s largest shipping line amid growing maritime concerns. The Biden administration has added China’s largest shipping line, Cosco Shipping Holdings Co., and two major shipbuilders to a Pentagon blacklist over alleged ties to the People’s Liberation Army. This move, which also includes Tencent Holdings Ltd. and Contemporary Amperex Technology Co., signals increased scrutiny of China’s dominant maritime sector.

While the blacklist imposes no direct penalties, it discourages U.S. firms from engaging with the listed companies. The announcement comes as Washington expresses alarm over China’s control of global shipbuilding — responsible for nearly 60% of worldwide orders — contrasting with the decline of the U.S. industry. Cosco’s shares dropped 4.4% in Hong Kong following the news.

— China launches safeguard investigation on beef imports. China has notified the World Trade Organization (WTO) of its safeguard investigation into beef imports, citing a “recent dramatic increase” causing “serious injury” to the domestic industry. The investigation covers a range of beef products, including carcasses, cuts with bones, and boneless varieties, whether fresh, chilled, or frozen.

The notification, submitted on Dec. 27, allows interested parties 20 days to provide comments to the Ministry of Commerce’s Trade Remedy and Investigation Bureau. Data in the filing shows imported beef made up 27.7% of China’s total beef consumption in 2023, a sharp rise from 20.55% in 2019.

The investigation is expected to last eight months, with possible extensions. While the U.S. is not a major supplier, its beef exports to China have grown significantly under the Phase One trade agreement.

— Chinese rapeseed meal futures react to Trudeau resignation plans. China’s rapeseed meal futures fell to a three-week low on Tuesday after Canadian Prime Minister Justin Trudeau’s plans to resign sparked hope that trade tensions between Beijing and Ottawa will soften. The most active rapeseed meal futures for May delivery on the Zhengzhou Commodity Exchange fell 3.14% on Tuesday to 2,284 yuan ($311) per metric ton, the weakest close since Dec. 19 and the sharpest daily decline in a month. Around 40% of Canada’s rapeseed exports typically go to China, accounting for 90% of China’s imports of the oilseed.

The Biden administration is finalizing a rule to address medical debt’s impact on individuals’ credit. Key elements include:

• Ban on medical debt in credit reports: Medical debt will no longer appear on credit reports, affecting approximately 15 million people and removing $49 billion in medical bills from their records.
• Protections for medical devices: Lenders are prohibited from using essential medical devices, like wheelchairs or prosthetics, as loan collateral. They also cannot repossess these devices if borrowers fail to repay.
• Implementation timeline: The rule, proposed in June, will take effect 60 days after its publication in the Federal Register.
• Congressional review: Congress has a limited window to potentially rescind the rule.

Bottom line: This measure, led by the Consumer Financial Protection Bureau, aims to reduce the financial burden of medical debt and its long-term consequences.

— NWS outlook: Moderate to heavy lake-effect snow downwind from the Great Lakes on Tuesday and Wednesday... ...A Developing Winter Storm will produce snow and rain/freezing rain, icing, over parts of Texas on Wednesday... ...Light snow over parts of the Great Basin, Southwest, and Central/Southern Rockies on Tuesday and over the Northern Rockies/Northern High Plains on Wednesday... ...There is a Critical Risk of fire weather over parts of Southern California on Tuesday and Wednesday, with an Extremely Critical Risk for portions of Los Angeles and Ventura counties on Wednesday.

(NWS)

8: First Social Security benefit checks of the year; cost of living adjustment is 2.5%
9: Day of Mourning for the late former President Jimmy Carter
10: Bureau of Labor Statistics December employment situation report
10: USDA Annual Summary, WASDE, Crop Production, Grain Stocks, Winter Wheat/Canola Seedings
15: BLS consumer price index report (inflation)
15: Quarterly estimated taxes due
15: Last day to enroll in a 2025 health plan via HealthCare.gov
20: Inauguration Day
20: College football national championship
24: USDA Food Price Outlook
26: AFC and NFC football championships
27: (tentative) First day IRS will begin accepting 2024 federal tax returns
28: Florida’s 1st and 6th special primaries
31: Employers and financial institutions should send out W-2 and 1099 tax forms
31: Federal Open Market Committee meets
31: USDA Cattle

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