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Trump administration eyes tariffs on Mexico and Canada amid trade talks... Momentum is building among President Trump’s advisers to impose a 25% import tariff on goods from Mexico and Canada as early as Feb. 1, the Wall Street Journal reports. This move defies expectations in Washington and on Wall Street, where analysts had anticipated Trump might soften his stance in exchange for concessions.
The proposed tariffs are intended to pressure the two countries into negotiating on migration, drug smuggling and reforms to the U.S.-Mexico-Canada Agreement (USMCA). The strategy reflects Trump’s preference for using tariffs as a tool to secure compliance with U.S. demands, as seen in a recent, albeit reversed, threat against Colombia.
While both Canada and Mexico have made overtures to address U.S. concerns, Trump’s administration remains unsatisfied. Canadian officials have prepared a list of retaliatory measures and expressed frustration over unclear demands and limited communication. Mexico, meanwhile, has stepped up efforts to curb migration and drug trafficking but faces similar obstacles in negotiating directly with Trump’s yet-to-be-confirmed economic team.
If enacted, the tariffs could disrupt key industries, particularly the ag sector and automotive manufacturing, where supply chains depend on cross-border collaboration. Critics warn of potential economic fallout, including higher consumer prices and a possible recession in Canada.
Despite these risks, Trump’s advisers, including Commerce Secretary nominee Howard Lutnick, advocate for a “tariffs-first” approach to bring trade partners to the table.
Observers now await Feb. 1 to see whether the tariff threats materialize, potentially triggering a new trade war on the continent.
Canada to meet with others in bid to fend off U.S. tariffs... Canadian Foreign Minister Melanie Joly said on Monday she would soon be talking to counterparts in allied nations in a bid to fend off tariffs that U.S. President Donald Trump is threatening to impose. Joly said she would speak to the foreign ministers of Britain, Mexico and some members of the 27-nation European Union.
Joly, who reiterated that Canada would respond with countermeasures in case of tariffs, said she would be in Washington this week for talks with U.S. officials, including Secretary of State Marco Rubio.
Tesla, BMW join Chinese EV makers in challenging EU tariffs... Tesla and BMW have joined Chinese electric vehicle (EV) manufacturers in challenging the European Union’s (EU) tariffs on Chinese-made EVs, filing cases with the Court of Justice of the European Union (CJEU). The automakers’ lawsuits follow similar filings last week by Chinese EV manufacturers BYD, Geely, and SAIC, contesting the EU’s additional import tariffs. Under the EU tariff scheme, U.S. automaker Tesla, which manufactures vehicles in China, faces a duty of 7.8% after requesting an individual review. BMW, which also produces certain models in China, is subject to a 20.7% duty. Tariffs for Chinese manufacturers vary: 17% for BYD, 18.8% for Geely, and 35.3% for SAIC.
Trump orders review of FEMA amid concerns of political bias... President Trump issued an executive order on Sunday to establish a review council to evaluate the Federal Emergency Management Agency (FEMA). The council is tasked with holding its first meeting within 90 days and submitting a report to the president within 180 days thereafter. The order cites “serious concerns” about potential political bias at FEMA and allegations that agency funds were used to support incoming migrants. Trump has also raised the possibility of terminating FEMA, fueling speculation about the agency’s future.
World Bank president urges caution on Trump policies... World Bank President Ajay Banga advised countries to exercise patience in responding to potential actions from the Trump administration. Speaking to Reuters at the Mission 300 Africa Energy Summit, Banga emphasized the importance of understanding actual policies before reacting. “My only advice to everyone is don’t be in too much of a hurry to respond or judge,” Banga said, noting his past dealings with Trump. Describing the former president as “practical,” Banga highlighted Trump’s grasp of numbers, leverage and advantage, urging leaders to approach him with clear explanations of their contributions. Banga also confirmed the Trump administration’s foreign assistance freeze has “not yet” impacted World Bank operations.
Fed policy and political influence: A critique by Malanga... Dr. Vince Malanga, president of LaSalle Economics, criticizes the Federal Reserve’s claims of being non-political, pointing to recent actions that suggest otherwise. He highlights:
- Federal Reserve actions in election season: Despite previously avoiding fiscal commentary, the Fed cut rates three times in late 2024 during the election period. It shifted its stance, citing political factors like Trump-era tax cuts, deregulation and tariffs.
- Potential chairmanship politics: Fed Governor Christopher Waller, a known hawk, has signaled more rate cuts in 2025, potentially positioning himself for the Chair role as the current term for Jerome Powell ends in May 2026.
- Inflation and energy prices: Malanga aligns with Waller’s view that inflation may resume its downtrend by spring 2025, driven by energy price weakness. However, he warns that weather disruptions and geopolitical factors could influence outcomes.
- Bond market and fiscal challenges: Long-term interest rates, Malanga argues, hinge less on monetary policy and more on expectations of unchecked deficits and debt. He suggests that fiscal reforms, like controlling government spending, are critical to stabilizing the bond market.
- Risks of fiscal drag: Malanga warns that while reforms may address excessive spending, they risk economic slowdown, especially given the affordability crisis in housing and construction. He urges the Fed to prioritize liquidity to counter potential fiscal drag but expresses concern that political distractions may delay necessary actions.
U.S. reports first outbreak of H5N9 in poultry... The U.S. reported its first outbreak of the H5N9 strain of highly pathogenic avian influenza in poultry on a duck farm in California, the World Organization for Animal Health (WOAH) said. U.S. authorities also detected the more common H5N1 strain on the same farm in Merced County, California.