CIBC issues warning: US trade trust collapsing, stock market in peril
1min read According to analysts at the Canadian Imperial Bank of Commerce, trade risks will dominate financial markets in the coming weeks as the implementation date of tariffs set by the Trump administration approaches.
Strategists Ian de Verteuil and Will Stevenson said in a note to investors that the stock market is "highly vulnerable" to a pullback, "even though US economic data remains robust and deregulation efforts have had a positive impact, the significant uncertainty facing US businesses merits caution."
President Trump signed an order last month to impose 25% tariffs on most Canadian and Mexican goods, with lower tariffs of 10% on Canadian energy products. The tariffs will take effect at 12:01 a.m. ET on Tuesday, unless the White House decides to delay again.
The US government also plans to impose 25% tariffs on imported foreign steel and aluminium on March 12, and Mr Trump has also mentioned tariffs on cars, copper, lumber and other goods.
"The rhetoric emanating from Mar-a-Lago, and the willingness to ignore existing, previously negotiated trade deals, casts a shadow over all international trade relationships between the US and its allies," De Verteuil and Stevenson wrote.
"The reality is that the days of allies trusting the US to honour trade deals may be over," they added, with existing deals such as the US-Mexico-Canada agreement, which Mr Trump signed in 2020, "dead in the water".
Mr Trump and his officials have given a variety of reasons for their tariff plans — including creating leverage to force Mexico and Canada to strengthen border security, reducing the size of the US trade deficit and increasing revenue to help pay for tax cuts.
CIBC analysts said they believed the tariffs were coming, "but the pace and variety of threats almost daily has exceeded our expectations. This uncertainty poses a significant risk to the stock market and the broader economy."
The S&P 500 has risen nearly 3 per cent since Mr Trump’s election.
Mr Trump also said he planned to impose “reciprocal tariffs” on trading partners as early as April, based on the tariffs and other barriers those countries impose on US products. CIBC analysts called the idea “quite silly”, saying the complexity of international trade may make reciprocal tariffs difficult to implement.