Morning Market Brief February 5, 2025

Attention turns to US-China trade relations

Late on Monday, Canadian Prime Minister Justin Trudeau came to an agreement with US President Donald Trump to delay the tariffs announced on February 1 for 30 days. This followed an announcement earlier in the day that tariffs on Mexico would be delayed. One of the key issues for the US was tightening security at both borders. Both nations stepped up efforts to do so while agreeing to continue to negotiate to avoid tariffs altogether. The US also announced a 10% tariff on China, which took effect yesterday. China’s government responded by placing tariffs on several goods from the US.

• China has retaliated with a tariff on US$14 billion worth of American goods. China has taken a more tactical approach, rather than a blanket tariff on everything. This comes at a time when China’s economy is struggling under lacklustre domestic demand and a troubled property market.
• China will put a 10% tariff on agricultural machinery and crude oil, among other products, from the US. There will be a 15% tariff on liquefied natural gas products.
• These measures are set to take effect on February 10. Both leaders are set to speak and will likely try to resolve any issues before next Monday.
• President Trump wants more balanced trade between the two countries, a sale of TikTok and China’s help to resolve Russia-Ukraine tensions.
• China also announced an antitrust investigation of Google. Chinese smartphone makers have often complained about Google’s business practices.

North American trade conflicts eased on Monday, but the trade conflict between the US and China intensified yesterday. A trade conflict between two economic powerhouses has the potential to significantly impact global growth. In Canada, the crisis was averted on Monday, but there will be plenty for the government to do to secure a deal with the US to avoid tariffs in March.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.