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The US imports over $1.1 trillion of goods and services annually from the three countries of Canada, China, and Mexico. President Trump recently announced new tariffs for these three countries. Around 75% of Canadian and 80% of Mexican exports go into the USA, in particular vehicle and auto parts, making up a large share of both countries’ exports — for Mexico it’s a staggering $157bn. Given the level of complexity in these supply chains, few can predict what manufacturers will do, but many agree the impact will be profound.

If auto makers took action by moving production or re-routing parts sourcing, the knock-on effects may not be immediate. Many economists argue that such tariffs will add significantly to US Inflation, while others argue that consumer consumption will simply shift to domestically built products. Such a reaction could reduce competition and therefore give US companies further pricing power. Whichever prognosis you’re leaning towards, the “inflation story” of the past 4 years will remain at the forefront of investment decisions. As the chart below shows, the three affected economies have all grown their exports to the US dramatically over the past 30 years. There is no doubt: the effects of the “Trump tariffs” are going to be felt far and wide for a long time.

For important Disclosures, see: https://lnkd.in/eqfE6apz