February 22, 2025
Well folks, we seem to be in a downward spiral. Yesterday the Dow Jones Industrial Average when down by another 748.63 points. The volitale week took the Dow down by 1,255 points. So plain and simple, there has been a stock market sell-off this week. The 10-year Treasury yield dropped with a concern over the health of the economy. The midigating factor – the threat of more tariffs.
I’ve had concerns about the economy being affected by Trumps threats of tariffs to our neighbor to the north, Canada, and to our neighbor to the south, Mexico for quite some time in posts dating back for months. And if that weren’t enough, Trump put a tariff on China of an additional 10%, added to the 10% he put on China during his first term as president.
Prior to Trumps threats to Canada, our neighbor to the north was shipping 97% of all crude oil from production to the United States. But recently after the threat of a 20% tariff to Canada, they decided to start doing business elsewhere. Canada has just made a trade agreement with China, and now they are shipping oil to China. I might add that they have worked out a deal where there will be no tariffs between the two countries.
Last week, Canada joined the EU. That was a result of the threats made by Trump. Canada is now widely diversifying, and they are now trading substantially with Europe. This adds up to only one thing. The United States will no longer get 97% of Canada’s shipments of oil. If the U.S. is lucky, they many get 50%. So what does this mean. It means that the prices at the gas pumps will be going up soon. Prior to Trumps threats, the major exports from Canada went almost solely to the United States. Not any longer. And, I’m sure thaat Trump is proud of himself.
Things like this will have a cascade effect on our economy. If oil prices go up substantially, Trump will be forced to tap into the oil reserves within the U.S. But with possible upcoming tariffs to Canada, we can expect Trump to use the oil reserves and then there is a chance that gas prices will double. But if you ask Trump about tariffs, he will tell you that Canada will pay for them. But shortly, everyone will see first hand who has to pay for Trumps mistakes with Canada.
I actually don’t see a way to stop the downspiral of the DOW. There is a big chance that all the gains that were made during the Biden presidency will be lost in the markets in the next upcoming months and beyond, and the GDP will also fall.
I hate to be the grim reaper here, but what you are reading is the truth. Trumps actions tell a terrible story that did not have to happen. If I were reading a book and see how the cost of gasoline is going up, I would think it was just fiction. Actually, it is fact and about to become very real.
As always when I write so negatively about our economy, noone wants me to be wrong more than myself. But I’m reporting the facts here, and I see which way the markets are going.
By the way, the other major markets tanked on Friday too.
The NasdaQ composite dropped by 438 points on Friday.
The S&P 500 dropped another 104 points from Thursday.