The trade war has officially begun, here’s our take on it:

1. New tariffs of 25% on Mexico, 25% on Canada, and 10% on China are now live. We must first put this into perspective

2. Mexico and Canada’s exports to the U.S. account for approximately 78% and 77% of their total annual exports, respectively

3. U.S. exports to Mexico and Canada account for approximately 16% and 17% of total U.S. annual exports, respectively

4. U.S. exports to Mexico and Canada are ~$320 billion and ~$360 billion respectively, which is less than 2.5% of U.S. GDP

5. On the other hand, these exports represent 20%–30% of Canada and Mexico’s GDP. This trade war is clearly lopsided

6. The real wildcard here is how China will respond to the additional 10% tariff. We expect higher prices for consumers soon

7. This comes at a particularly important time as DeepSeek has disrupted AI, and the U.S. is probing potential illegal chip purchases in China

8. The combination of a trade war and potential new chip bans could significantly weigh on technology stocks

9. U.S. officials are being careful with their comments regarding chip bans and the DeepSeek situation for a reason

10. If these tariffs persist for more than a year, we expect U.S. economic output to decline by an average of ~2% per year through 2026

11. Unless oil prices drop by 80% to ~$15 per barrel, it is unlikely that lower energy prices will offset the effects of tariffs and existing inflation

12. Higher interest rates are here to stay through at least Q3 2025

13. President Trump’s threat to impose 100% tariffs on BRICS countries (which could include more than 30 nations) poses an even greater risk

14. The average U.S. tariff rate is set to rise to ~22% under President Trump—more than 5 times the average over the last 30 years

As an investor, you CANNOT change the market. You can only react to CHANGES in the market.

The coming volatility will be a tradable opportunity.