I’m getting a lot of questions and seeing a lot of discussion about why President Trump is about to enact 25% tariffs on Mexico and Canada early next week. Government officials from both countries say that at this point, they aren’t completely sure what they’d need to do to be in compliance with the wishes of the White House. That may actually be true.
Public comments out of the White House have been asking for more help securing the border and a reduction in the amount of fentanyl crossing into the US. These are reasonable requests, but if Canadian and Mexican officials don’t know specifically what kind of cooperation President Trump wants, they will be unable to comply. I think it’s likely there’s another issue which is significant, but not being discussed.
During President Trump’s first term, he enacted steep tariffs on imports from China. China evaded a lot of those tariffs by shipping through Mexico, Canada, and one particular Asian country. (Regular DKI readers will understand which country that is and why I’m not naming it.) I think Trump is trying to close that loophole and make it more cost efficient for China to just pay the tariff than to try to evade it. I’m making an inference, not reporting on something I “know”.
The US equity markets traded “risk-off” on Friday afternoon when it became apparent that tariff implementation was likely. As usual, when the stock market trades risk-off, Bitcoin falls as well. As of this writing, it’s fallen back below the $100k mark, something that has happened many times in recent weeks. The DKI portfolio is heavily hedged, and I’m not selling Bitcoin based on a trade and tariff spat. My Bitcoin thesis is based on continued debasement of fiat currencies and increased institutional adoption. That’s a long-term thesis, and none of the weekend news changes that.
As always, these kinds of situations change quickly. I’ll continue monitoring and keep you updated when I think there’s something relevant to the portfolio.
For those of you with questions and opinions, you are always welcome to reach me at IR@DeepKnowledgeInvesting.com
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