President-elect Donald Trump's new pledge to levy 25% tariffs on imports from Mexico and Canada, as well as an additional 10% tariff Chinese imports, is having an impact on markets from commodities to currencies and bringing quick reactions from U.S. CEOs, market strategists and traders. The following is a selection of commentary and analysis covering the equities market, retail sector, commodities, currencies, fixed income as well as geopolitics and economics.

EQUITIES & RETAIL:

Best Buy CEO Says Customers Would Largely Pay for Trump Tariffs

10:17 ET - Best Buy customers would bear most of the added costs from tariffs that President-elect Donald Trump has promised to impose on imports from China and Mexico, CEO Corie Barry says on a call. Trump recently said he would levy a 25% tariff on Canadian and Mexican goods. While Best Buy doesn't import from Canada, Mexico is its second-biggest importing country. Vendors and Best Buy would bear some costs from new tariffs, but margins in the consumer electronics industry are already very small, so "the vast majority of that tariff will probably be passed onto the consumer as a price increase," Barry says. (dean.seal@wsj.com)

Burlington Stores Sees Opportunity Amid Uncertainty of Trump Administration

10:14 ET - Burlington Stores believes any short-term uncertainty that the incoming Trump administration will pose could be a good opportunity for the off-price retailer and others. "The reason why uncertainty and disruption often work out well for off-price is that the off-price business model, when it's well-executed, is better able to handle the uncertainty and respond to whatever happens," says CEO Michael O'Sullivan on an earnings call. He notes that the administration has proposed policies that could potentially help Burlington, such as lower taxes on overtime pay that boost spending power among its core customers. But there are risks surrounding inflation rising again and the scale of tariffs, says O'Sullivan. (denny.jacob@wsj.com; @pennedbyden)

Trump's Threatened Tariffs Would Slam American Auto Demand

10:05 ET - Trump's threat of 25% tariffs on all imports from Canada and Mexico would likely stop American car demand in its tracks. Wolfe Research analyst Emmanuel Rosner says in a note that $97 billion worth of auto parts are shipped into the U.S. from the two countries, as well as 4 million finished vehicles. He says the levy would increase the average cost per vehicle in the U.S. by about $3,000. He says it may reduce light vehicle demand by 1 million units, a substantial portion of the nearly 16 million expected this year. The industry has already been bracing for a slowdown in demand for vehicles. Automaker and supplier stocks are trading lower. (ben.glickman@wsj.com; @benglickman)

Abercrombie & Fitch Has Steered Clear of China

09:49 ET - Abercrombie & Fitch isn't sweating potential steep tariffs on Chinese imports under the Trump administration. COO Scott Lipesky says on a call with analysts that the company imports about 5% to 6% of its receipts from China into the U.S. The retailer has worked since the first Trump presidency to pare down its imports from China. In 2019, the company imported about one quarter of its merchandise from China. Lipesky also notes that the company's exposure to Mexico and Canada is minor. (ben.glickman@wsj.com; @benglickman)

U.S. Utilities, Healthcare, Gold-Mining Stocks Could Perform Well Under New Tariffs

06:03 ET - U.S. sectors such as utilities, healthcare, and gold-miners are expected to perform better than other sectors under the proposed tariffs on U.S. imports, UBS Global Research analysts say in a note. Small cap stocks and cyclicals such as homebuilders, retail, and financials could perform poorly and face increased volatility, UBS says. Most U.S. indices face increased risk of underperforming due to the tariffs, the analysts say. (miriam.mukuru@wsj.com)

COMMODITIES

Grains Mostly Down as Trump Tariff Threats Mulled

09:54 ET - President-elect Trump's plans for a 25% tariff on goods from Mexico and Canada along with an additional 10% tariff on goods from China, are being met with a sense of relief by some analysts. "Now we know the tariff amount and when it's all going down--right away in January--so this 'unknown' is now 'known', and we can get back to life," says Naomi Blohm of Total Farm Marketing in a note. In a separate note, analysts with Capital Economics speculate that this announcement is designed to extract concessions from the affected nations, meaning that they can be possibly avoided. Corn is down 0.5%, while soybeans are off 0.4% and wheat is up 0.9%. (kirk.maltais@wsj.com)

Trump 2.0 Stands to Reshape Global LNG Landscape

09:35 ET - Donald Trump's return to office could reshape the global liquefied natural gas landscape and unlock long-term demand, analysts at Rystad Energy suggest. Based on campaign pledges, the returning president is expected to accelerate U.S. LNG infrastructure expansion via deregulation and faster permitting. That could support sentiment around global LNG after years of uncertainty, boosting demand, but it also carries risk, a report by Rystad says. It points to the threat of LNG oversupply, particularly if several new U.S. LNG projects move together at once. That would erode prices and disadvantage U.S. suppliers compared with competitors such as Qatar and Australia. Rystad also says Trump's history of imposing tariffs also raises concerns about the possible impact on LNG infrastructure costs and trade, which could slow LNG contracting activity with key buyers and jeopardize longer-term export growth.(robb.stewart@wsj.com; @RobbMStewart)

Trump Tariff Threat Has Implications for Energy Trade

09:10 ET - Donald Trump's threat of 25% tariffs on all goods from Mexico and Canada, and an incremental 10% tariff on China, could have "potentially significant implications for North American energy flows," Eli Rubin of EBW Analytics says in a note. Tariffs could put downward pressure on Canadian oil and gas prices and upward pressure on U.S. pricing as Canada has few other outlet options that aren't being fully used, he says. In the medium term it could slow expansion of Canadian exports to the U.S. while inviting "new direct Canada export options in the longer term." Also, the potential for retaliatory tariffs, particularly from China, could limit the attractiveness of US LNG and oil exports, he adds. (anthony.harrup@wsj.com)

GEOPOLITICS

Canada, Mexico Face Return of Trump Playbook of Tariffs for Concessions

09:29 ET - President-elect Trump's promised tariffs on Canadian and Mexican goods is an explicit return to his first-term playbook of using such measures to extract concessions on specific issues, Capital Economics' Stephen Brown says. However, the threat to enact tariffs on day one of his return to office suggests Trump is looking to act much more quickly than in his earlier term, when the first tariffs weren't imposed until a year in, Brown adds. Canada and Mexico, as well as China which also is in Trump's firing line, seem more likely to respond initially by pledging cooperation. But all three may feel obliged to retaliate if the tariffs are introduced, and other countries, including in Europe, will be wary of facing Trump's wrath, the economist says. (robb.stewart@wsj.com; @RobbMStewart)

ECONOMIC IMPACT

Trump Tariff Threat Brings Uncertainty That Dampens Confidence In Canada

09:18 ET - President-elect Donald Trump's promise to slap a 25% tax on imports from Canada and Mexico brings high uncertainty that dampens confidence and the ability to plan, invest and consume at the expense of growth, but also an opportunity in finance markets, Scotiabank's Derek Holt reckons. The prospect of tariffs remains a threat currently and not a certainty, and it may be temporary if executed, Holt adds. The economist suggests cause for calm for now as cooler heads may prevail, since U.S. businesses would be hit hard by tariffs given integrated supply chains in North America. He adds currencies of trade-dependent nations also would depreciate in response to terms of trade shocks, pushing dollar strength back on the U.S. (robb.stewart@wsj.com; @RobbMStewart)

Threat of Tariffs Suggests Less Central Bank Easing in North America

09:14 ET - If president-elect Trump's threat to impose a 25% tariff on imports from Canada and Mexico comes to fruition, the first-round effect is likely to mean less monetary easing by the Fed, Bank of Canada and Banxico on inflation fears, Scotiabank economist Derek Holt suggests. He expects central banks to turn less dovish if tariffs are implemented as the concerns dominate and the pandemic-era logic of responding to supply shocks returns in part. He predicts North American inflation will rise as tariffs are passed onto shoppers, businesses and government procurement programs, and as the Canadian and Mexican currencies weaken. That in turn could weigh on shareholders through reduced company margins. What latter effects of tariffs might be is more uncertain, he adds. (robb.stewart@wsj.com; @RobbMStewart)

Trump's Tariff Risks Are Underpriced; Canada Assets Look Most Vulnerable

07:46 ET - Financial-market assets are considerably underpricing risks associated with proposed U.S. trade tariffs and policy changes under President-elect Trump, Deutsche Bank Research's George Saravelos says in a note. Canada is the most vulnerable developed market nation to the new tariffs but is most under-priced in terms of risks, he says. The newly announced tariffs on Chinese, Mexican and Canadian goods are likely to have a considerable economic impact, says Saravelos, who is head of FX research at the German bank. "While only limited to three countries, the impact is economically large at it applies to America's three largest trading partners after the euro-area." (miriam.mukuru@wsj.com)

Trump Tariff Campaign Pledges Could Cost U.S. Consumers $2,400 a Year, ING Says

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November 26, 2024 12:54 ET (17:54 GMT)

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