President Donald Trump looks set to deliver on his promise and impose hefty tariffs on Canada, Mexico, and China, with Europe next in his sights. Amid all the turbulence that's causing in financial markets, one question is obvious -- why is this such a surprise?

After all, this is what Trump promised to do since he started his campaign to retake the White House. He reiterated it after he was elected in November. He even gave specific numbers and dates for a start last week.

But traders were still skeptical that anything material would come of it. Stocks rose markedly in January, extending impressive gains since Trump's victory in November on optimism that deregulation and tax cuts would bolster corporate earnings.

The reason investors dismissed the rather obvious signs was because the tariffs don't seem to make sense. Maybe they would work as a negotiating technique to extract concessions on other things, but from an economic perspective it's hard to see what tariffs accomplish -- other than rapidly increasing prices for fuel and other goods that will hamper economic growth.

Furthermore, the actual announcement was on the extreme end of the spectrum of what was possible. George Saravelos, a strategist at Deutsche Bank, noted that the tariffs are three times larger than had been priced into the market -- and five times as big as the cumulative action Trump took in his first term.

To be sure, Trump may yet de-escalate and walk back the levies -- or be forced to do so by the courts or Congress. Given the market's early losses Monday, it would still be a huge surprise if the tariffs lasted a long time -- it certainly seems unlikely they will be in place for four years.

One thing is clear. Chaos and confusion will remain a feature of Trump's policies.

-- Brian Swint

*** Retirement might come with a gold watch or its digital successor, but it doesn't come with a crystal ball. All the more reason to prepare financially for a world of possibilities -- good, bad, and inevitably expensive in the case of medical care. Join us on Feb. 11 at noon for conversations with experts on how to secure a nest egg in a pricey market, and how to estimate retirement healthcare costs. Sign up here.

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U.S. Levies Ignite Trade War as Canada, Mexico Vow Retaliation

Canada and Mexico will retaliate against President Donald Trump's 25% tariffs on imports from the two U.S. neighbors, triggering a trade war. Canada's Prime Minister Justin Trudeau has spoken with Mexican President Claudia Sheinbaum on working together to counteract Trump, who invoked emergency powers to implement the tariffs.

   -- Trump said on Sunday that his plans, including a 10% tariff on Canadian 
      energy products and 10% on Chinese imports, will cause American consumers 
      some pain. But he said in a social media post that it would be worth the 
      price. He cited illegal immigration and illicit drugs crossing the border 
      for implementing the tariffs. 
 
   -- Eswar Prasad, a Cornell University professor of trade policy, told 
      Barron's that U.S. trade protectionism will likely affect a wide swatch 
      of America's trading partners, whether rivals or allies, and 
      significantly disrupt international commerce. 
 
   -- Lawmakers also expressed concern. Sen. Susan Collins, (R., Maine), said 
      tariffs would impose a burden on households, manufacturers, the forest 
      products industry, small businesses, and agricultural producers. Senate 
      Minority Leader Chuck Schumer (D., N.Y.) said the tariffs would cost 
      households $1,200 a year. 
 
   -- Kirsten Hillman, Canada's Ambassador to the U.S., told ABC News that the 
      tariffs would disrupt a successful trading relationship that was only 
      recently renewed by Trump during his first administration with the 
      renegotiated North American Free Trade Agreement. 

What's Next: The effective tariff rate on all goods is now 2.3%, according to JPMorgan. Boosting it could raise consumer prices by 0.3% to 0.6% and gross domestic product could take a hit of 0.4% to 1.0%.

-- Catherine Dunn and Janet H. Cho

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Consumers Brace for Tariff Effects on Food, Booze, Autos

While Canada and Mexico are more dependent on U.S. exports than the U.S. is on them, tariffs could hit certain U.S. sectors and pocketbooks hard. While the Trump administration has noted that tariffs during President Trump's first term didn't raise inflation, the backdrop was different.

   -- Canadian Prime Minister Justin Trudeau announced plans for tariffs on 
      $155 billion of U.S. goods, starting with $30 billion on Tuesday. 
      Provinces took their own steps, with British Columbia banning sales of 
      U.S. alcohol from Republican-controlled states. Nova Scotia is pulling 
      all U.S. alcohol from its stores. 
 
   -- Most immediately, Americans will see food prices rise. Mexico is the 
      source of around half of U.S. fruit and vegetable imports. More than 80% 
      of avocados in the U.S. come from Mexico, the Agriculture Department 
      says. Canada supplies food like kidney beans and cherry tomatoes. 
 
   -- Gasoline prices may rise. The average national price was $3.098 a gallon 
      on Sunday, AAA said. And auto prices could rise because tariffs mean 
      higher costs and potential supply-chain issues. About 15% of the parts in 
      a Tesla Model Y sold in the U.S. come from Mexico. 
 
   -- The developments upend the trade liberalization that has dominated for 
      decades. The tariffs will hit roughly 40% of all U.S. imports. Wall 
      Street will now have to reassess expectations on how central tariffs are 
      to Trump's policy priorities and the longer term impact on the economy 
      and markets. 

What's Next: If the tariffs stick, they could plunge the Canadian and Mexican economies into a recession later this year since the U.S. accounts for roughly one-fifth of their GDP. There also would be fallout in the U.S., said Capital Economics Chief North American economist Paul Ashworth.

-- Reshma Kapadia and Al Root

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Latest Data on Hiring, Turnover, and Unemployment This Week

A softer than expected jobs report for January could reignite talk about future Federal Reserve interest rate cuts this year. Though Fed Chair Jerome Powell said they were in no rush, signs of a weakening labor market could spur action. The Fed next meets on interest rate policy in March.

   -- Expectations are for 8.02 million job openings as of the last business 
      day of December, which would be down from November despite holiday hiring 
      season. Private payrolls are expected to reach 150,000 for January, a 
      boost from December's number. 
 
   -- The big report on January jobs is coming Friday, with expectations for a 
      165,000 increase, while the unemployment rate is expected to remain 4.1%. 
      January's report could be affected by bad weather in many areas of the 
      U.S., said Bill Adams, chief economist at Comerica Bank. 
 
   -- The administration's immigration crackdown could cause a 
      sharper-than-expected downturn in jobs growth this year, Standard 
      Chartered economists said. Oxford Economics' lead U.S. economist Nancy 
      Vanden Houten said the potential for mass deportation could lead to a 
      labor shortage, increasing pressure on wages and inflation. 

What's Next: The University of Michigan on Friday will release its preliminary Consumer Sentiment Index for February. Consensus estimate expects a 71.5 reading, up from January's reading. Consumers' year-ahead expectation for inflation was 3.3% in January, a seven-month high.

-- Janet H. Cho and Nicholas Jasinski

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Alphabet, Amazon Earnings Renew Focus on DeepSeek's AI Claims

This week's earnings reports from Alphabet and Amazon.com are expected to give investors more clarity about the companies' plans for artificial intelligence spending, after Chinese AI developer DeepSeek's claims about lower-cost, lower-energy AI capacity raised alarms about how much money American tech giants have poured into AI.

   -- Tech executives last week said they were sticking to their spending plans, 
      which run into the tens of billions of dollars, even though DeepSeek 
      claimed to train its AI model for $6 million. DeepSeek could spark a 
      value shift among tech stocks from hardware to software. 
 
   -- Alphabet reports earnings results on Tuesday, and Amazon reports on 
      Thursday. In addition to DeepSeek, analysts have questions about the 
      cloud computing business after Microsoft's disappointing report. Amazon's 
      web services cloud division drives a large percentage of its sales. 
 
   -- Alphabet is expected to report quarterly revenue of $96.7 billion and 
      earnings of $2.12, according to FactSet. It is expected to report capital 
      expenditures of $13.3 billion. Analysts will also be looking at digital 
      advertising demand for both Google and YouTube 
 
   -- Wedbush analyst Dan Ives said he was upbeat about Amazon but noted 
      uncertain costs related to its satellite ambitions and rising costs for 
      AI. Amazon is expected to report December-quarter earnings of $1.49 a 
      share, on sales of $187.3 billion. Capital spending is expected at $22.1 
      billion. 

What's Next: Barron's h as reported that analysts are skeptical about DeepSeek's claims of having replicated OpenAI's ChatGPT's AI capabilities. DeepSeek made its model open source and produced two white papers detailing its methods. AI labs are busy trying to replicate what DeepSeek did.

-- Adam Levine and Janet H. Cho

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Chinese EV Makers Post Strong January Sales Numbers

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