Dear valued client,
Markets remained choppy this shorter week while investors wait for clarity on trade policy.
The Bank of Canada maintained its interest rate at 2.75% amid uncertainty over trade disputes, which could disrupt Canadian trade and economic stability. Governor Tiff Macklem noted that while a rate cut was considered, the bank opted to hold steady to gain clarity on U.S. trade policy, prioritizing inflation control. Canadian inflation figures were also released this week, coming in at 2.3% in March (compared to 2.6% in February and 1.9% in January), driven by a 1.6% decline in gas prices, a 12% drop in airfare costs due to reduced U.S. travel, according to Statistics Canada. While Canada’s counter-tariffs on U.S. goods exerted slight upward pressure on some product categories, significant declines in travel and gasoline costs offset these effects. Food and restaurant prices rose 3.2% annually, partly due to the end of a federal tax holiday. This cooling trend and economic growth risks support expectations for a potential Bank of Canada interest rate cut from 2.75% at its upcoming decision.
As for the U.S. monetary policy, Federal Reserve Chair Jerome Powell warned this week in Chicago that proposed tariffs could complicate the Fed’s dual mandate of maintaining stable prices and low unemployment. In a recent speech, Powell noted that tariffs might lead to higher inflation and increased unemployment in the short term, creating a challenging scenario for monetary policy. The Fed will assess the economy’s distance from these goals and the time needed to achieve them before deciding on interest rate adjustments, with further clarity needed before acting.
Japan and Italy are engaging in trade negotiations with the Trump administration to mitigate the impact of the proposed “reciprocal tariffs.” Japan, led by Economic Revitalization Minister Ryosei Akazawa, aims to reduce tariffs to zero, leveraging its status as a key U.S. ally and major investor despite a longstanding trade surplus that irks Trump. The 25% global tariff on cars and steel, alongside a 24% levy on Japan, threatens its economy, but talks have shown “big progress,” with further discussions planned. Meanwhile, Italian Prime Minister Giorgia Meloni, whose export-driven nation faces a 20% EU tariff, seeks to use her alignment with Trump on social issues to secure favorable terms. These talks test Trump’s deal-making approach and could shape broader US trade relations, potentially isolating China while influencing EU unity.
Trump has also temporarily exempted key tech products, including smartphones, laptops, and semiconductors, from his proposed 145% tariffs on Chinese goods, providing imminent clarity for tech companies and consumers. Announced late Friday, this decision, detailed in a US Customs list and a presidential memorandum, spares approximately $100 billion in Chinese imports from the reciprocal tariffs, though a 20% tariff on Chinese goods and a 10% blanket tariff on all U.S. imports remain. Commerce Secretary Howard Lutnick emphasized that these exemptions are not permanent, with new semiconductor tariffs expected within months, signaling that further details on the U.S.-China trade approach will soon emerge, particularly following Trump’s promised Monday update on the semiconductor industry.
Nvidia, the global leader in semiconductor production, announced plans to manufacture its AI supercomputers entirely in the U.S., marking a significant shift driven by looming tariffs on foreign-made chips. The company aims to invest up to $500 billion over four years, with production of its Blackwell chips already underway at TSMC’s Arizona plants and set to expand at Wistron and Foxconn facilities in Texas. Hailed by the White House as part of President Trump’s push for an “American manufacturing renaissance,” this move contrasts with challenges faced by companies like Apple, where reshoring is costly and hindered by a U.S. workforce less skilled in mass production. While supported by unions like the Teamsters for boosting domestic jobs, public sentiment remains mixed.
Sudan’s civil war, marking its second year, has reached a devastating milestone, with over 150,000 deaths, 13 million displaced, and reports of genocide, famine, and widespread rape as weapons of war. The conflict, pitting the Sudanese Armed Forces (SAF) led by Gen. Abdel Fattah al-Burhan against the Rapid Support Forces (RSF) under Gen. Mohamed Hamdan Dagalo, has intensified, with the RSF launching a brutal offensive in el-Fasher, Darfur, targeting refugee camps and aiming to seize the last SAF-controlled state capital. Despite SAF regaining Khartoum, foreign-backed weapons fuel the ongoing violence, and global focus on other conflicts like Ukraine and Gaza has sidelined Sudan. The UK’s recent hosting of 20 countries in London to restart peace talks underscores the urgent need for international action to address this overlooked crisis.
“Our wishes are presentiments of the abilities that lie in us, harbingers of what we will be able to accomplish.” – Goethe
Have a great weekend,
PW
