 Welcome to Mind Your Business ! Consider this your weekly guide to understanding what’s happening in the worlds of economics, business and finance. By Peter Armstrong
|  | Donald Trump unveiled his sweeping global tariffs at the White House last week. (Mark Schiefelbein/Associated Press) | | | The hard part about conflict is finding an exit ramp once it starts. It's as true for schoolyard fist fights as it is for global trade wars.
As the global order the world spent 70 years building up started to unravel last week, I found myself wondering what the path to de-escalation will look like.
Stephen Gordon, an economics professor at (my old alma mater) Université Laval, posted a really smart thread on how trade wars end.
"Every action in a trade war directly penalises your own side (your tariffs increase your costs/prices) and indirectly penalises the other side (foreign tariffs reduce the demand for your exports)," he wrote on X.
Eventually, he says, one side decides that the benefits of inflicting pain on the other side don't justify the costs of the pain you're inflicting on yourself.
"So trade wars are a war of attrition: the winner is the side that can sustain the pain the longest," wrote Gordon.
And the pain is already abundantly clear. Markets have tanked, while layoffs in both Canada and the United States have been announced.
And price growth is coming for us all. | | |  | | | | | Last week, the U.S. jobs numbers came in well above expectations. That's a sign that the economy was in good shape before Trump's tariffs, and a rebuke of the president's claim that markets are selling off because of the previous administration.
"Well, I mean, it is to be expected, this is a patient that was very sick. We inherited a terrible economy," Trump said on Air Force One on Thursday.
On Friday, Jerome Powell, chair of the U.S. central bank, the Federal Reserve, confirmed the data last month showed the American economy was still in good shape.
But he sees the impact of tariffs like everyone else.
"It is now becoming clear that the tariff increases will be significantly larger than expected," said Powell.
And here's the real concern: the trade war is just days old. Only the very first salvos have been fired. No one knows what happens next.
Tariffs are bad for both stock markets and the real economy.
And it's not just investors that are worried. Businesses, consumers and policymakers alike say they expect things to get worse. |  | | | So, to return to my starting point: how does this end?
More to the point, who blinks first?
Canada is not the only country struggling to understand what it needs to do to bring down tariffs.
The new American tariff rates aren't calculated based on actual trade barriers — they are a strange formula using the trade deficit. Even countries that tried to bring down their own tariffs were hit by Trump's trade action.
Colleague Andrew Chang and the team at About That did a great job of breaking down precisely what that formula is and how it works. Click here to see that.
So there's a clear disconnect between what happened and what needs to happen to end the trade wars.
In that case, I come back to Stephen Gordon's assertion that eventually one side will decide the pain it's inflicting on itself is no longer worth it.
So far, the side inflicting the most pain on itself is the U.S., and if stocks continue to sell, inflation starts to pick up and the "hard data" starts to catch up to the "soft data," it will be hard to sustain.
(Hard data is the actual statistics measuring the economy; soft data is sentiment surveys and expectations.)
But guessing what Donald Trump may do or not do is a fool's errand.
What do you think will happen?
Follow our coverage at cbc.ca/news.
As ever, I'm trying to grow the newsletter, so share this email with friends or click on the share button below.
Someone wrote to say it wasn't working for them. So if you want to send someone a link to sign up, click here or copy/paste this:
https://subscriptions.cbc.ca/listmanagement/forms/mindyourbusiness | | | Share this newsletter | | or subscribe if this was
forwarded to you. | | |  | | Two key surveys from the Bank of Canada will be released on Monday. The Survey of Consumer Expectations and the Business Outlook Survey help shape the central bank's view of the economy. | | | | | | U.S. inflation numbers will be released on Thursday. The release will capture price growth in March. But that won't show any impact from tariffs. Canada's numbers will be unveiled next week. | | | | | | On Friday, we'll get the University of Michigan Consumer Sentiment Index. The survey is a crucial measure of American consumer confidence. | | | | | Three things to read, watch and listen to this week | | |  | Hollywood won't get hit by tariffs, but could be clobbered by an ensuing downturn. (betto rodrigues/Shutterstock) | | | 1. Hollywood's tariff blow | | | I've been thinking about this piece in Variety magazine for a while.
I think it's a good example of the risks that come with a trade war. Even the industries that won't feel a direct impact of tariffs have plenty to be worried about.
"The knock-on effects — namely, depressed U.S. consumer spending and a pullback in ad budgets — would clearly cut into Hollywood’s profits, according to analysts," wrote Todd Spangler in Variety.
In a downturn, companies will look for ways to cut costs. But analysts say that can backfire.
“What we’ve seen from our research is companies that don’t cut marketing in a downturn do much better than those that do,” C.J. Bangah, principal in PwC’s telecom, media and technology practice, told Variety.
The piece speaks to at least part of the reason so many sectors that aren't really exposed to international trade are so worried about the road ahead.
Spangler quotes a research note from Morningstar senior equity analyst Matthew Dolgin.
"[Most companies in the sector] don’t rely much or at all on selling goods. However, most do rely directly on consumer spending, so economic weakness that results from the tariffs could impede business," he wrote.
And that's how a trade war over manufacturing can clobber a much broader swath of the economy. That's why so many companies' stock was hit in the selloffs last week.
Read Variety's piece about the tariff risk for Hollywood here. | | | 2. America's Brexit moment? | | | One of the only good things about a crisis like this is that really good writers emerge from the sea of hot takes.
One of the best writers about things economic/financial is Luke Kawa. He's a Canadian who used to work with Bloomberg. He's now with Sherwood News (which makes the amazing Chartr newsletter I often write about in this section).
Kawa and Matt Phillips had a piece last week asking if the U.S. dollar is having its "Brexit moment."
"Not long ago, the widely held view on Wall Street was that President Trump’s plan for tariffs could potentially supercharge the strength of the dollar," he writes.
The assumption made sense. After all, the U.S. economy was the world's strongest. Strong economies generally lead to strong currencies.
But they quoted an analyst warning that a confidence crisis may be brewing.
"Developments since the start of the year make us worried about a broader undermining of confidence in the U.S. economic outlook and the medium-term desirability of dollar allocations," wrote Deutsche Bank head of currency strategy George Saravelos.
Why such a turnaround? Tariffs.
"[Tariffs] are going to be even more of a shock for the U.S. economy than they will be for our trading partners. Think of this as America’s version of Brexit: a self-imposed supply shock that serves to make the nation poorer," wrote Kawa and Phillips.
He says it would have been one thing if the U.S. had launched a targeted trade war against a specific group of nations — that would have hurt them and shielded the American economy.
The falling dollar will only exacerbate an already bad situation.
"The lower dollar reflects lower U.S. purchasing power at the same time tariffs are raising the cost of importing goods. That’s an ugly combination for consumers, and makes the outlook for spending unambiguously worse than it was one day ago," they wrote.
The piece is typically smart and a good reminder to sign up for Sherwood's newsletters.
Read Kawa and Phillips's piece on America's Brexit moment here. | | | 3. Why McKinley abandoned his own tariffs | | | I love this little history lesson on tariffs from the Wall Street Journal.
The journal’s senior video journalist Madeline Marshall explores Donald Trump’s obsession with former U.S. president William McKinley and how McKinley went from being the “tariff king” to abandoning them.
“McKinley's story really starts around here in the 1880s, when the U.S. collected about half its revenue from tariffs — too much revenue, actually,” she says.
Back then, the U.S. was a largely agrarian economy. It was using tariffs to collect revenue and protect American farmers from foreign competition.
But those tariffs were actually too successful.
“The U.S. had a huge surplus and had basically paid off all the Civil War debt,” says Marshall.
The government had too much money (an enviable problem, to be sure). So, a debate began in Congress focusing on what to do with the tariffs.
“If you cut the tariff rates, you're gonna encourage more imports. That's gonna generate more revenue, and it'll exacerbate the problem,” said author and historian Douglas Irwin. “So what you have to do is raise tariff rates to squeeze out imports, and then the revenue will go away.”
Back then, the chair of the House ways and means committee was a representative from the state of Ohio named William McKinley,.
He raised tariffs on imports. This boosted American industries making wool, fabrics and yarn, and tin plate.
Tin plate was used to make everything from tools to shovels to buckets. It was ubiquitous at the time.
“As McKinley put it, the point was to make the cost of foreign tin plate high enough to ensure its manufacture in this country. It worked. Tin plate prices did go up at first, because that's what happens when you raise tariffs, but so did U.S. production — it boomed. Meanwhile, tin plate imports went down,” says Marshal.
That lowered tariff revenue, which in turn lowered the surplus.
Then a recession hit in the 1890s.
Tariffs were seen by voters as a reason prices were so high. So they punished Republicans. The party lost the 1892 midterms. Even McKinley lost his seat.
He retreated to Ohio, served briefly as governor, but stomped back to Washington after winning the 1896 presidential election.
And once he was back, he started thinking about tariffs differently.
By then, manufacturing output in the U.S. was rising. American companies were selling their products all over the country, and wanted to sell more.
“They've sort of saturated the domestic market, and so we need foreign markets to sort of vent our surplus. And you're not gonna export to the world if you are a very closed, protected economy. You have to open up,” said Irwin.
So, McKinley gave a speech at the Pan American Exposition in Buffalo, N.Y. And he proposed a new way forward.
“If perchance some of our tariffs are no longer needed for revenue or to encourage and protect our industries at home. Why should they not be employed to extend and promote our markets abroad?" asked McKinley.
In other words, he said, let’s remove tariffs and negotiate trade deals all over the world.
We’ll never know what McKinley might have done if he went ahead with that plan.
“The very next day. He was shot by an anarchist and later died. Vice-president Teddy Roosevelt took office,” says Marshall.
I don't know what this may tell us about Donald Trump's tariffs or even his take on McKinley's legacy. But I learned a lot and figured you'd enjoy it, too.
Watch the Wall Street Journal video on McKinley's tariff strategy. | | | How the economy looks beyond Bay Street | | | Jobs update | | | Jobs numbers last week were the worst we've seen in years.
Canada's economy lost 33,000 jobs.
"The wheels may be starting to fall off the Canadian labour market, with a 33,000 decline in jobs during March falling well short of consensus forecasts for a 10,000 gain," wrote CIBC's Andrew Grantham.
The losses come before the impact of tariffs bites into the economy, so it's a troubling sign that any cushion we may have had is gone.
BMO's Douglas Porter wrote about how the job losses will inform the Bank of Canada's next move.
"The weak jobs data, along with the deep sag in global markets, will keep prospects of an April rate cut very much alive. We lean against a move at this point, but the situation is, shall we say, fluid," wrote Porter. | | |  | That chart comes via Brendon Bernard from the jobs search site Indeed.
He says slow hiring had made it tougher for those out of work to find a job.
He says job postings on Indeed ticked down slightly last month.
"The unemployment rate ended the first quarter at 6.7 per cent, matching where it stood in August. This rate isn’t bad by historic standards, but we're still waiting for the real hit from the trade war. With global stock markets now falling, the storm clouds on the horizon are quickly approaching," wrote Bernard.
What do you think?
I always appreciate your feedback. | | | Share this newsletter | | or subscribe if this was
forwarded to you. | | | That's it for this week | | | Drop me a line anytime.
Send ideas, comments, feedback and notes to peterarmstrong@cbc.ca.
I'm still lingering over at X, but migrating to Bluesky. Come join the conversation there.
Problems with the newsletter? Please let me know about any typos, errors or glitches.
And if you like this newsletter, share it with your friends by clicking on the link below.
Check cbc.ca/news/business throughout the day for the most recent business headlines. | | | | |  | | | On the lookout for more consumer news? The Marketplace Watchdog newsletter is your weekly look at exclusive investigations and consumer tips and tricks to help you and your wallet. Subscribe now. | | | | | |
