San José, CA – On Monday, March 10, U.S. stock markets fell. The S&P 500, which includes 500 of the largest U.S. corporations, dropped 2.7% for the worst trading day of the new Trump administration. The NASDAQ, which is over-weighted in technology stocks, fell even more, dropping 4% as high-flying technology stocks continued their descent to earth. Both the broader market and the technology sector were led down by a 15% drop in Tesla share prices, bringing that stock down about 50% from its high just months ago.

Behind the drop in the stock markets was the growing realization of the economic costs of Trump’s trade wars and the growing possibility of a recession. The worry is that Trump’s tariffs will lift import prices, causing inflation to go up and production to go down because of higher costs. This so-called “supply-shock” would be a (hopefully) milder version of the COVID-19 pandemic impact in 2020.

On Monday, the Canadian province of Ontario imposed a 25% surcharge on the electricity it exports to the United States in response to Trump’s tariffs. About 1.5 million households and businesses in the states of Michigan, Minnesota and New York use Canadian electricity. The Premier of Ontario also said that they could shut off electricity exports altogether if Trump escalated his trade war on Canada.

The same day, China’s previously announced response to Trump’s tariffs also went into effect. It consisted of 15% tariffs on chicken, wheat and corn and 10% tariffs on soybeans, pork, beer and fruit. China also limited purchases of Chinese goods by 15 U.S. companies and banned ten from doing business in China. These agricultural tariffs are both an attempt to hit back at U.S. farmers, which is one of Trump’s bases of support, and reflect the progress China has made in applying technology including AI, global positioning (what we call GPS, but China has its own system by Baidu), and drones to agriculture.

Further, Trump’s 25% tariffs on aluminum and steel for all countries are scheduled to go into effect on Wednesday. The tariffs on aluminum will hit Canada the hardest, as they are the single largest country exporting aluminum to the United States. In fact, Canada’s exports are about the same as total U.S. production of aluminum. While steel imports are only less than a quarter of total U.S. steel consumption, Canada is still the largest exporter of steel to the United States, with Mexico as number two.

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