Canada, Iran, and US affordability

Daily update

The collapse of trade talks between Canada and the US resulted in US importers being charged tariffs on a further USD 20bn of imports. Import prices (where the tariff is levied) typically represent about 40% of the end-consumer price. These tariffs will be harder than others to avoid. China seems to have helped its US customers avoid or reduce tariffs by rerouting goods—that is not economically practical for Canada.
The tariffs add to the US affordability crisis (which is as much about inflation perception as reality). Economic warfare against Canada and Iran are beyond the control of US monetary policy, but Federal Reserve Chair Warsh’s obscure communication style amplifies their damage by creating uncertainty about how the Fed will view any ensuing inflation.
A Financial Times article under US Treasury Secretary Bessent’s name promises an “economic D-day” for Iran. If the US imposes tariffs on products from Iran’s main trading partners, that would hurt US consumers of imports from China and the Middle East. Bessent is to give a press conference today—presumably to try and calm the bond market (vague promises of growing out of debt or suggesting superior knowledge are unlikely to reassure).
The data calendar today is a drought-ridden wasteland of nothing of any importance.