Why Trump's Tariffs Triggered A Global Sell-Off

[00:00:00]President Trump in his first term said NAFTA is a horrible agreement and he ripped it up.

[00:00:06]Instead, he built a new agreement called USMCA, this United States Mexico Canada agreement, which said that now 75% of a car has to be built in North America in order for it to not be subject to these taxes.

[00:00:24]But this USMCA agreement also had a little clause in there which said that it would be subject to renegotiation on July 1st, 2026.

[00:00:36]And yesterday, July 1st, 2026, President Trump said, "I don't like the deal anymore." and he ripped it up. The reason why he doesn't like the deal has to do with something called a trade deficit that the United States is buying more stuff from Mexico, the United States is buying more stuff from Canada, we are putting more money into their economies than they are putting into our economies, and that's why President Trump says that we would be better off without this deal.

[00:01:03]Now, there are consequences to this because remember this deal means that we are not going to be taxing their stuff.

[00:01:13]So, for all the people that are buying lumber from Canada all the businesses that are buying groceries from Mexico they were able to purchase this stuff without additional layers of tax thanks to the deal.

[00:01:26]Now that this deal no longer exists, that means you might be seeing a tax coming soon on goods that you buy from Mexico or Canada which were not subject to tariffs.

[00:01:38]But we have to see what will happen because we know that there are certain tariffs. For example, if you want to buy steel, aluminum, or copper from Canada, there's a 50% tariff on that. There's a 25% foreign part tariffs on cars.

[00:01:52]So this could be an expansion on tariffs or a way for renegotiation for Canada and Mexico to buy more stuff from the United States. But, the thing that you have to pay attention to in the meantime is that the prices of certain things could be going up here in the United States. Why does that matter?

[00:02:11]Because when there is a 50% tariff on Canadian steel, do you know what companies do?

[00:02:19]They stop buying Canadian steel because now all of a sudden it's a lot more affordable to buy American steel. So, now you start shopping around at American steel companies. Why does that matter? Because that can change the supply chain. It changes where money moves because now people will be looking for other places to buy certain things if it is available.

[00:02:40]And we don't know how long this agreement is going to go through in negotiation, but it could change how companies spend or it could change how much companies have to pay. If companies have to pay more money to produce their stuff, they might have to charge you more money to buy that stuff.

[00:02:58]If it costs more money to get wood, producing a house gets more expensive.

[00:03:02]If it costs more money to get steel, well, certain metal products get more expensive. If it costs more money to get avocados, your guac can get more expensive as well. That's why you want to pay attention, and this is coming at a time where inflation is already at over 4%. We have the highest inflation that we've seen in approximately 3 years. So, since the tail end of the pandemic.

[00:03:23]Now, part of the reason why we have such high inflation right now is due to the United States attacking Iran.

[00:03:30]That attack on Iran led to higher oil prices. The higher oil prices then led to higher gas costs. The higher gas costs also meant we have higher diesel costs. That means shipping becomes more expensive.

[00:03:42]That means transporting groceries from the farm to the warehouse to the store becomes more expensive, and it also means fertilizer for farmers gets more expensive. So, the higher oil prices mean that a lot of things get more expensive, things that you need, which has been contributing to the higher inflation. Now, there's been a lot of talks about the war with Iran being over.

[00:04:05]Again, that kind of flip-flops very regularly, but we've seen oil prices fall.

[00:04:11]However, despite oil prices falling, gas prices are still higher than where they were before, and that lower oil price still hasn't been seen in a lower inflation rate yet. Now, things could change in the future, but this is where people are getting concerned about is inflation getting overheated because if inflation stays high, it makes it harder for people to afford life. It makes it harder for people to afford groceries because incomes are not rising fast enough to keep up with inflation, which means the average person is getting poorer.

[00:04:43]Because your savings have less buying power.

[00:04:48]Your salary buys you less stuff.

[00:04:51]It's not because you're making less money. You might actually get a raise, but if that raise isn't matching or exceeding inflation, you're still poorer after the raise than you were before the inflation hit. Keeping up with the economy is not an easy thing to do. And then when you have all these crazy things happening, it makes it so much more difficult not to get caught up in the political mess, and that's why I created Market Briefs. It's a free newsletter for investors that breaks down what's happening in the economy without all the politics and without all the fluff. It's a quick 5-minute read.

[00:05:23]We break down what's happening in things like the economy, housing market, stock market, crypto market, and global economy into a fun, witty, and easy-to-read newsletter. It's read by hundreds of thousands of investors every single morning, and as an added bonus, when you sign up for Market Briefs, which is free, you're also going to get my Investing Masterclass where I walk you through how you can start it as an investor and find hidden investment opportunities before they hit the headlines. I'll show you the exact framework that my firm uses to research investment opportunities. So, if you want to get the investing masterclass and market briefs all for free, all you have to do is sign up and I have the link for you down in the description below. That's why investing your money is so important because when you have inflation, it is the investor that gets richer.

[00:06:05]So, the thing that you want to understand of how this is going to impact the stock market now is that the one thing that the stock market does not like is uncertainty. And what this trade agreement does is now it's going to unleash some more uncertainty into the economy. The reason is is businesses, like car businesses, now don't know what is going to happen in terms of importing goods from foreign countries.

[00:06:32]And when there is more uncertainty, there's less business investment.

[00:06:37]Because a car company might say, "We're thinking about opening a car facility, but we don't know what's going to happen with taxes. We don't know what the true cost is going to be of opening it up in Ohio or Mexico. So, let's wait and see."

[00:06:52]And so, it can slow down business investment.

[00:06:55]It can slow down stock market investment as people now want to wait and see what is going to happen because the reality is we know that there's been a lot of volatility when it comes to tariffs. How do we know? Well, history doesn't exactly repeat itself, but it does rhyme.

[00:07:09]If we go back to the beginning of 2025, this was a very interesting time and I like talking about this because it really is one of the most educational times ever. Because we had three stock market crashes in the first half of 2025.

[00:07:27]In February of 2025, President Trump has just entered the White House and he announced harsh tariffs on Canada and Mexico.

[00:07:37]That announcement triggered a fast and big stock market sell-off in the United States.

[00:07:43]Which created a great buying opportunity. Because now stocks were falling and you could buy good stocks at a discounted price.

[00:07:50]And a few days later after the stock market crash happened, people were freaking out. There was a lot of uncertainty about this trade agreement.

[00:07:57]President Trump said, "We're going to pause these tariffs."

[00:08:02]So then the stock market started breaking brand new record highs about a week later.

[00:08:06]Fast forward to March, 1 month later.

[00:08:10]President Trump says, "The tariffs are back on Canada and Mexico. And not only are they back, but they're back stronger and harsher than before."

[00:08:20]Now the uncertainty started again.

[00:08:22]The stock market started sell-off again.

[00:08:24]It was selling off even harder than it was in February. Again, it created a great buying opportunity.

[00:08:29]And then some days later as people were panicking, freaking out about what this is going to do to the economy, what it's going to do to the stock market, what it's going to do for business investment.

[00:08:38]President Trump paused those same tariffs again.

[00:08:41]Now about a week or so later, the stock market was breaking brand new record highs. We saw a big stock market sell-off.

[00:08:48]Now stock market is booming again. Then came April. And in April, 1 month later, the third month in a row, not only did President Trump announce new tariffs on Canada and Mexico, he announced liberation day. Liberation day was tariffs on many many many countries all around the world. It was sweeping tariffs.

[00:09:08]And this caused not just a stock market sell-off in the United States, but a global stock market sell-off, the fastest one that we had seen since the pandemic.

[00:09:17]And now people were freaking out, people were panicking, but again it created a great buying opportunity. And then some days later President Trump then paused that same liberation day tariff.

[00:09:30]And then about a week or so later, the stock market went from crashing to breaking brand new record highs.

[00:09:38]This is why, again, uncertainty is what Wall Street doesn't like. But as an investor, uncertainty creates opportunity. This is why I always talk about ABB, always be buying. The way that you win is not by trying to time the market, it's by always buying the market. And markets are up, down, and sideways. In fact, when markets go down, that's when you want to buy even more aggressively because it allows smart investors to come in and buy good investments at a discounted price.

[00:10:02]>> If you enjoyed this clip and you want to continue your financial education journey, I have another video that I think you'll love. All you got to do is click that button right over there. And for those of you who want to stay up-to-date on the top finance and business news, you can join Market Briefs, my free financial newsletter, by clicking that button below. Thank you for watching and I'll see you in the next one.