TARIFFS: Canada Will Respond With "Calibrated" And "Targeted" Measures - Carney
Apr-03 15:58
Canadian Prime Minister Mark Carney has delivered remarks stating that Canada will respond to US President Donald Trump’s tariffs with a “carefully calibrated” and “targeted” response. Carney reiterates that 80 years of US-Canada integration is “over,” and says, “we must respond with purpose and force.”
- He says Ottawa will match US auto tariffs by imposing a 25% tariff on all vehicles imported from the US that are not USMCA compliant. Carney notes that Canadian tariffs will not affect auto parts and will not affect vehicle content from Mexico, as Mexico complies with USMCA. He also confirms that previously announced retaliatory tariffs will remain in place.
- Carney adds that Canada is developing a framework for Canadian auto producers to avoid the counter tariffs if they “maintain their production and investment in [Canada].”
- Adds that, “every single dollar raised [roughly C$8 billion before remission] from these tariffs will go directly to our auto workers and the companies affected by these tariffs.”
- In his comments, Carney also notes that Canadian measures to secure the US-Canada border, in accordance with Trump's request, are “working”, noting a 97% drop in Fentanyl seized at the border between December and January.
- Carney said in a statement on X a short time ago, following a call with German caretaker Chancellor Olaf Scholz: “We agreed to strengthen the diverse trade relationship between Canada and Germany. As we face the crisis caused by President Trump’s tariffs, reliable trade partners are more important than ever.”
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FRANCE DATA: Possible Revision to Services PMI After 4/5 Prior Months Revised Up
Mar-04 15:55
- The market reaction to the February flash PMIs was largely due to the much weaker-than-expected French services PMI reading of 44.5 (vs consensus of 48.9), a 17-month low.
- It's worth noting that the French final services PMI (due tomorrow) has been revised higher 4 out of the last 5 months, and we expect there is probably a good chance that we see another higher revision tomorrow.
- The EC's services sentiment index has not shown a similar pullback with a print of -0.8 in February (vs -2.1 in January and December). This is the highest reading since October 2024, though it is the ninth successive negative print.
- It is too early to tell whether the disappointing flash PMI is real signal or noise, and therefore it is important not to overreact from signals from one-month of soft data. Despite referring to a different month's data, this is a similar message outlined in the ECB's January accounts: "The euro area economy had seen some encouraging signs in the January flash PMIs, although it had to be recognised that, in these uncertain times, hard data seemed more important than survey results".
- Looking further ahead, services activity remains moderate (likely contributing to the weaker than expected Q4 GDP reading of -0.1% Q/Q), the divergence between the EC services sentiment and February flash PMI points to potential two-way risk to Q1 GDP. If we see an upward revision to tomorrow's services PMI, we may be on track for less disappointment than the market is positioned for.
INTERNATIONAL TRADE: Trump-"If Companies Move To US, There Are No Tariffs"
Mar-04 15:50
Posting on the Truth Social platform, US President Donald Trump says, "IF COMPANIES MOVE TO THE UNITED STATES, THERE ARE NO TARIFFS!!!".
- Reports in recent months have raised the trend of both US-owned firms with production based overseas or foreign firms that rely strongly on the US market for demand, contemplating shifting production to the US to avoid being targeted by the Trump administration.
- On 3 March, Anadolu Agency wrote "Major South Korean companies are assessing ways to minimize the impact of new US tariffs on imports from Canada and Mexico, with some considering relocating production to the United States, officials said Sunday. [...] South Korean electronics giants LG Electronics and Samsung Electronics, which have manufacturing operations in the affected countries, are exploring options to bypass the tariffs."
In January, CNBC reported that a "record share of U.S. companies in China are accelerating their plans to relocate manufacturing or sourcing, according to a business survey [...]. About 30% of the respondents considered or started such diversification in 2024, surpassing the prior high of 24% in 2022, according to annual surveys from the American Chamber of Commerce in China."
STIR: BLOCK: Dec'25 SOFR Ratio Put Spread
Mar-04 15:50
- 5,000 SFRZ5 96.12/96.50 3x2 put spds, 18.5 net ref 96.44 to -.435 from 1043-1046ET
