Trump’s Canada Trade War Could Pull the U.S. Back into QE

The United States' most powerful economic tools are being tested once again as Trump threatens a new trade war with Canada.

Trade War Timeline

■In 2024, the Trump administration imposed $2.5 billion in tariffs on Canadian agricultural and food products.

■Canada retaliated with $1.8 billion in tariffs.

■The $30 billion trade volume between the two countries fell 5%.

Quantitative Easing: A New Era

■The Fed plans to expand its $1.5 trillion asset portfolio again in 2025.

■Interest rates remain at 0.25%, while money supply is expected to rise 4%.

■This move targets the highest liquidity levels seen since 2019 at $4.2 trillion.

Market Impacts: Gold, Equities, and Bonds

■Gold prices rose from $1,800 to $1,950, an 8% increase.

■Dow Jones, S&P 500, and Nasdaq indices climbed from 3,200 to 3,450, a 7.8% rise.

■The 10‑year U.S. Treasury yield increased from 1.75% to 1.95%, a 0.20% jump.

Future Scenarios: Fed’s Roadmap

■Soft landing scenario: keep rates steady while boosting asset purchases.

■Tightening scenario: raise rates by 0.5% and reduce asset purchases.

■Stable scenario: maintain rates at 0.25% and sustain moderate asset purchases.

Strategies for Firms and Investors

■Plan a $200 million investment to build a flexible supply chain.

■Diversify portfolios with 30% allocation to gold and bonds.

■Leverage the low‑rate environment for a $1.2 trillion borrowing advantage.

The Fed’s policy decisions require a balanced approach amid trade tensions and global supply‑chain risks.