Economic warfare is back on the menu

Remember all the fun times we had together on Liberation Day? Don’t get nostalgic, because we’re about to get a sequel.

The White House kicked off the week with two major, aggressive economic moves.

First, trade talks with our northern neighbor fell apart on Friday, automatically triggering 50% levies on a slew of Canadian goods worth roughly $20 billion. Then, in a fit of Truth Social posts, President Trump announced this afternoon that he’s slapping 50% tariffs on Canadian automobiles starting in January.

“They feel entitled, and yet, WE DON’T NEED CANADA, THEY NEED US!” he wrote. “They do 95% of their business with the U.S., with us, the exact opposite!”

Both sides blamed each other for the talks falling apart. And Canada doesn’t look like it’s going to back down: Canadian Prime Minister Mark Carney is expected to announce the nation’s own tariff retaliation on September 8, targeting specific sectors that are particularly politically sensitive ahead of the midterms. And, of course, Trump has vowed to escalate even further after Canada strikes back.

What this all means: While the first Liberation Day roiled markets, the long-term damage was relatively mild, all things considered—and some analysts expect the same from this latest round of tariff tit-for-tat.

“End of the day, the Canadian tariffs on US goods equates to a drag of -0.5% to -1.0% on S&P 500 earnings, whereas it could negatively impact 5%–8% of Canada’s index,” explained Zacks Investment Management Chief Market Strategist Brian Mulberry. “That gives a significant advantage to US markets if this becomes a long lasting dispute, but as history tells us this is likely a short term political gamble on Canada’s part, we will wait to see who wins the best deal on the far side of all the politics.”

D-Day doom

But the Canada debacle isn’t the only economic battle the US waged today. This afternoon, Treasury Secretary Scott Bessent announced an “Economic D-day” against Iran dubbed “Operation Economic Outcast.”

Dramatic names aside, what this actually means is a slew of punishing sanctions against Iran and its trading partners, with Bessent threatening that, “Any entity that facilitates money laundering on behalf of Iran will be removed from the U.S. dollar system.” The specific sanctions will hit technology, gold, digital assets, and shipping, Bessent said.

The Iranian rial hit a new low against the dollar this morning, another blow to Iran’s already beleaguered economy. At a press conference, Bessent said the goal was to “sever every economic lifeline that sustains this tyrannical regime.”

As per usual, investors are playing the highest stakes game of whack-a-mole ever: Just as one crisis seems to wane, two more pop up.—LB