Blame Canada for This New Front in the Global Trade War

Jennifer Sauer is the first casualty of a new trade war…

Jennifer is a third-generation dairy farmer in Wisconsin. She sells her milk to Grassland Dairy Products.

But Grassland is cutting ties with 75 dairy farms—including Jennifer’s.

Here’s why…

Canada will impose a tariff on ultra-filtered milk made in America. Ultra-filtered milk is used to make cheese.

As a result of this tariff, Grassland is losing a lot of business… about $100 million per year.

The tariffs Canada has placed on American dairy farmers is just the latest front in a growing global trade war.

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American farmers are now calling on President Trump to retaliate against Canada with his own punitive tariffs.

The battle between American dairy farmers and Canada is just part of the overall unraveling of world trade.  It’s a theme we’ve followed for months in The Palm Beach Daily.

The fallout from this war will eventually hurt the economy… causing more companies to shutter their doors and lay off their employees.

And if you own any of these companies, they will decimate your portfolio.

At The Daily, our mission is to help you get a little richer every day. And you can’t do that if you lose money.

So today, we’ll tell you which types of companies will be the biggest casualties of this new war. And why you should avoid them…

Economic Warfare

Citizens around the world are electing protectionist candidates to power.

Much like President Trump’s own rise to power, they’re pinning hope on the candidates’ ability to “put the people’s needs first.”

With a snap of their fingers (or stroke of their pens), these politicians can hurt a company’s bottom line via protectionist measures.

It’s a form of economic warfare.

In this case, Canada decided to put its dairy farmers first. Now American milk farmers like Jennifer are suffering.

That’s the danger of doing international business in this era of protectionism.

But U.S. dairy farmers aren’t the only businesses facing tariffs from Canada…

Trouble in the Neighborhood

You may not realize this, but Canada hasn’t been the friendliest of trade partners.

The North American Free Trade Agreement (NAFTA) was passed in 1994. Since then, the United States has filed more trade complaints against Canada (39) than Mexico (23).

And there’s a good reason why…

Last September, the Canadian government placed a 276% tariff on U.S. drywall. And Canada has a long-standing 238% tariff on American eggs.

So far, America hasn’t retaliated…

But don’t be surprised if we see tariffs imposed on Canadian maple syrup or a reinstatement of the tariff on Canadian lumber.

In the meantime, owning U.S. companies that do a lot of business in Canada will be risky. One example is Costco.

The popular American retail giant earns almost 15% of its revenues from sales in Canada. If Canada imposes tariffs on the goods Costco sells, its profits will be hit hard.

As we’ve told you in the past, tariffs take money out of the economy. And a smaller economy with higher-priced goods is the definition of stagflation.

For now, you should stick to your long-term wealth-building plan.

But be careful and watch this protectionist trend carefully. If too many of these measures get passed, you’ll have to sell some assets and move into safer ones.

One option to consider is our America First Portfolio. It contains 11 U.S. companies that will likely be winners if a full-scale trade war breaks out.

Regards,


Nick Rokke, CFA
Analyst, The Palm Beach Daily

P.S. At the end of May, I’m taking a trip through the Rust Belt to get a boots-on-the-ground view of global trade. I want to know if President Trump’s “America First” policies are working on the home front. And I need your help…

I’ll be making stops in Illinois, Indiana, Michigan, Ohio, Pennsylvania, New York, and even Ontario, Canada. I want to hear your stories.

If you’re a small businessperson, own a mom-and-pop store, or are an expert on the local economy, tell us if protectionism is creating a renaissance in your city or turning it into a ghost town. No industry or community is too small. You can reach me right here

Now, a special 3-Minute Market Minder from my colleague Greg Wilson, chief analyst for Palm Beach Confidential

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