Hello there.

Oh, hey dere, buddy. I haven’t seen ya down at the trading post lately. Somethin’ up, eh?

There’s a longstanding, as-yet-unsettled debate on the existence of Canadians. Some say they’re a myth fabricated by the French; others think they might actually exist. There’s only one way to find out for sure: Start a trade war. 👇

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The US just hit Canada with 50% tariffs on about $20 billion worth of imports using a law from 1930 that no president has ever actually used before… and Canada fired back with dollar-for-dollar tariffs on American steel, cheese, appliances, and farm equipment, kicking in September 8.

Both sides were apparently super close to a deal last week. Like, hours away. Then late-stage demands from US negotiators reportedly included wanting veto power over any trade deals Canada makes with other countries. Prime Minister Mark Carney walked away and told Canadians that "America has changed" and the old relationship is basically done.

To make matters funnier, Trump used this ancient law from the Great Depression called Section 338 that literally no president has ever touched before. It lets him throw 50% tariffs on countries he thinks are "discriminating" against American businesses, no investigation needed. Legal experts are split on whether this even holds up in court, but Trump went for it anyway because the Supreme Court shut down his bigger tariff plans earlier this year.

The slightly hopeful part is that these tariffs only cover about 5% of what Canada sells to America. Economists think the actual economic damage will be pretty small for now. Both countries do $880 billion in trade every year, and neither side actually wants this to blow up right before US midterms. Most analysts expect some kind of deal before November because voters really hate paying more for stuff, but for now, keep an eye on any holdings that rely on imports from up North.

Kevin Warsh gave his first big speech at Jackson Hole on Friday, and the main message was surprisingly direct: inflation is still too high, and he's ready to raise rates if it doesn't come down.

Markets moved fast. Bets on a rate hike at the September meeting jumped to around 56% right after the speech, up from 35% the day before. The 2-year Treasury yield popped nearly 8 basis points to 4.31%.

Warsh said the recent summer inflation readings were "better than expected" but they "do not tell me that underlying trends have meaningfully improved." Translation: good news, but not good enough. He committed to getting inflation back to 2% and made it clear the Fed will raise rates if that's what it takes.

The other big theme was that Warsh wants a "quieter Fed" that stops telling markets exactly what it plans to do months in advance. He's done with "forward guidance" and wants investors to read the economic data themselves instead of waiting for hints from Fed officials. Some analysts loved that approach. Others found it frustrating because nobody knows exactly what would trigger a rate hike.

The takeaway is pretty straightforward, at least: if inflation keeps running hot, Warsh is willing to raise rates to bring it down. He's not messing around about hitting that 2% target, and he made that abundantly clear. Whether that means a rate hike in September or later this year is still up in the air, but the market is definitely pricing in that possibility now.

Elected officials have had a tremendous amount of success in the market recently.

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Till next time,
— Brandon and Blake with Invested Inc.