Trump picks up where he left off: more tariffs on Canada. Stock markets react negatively, again.

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Donald Trump should reflect on a quip often attributed to Albert Einstein: one possible definition of insanity is repeating the same actions over and over again, expecting different results. Yesterday, for the umpteenth time, Wall Street indices dropped 0.3-0.4 percent after the president announced a further increase in tariffs on Canada, which could rise from 25 to 35 percent. In threatening the hike, the White House clarified, however, that—for now—the new tariffs will not apply to products covered by the free trade agreement between the United States, Canada, and Mexico. Whether the increase actually takes place or not, we will find out on August 1st: the same day the outcome of negotiations with Japan, South Korea, Brazil, and all the other trading partners who received the letter regarding the application of "reciprocal tariffs" will be revealed . So far, in fact, a compromise has only been reached in three cases, and not always in a clear or definitive way: the United Kingdom, China, and Vietnam.

The negative reaction of the markets, in the United States and elsewhere, is easily explained: the increase in customs barriers entails a loss of efficiency for the global economy, as it impedes or at least complicates the natural process of labor specialization.

American consumers and businesses will end up paying more for the goods they need, and their production will shift from more productive nations to less so. We're seeing this in the copper market, on which Trump has imposed a 50 percent tariff, also effective next month : "How this will help the American economy remains a mystery," commented the Wall Street Journal, "especially since the copper market is in complete chaos, with disastrous results for American industries that use this vital metal."

Secondly, the effect is particularly strong when Trump's fury is directed against countries like Canada, which in no way can be defined as enemies of the United States: in fact, along with Mexico, Canada is by far Washington's largest trading partner, with trade last year approaching $800 billion. This close bond is consolidated in the free trade agreement linking the three North American countries, which replaced NAFTA in 2020, precisely at Trump's request, who made its renegotiation a cornerstone of his first term. Trump continues to point the finger at the alleged fentanyl trafficking across the northern border of the United States, despite Canadian Prime Minister Mark Carney's assurances of stricter controls and even accepting the American request to eliminate the digital services tax .

Finally, Trump's fickleness is unsettling the markets: while traders seem to have grown accustomed to the American president's outbursts and are therefore reacting less nervously than they did to his initial announcements a few months ago, the signals he is sending are still difficult to interpret. And while the actual implementation of the tariffs he threatens may be unlikely, such an eventuality is not entirely impossible and is therefore factored into investment and savings decisions.

The paradox, in short, is that Trump appears not to be learning from the past: in the aftermath of Liberation Day on April 2nd, the stock market responded violently, with a rapid loss of capitalization and a rise in interest rates on government bonds. Subsequent clarifications and rapid backtracking have calmed the situation, earning him the nickname "Taco," meaning "Trump Always Chickens Out ." But the subsequent normalization now seems to be convincing him that he can pick up where he left off: by starting this extremely expensive Groundhog Day all over again.

If there's one lesson everyone should learn, it's that protectionism is harmful even to mention, let alone put into practice . This is a valuable lesson for the White House, but also for others—including Europeans—who are often tempted to respond to Trump with an eye for an eye and tariff for tariff.

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