👉 Background: As part of Donald Trump’s election campaign, he had promised to stem the flow of illegal migration as well as drugs. He claimed that three - Canada, Mexico and China - were the main perpetrators. These three countries also happen to be the US’ top three trading partners.

‍👉 What happened: Trump warned that if they didn’t tighten their borders and reduce the flow of drugs into the US, he would impose major tariffs: 25% tariffs on the goods from Mexico and Canada…as well as 10% tariff on goods from China.

‍👉 What else: On Monday, these tariffs were supposed to be enforced. And given the US does $2.1 trillion USD worth of annual commerce with these three countries, the markets were SHOOK. But now, Trump has agreed to pause these tariffs with Mexico and Canada for 30 days. And while the trade-war crisis has been averted… for now… the battle with China and potentially other countries is still to come.

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What's the key learning?

💡A trade war is like an economic tug-of-war, where countries slap tariffs on each other’s goods. Tariffs = taxes on imports. You slap tariffs on our goods, then we'll slap even bigger tariffs on your goods.

💡The prospect of these tariffs leads to a heap of uncertainty—so when Trump announced tariffs on China, Canada and Mexico, investors panicked:

• US market fall by more than 2%
• Bitcoin fell by more than 8%
• And even ASX got hit - with around $50 billion wiped
  

💡Over the past few decades, we've seen many developed countries remove tariffs to encourage free trade between countries. So, although the tariffs have been paused right now, this might just be a sign of things to come.