Daily Commentary

MarketMinder’s View: Over the past couple months, we have pointed out the many ways companies can mitigate tariffs’ bite. The tactics addressed here are another example, and we think they showcase not only businesses’ creativity but also why tariffs are economic negatives in general. On the former, Canadian warehouses are seeing a surge in demand as companies look for ways to avoid the biggest tariffs. As explained here, a company can change the final destination for its shipment to a Canadian warehouse, then transport the goods to the US in special bonded trucks, “which exempt their contents from duties while they’re in transit. Legally, it was as if the products never landed in the US at all.” Doing so doesn’t skirt all tariffs, but “it does let the owner delay paying them until the goods are shipped stateside. That can prove useful as Trump’s rates keep shifting. It also helps companies smooth out cash flows and avoid paying any tariffs on unsold goods.” Smart! Yet this also illustrates how tariffs throw sand in the gears of the global trading system and add costs beyond the duties themselves. As the warehouse owner interviewed here explains, some goods from China are making a pitstop in Canada before heading back to the Pacific (e.g., Japan and Australia). For many mid-sized US firms, having a single location to organize their orders from Chinese suppliers is most efficient—and thanks to US tariffs, some businesses are considering shifting to more friction-less options like Canada to serve as their logistics hub even as the prices for such services jump. Creative cottage industries help businesses navigate the storm, but added costs are added costs. For more, see this week’s commentary, “Charts of the Day: Trade Winds Shifting Around Tariffs.”

MarketMinder’s View: UK GDP fell -0.3% m/m in April, worse than estimates and the sharpest contraction since October 2023. Tariff uncertainty and the hangover from US customers’ front-loading purchases in February and March likely weighed on some industries (e.g., motor vehicle manufacturing dropped -9.5% m/m), but domestic developments contributed to April’s weakness, too, particularly on the services front (legal activities plummeted -10.2% m/m). “The slump came as some tax rises came into force, including a change to stamp duty rates in England and Northern Ireland that led to a sharp drop in house sales. The hit to estate agents, conveyancing lawyers and other property industry businesses helped push the services sector down by 0.4%.” Call a spade a spade: This was a poor report. However, this is also the nature of a monthly data series, where one-off factors can have an outsized effect. Trends take time to materialize, so we don’t yet know the long-term effects of this or the other tax changes taking effect in April. Monthly GDP also has a history of being quite bouncy. Regardless, these data reflect what happened in April. We are now almost halfway through June, and forward-looking markets are, well, looking forward … and hitting all-time highs and rising in the UK.

MarketMinder’s View: Please note, MarketMinder is nonpartisan and prefers no politician or political party over another. We highlight this look at the changes Senate Republicans want to make to President Donald Trump’s One Big Beautiful Bill Act to make a broader point: Intraparty gridlock is likely to dampen many of the provisions. Consider the debate over the state and local tax deduction (SALT). “In the House, a small group of Republicans from New York, New Jersey and California demanded that the legislation include an increase to the $10,000 cap on the deduction. They ultimately won an agreement to set the new limit at $40,000, an expensive change that would largely benefit homeowners in areas with high taxes. While the change was necessary to win the support of blue-state Republicans in the House, senators are less committed to the policy. Senator John Thune of South Dakota, the Republican majority leader, recently remarked at the White House that ‘there really isn’t a single Republican senator who cares much about the SALT issue.’” They are also less taken with tax-free overtime and more focused on business-related measures to foster investment. These are just some of the points of debate, which is why we suggested investors take a wait-and-see approach when the House passed the bill last month. Things remain fluid, and while always worth watching, don’t presume major changes are coming down the pike exactly as outlined in the House legislation or on the campaign trail. For more, see last month’s commentary, “On the Big Beautiful Bill.”