By Michael O’Neill

In a world where ‘stable’ was once the middle name of American politics, President Trump has made “Chaos—The New Normal.” It is not just a headline, but a global economic and geopolitical reality check. From Wall Street to Main Street, and every country on the planet, his administration’s symphony of disruption plays on and on, leaving traders, investors, friends, and foes scrambling for the sheet music.

The First Fifteen Days

That is pretty impressive for just 15 days. Donald Trump has already achieved what no other president has managed—he’s turned the global economy, the U.S. government, and the intelligence community into a real-time episode of Survivor, minus the tropical beach.

Within hours of taking the oath, Trump yanked U.S. funding from multiple United Nations organizations, calling them “anti-American money pits” and triggering diplomatic meltdowns from Brussels to Beijing. The State Department was reportedly caught off guard, as were U.S. allies caught in the crossfire.

Then came tariffs on Canada, Mexico, and China, a move that sent FX traders into a panic spiral as the U.S. dollar lurched in every direction. Global trade partners barely had time to react before he slapped duties on illicit drugs coming from Canada and synthetic opioids from China, adding another layer of uncertainty to already fragile supply chains.

Then there’s the deep state purge, with Trump pushing mass buyouts at the CIA and cutting USAID down to the studs. Add in deregulation, restrictions on last-minute labor deals, and an Iron Dome missile defense system for the U.S., and you have an administration that isn’t just governing—it’s hitting the reset button on entire institutions.

And for the cherry on top? Trump ordered a plan for a United States Sovereign Wealth Fund, making economists choke on their coffee. The man who once ran a casino into bankruptcy now wants the government to run an investment fund. What could possibly go wrong?

If this is just the first 15 days, buckle up—Trump 2.0 is shaping up to be the most chaotic sequel yet.

Canada-Saved by a Czar

Canadians were rattled by Trump’s tariff bombshell—until he suddenly delayed the 25% tariffs on Canadian exports. His February 1 executive order claimed that criminal networks were fueling human trafficking and smuggling operations, enabling unvetted illegal migration across the northern border. It also alleged that Mexican cartels were running fentanyl and nitazene synthesis labs in Canada.

Who knew? Yet, based on that narrative, Trump was ready to cripple the Canadian economy. The Bank of Canada estimated that a 25% tariff would slash nearly 6% off GDP, while major banks projected the economy would contract between 3.8% and 5.8%.

But Canada got a last-minute reprieve. Nothing solves a fake fentanyl crisis like a pretend Fentanyl Czar—a token job for a manufactured problem. Trump was either elated or fooled, rushing to TruthSocial to declare, “Canada has agreed to ensure we have a secure Northern Border and to finally end the deadly scourge of drugs like fentanyl. Canada is making new commitments to appoint a Fentanyl Czar.” Presto: tariffs gone.(at least until March 4)

It’s a Delay Not a Cancellation.

Canadian dollar and Mexican peso traders took a beating—first when Trump announced that tariffs would take effect on February 3, then again when he abruptly changed his mind. USDCAD soared to 1.4793 on Monday before plunging to 1.4270 by Wednesday morning. But the move had little to do with traders believing the tariff risk had disappeared. It was simply a case of extreme positioning unwinding—like a piñata finally bursting after too many swings.

Trudeau knows it, and so do Canadians. Reports suggest consumers are embracing an “anything but U.S.” mindset when buying groceries, alcohol, and even snack foods. Tim Hortons might even steal some Starbucks customers—never mind that Timmy’s is owned by a Brazilian firm. Loblaws has pledged to source more homegrown Canadian food, a convenient distraction from its ongoing price-fixing scandals. Meanwhile, hordes of Canadians are loudly declaring their boycott intentions on X, Meta, and LinkedIn—blissfully unaware of the irony.

Canadian investors and traders need to ask themselves: Is USDCAD at 1.4300 fair value? Would it drop to 1.3500 if Trump had a sudden change of heart and decided to honor the US-Mexico-Canada Agreement (USMCA)? Or would it rocket to 1.500 if tariffs return?

The odds favor more upside. Canada’s economy remains under pressure, with sluggish GDP growth, falling inflation, and weak job numbers—a combination that will push the Bank of Canada to cut rates from 3.00% to 2.75% on March 12. Meanwhile, the Federal Reserve is holding firm at 4.50%, as U.S. inflation remains sticky and growth continues at a healthy 2.8% y/y in 2024.

Interest rate differentials strongly favor the U.S. dollar. The 10-year Canada-U.S. rate spread is deeply negative at -145 basis points, while the 2-year spread sits at -155 basis points, reinforcing the appeal of U.S. assets over Canadian ones. This discourages capital inflows into Canada and strengthens demand for the USD, keeping USDCAD tilted higher.

Chaos is the new normal as long as Trump keeps rewriting the rules.  Only, 1,445 days to go. 😊.