Still some 50 days out from taking office, President-elect Donald Trump has wasted no time returning to his usual governance-by-tweet strategy (or now, governance-by-Truth Social post).

Trump promised in a Truth post late Monday to levy via executive order 25% tariffs “on ALL products coming into the United States” from Mexico and Canada, plus an additional 10% tariff on imports from China, rounding out the trio of biggest exporters to America. By Tuesday morning, the ripple effects from the big Truth posts were becoming clear.

All’s Fair in Love and Trade Wars

Trump’s tariff declaration against Mexico and Canada did come with a stipulation — that they’ll remain in effect until the countries stop the flow of “Drugs, in particular fentanyl, and all illegal Aliens” over the northern and southern borders. Still, he provoked plenty of feedback. Mexico’s President Claudia Sheinbaum, a staunch leftist, suggested Tuesday that Mexico could impose retaliatory tariffs in response. She also blamed US demand for fueling the fentanyl crisis and lamented the large amount of US weapons smuggled into Mexico as a result. Canadian Prime Minister Justin Trudeau, meanwhile, said he had a phone conversation with Trump following the social media post to discuss “the intense and effective connections between our countries that flow back and forth.” The Canadian dollar and Mexican peso both fell after the Truth posts.

In other words: Roughly 30 years of trilateral trade agreements between the North American neighbors may be unwinding. It’s something of a reversal of the Trump 1.0 administration, which ushered in the USMCA free trade agreement (Trump’s promised executive orders would override part of that deal). 

Should the tariffs be implemented, which is of course totally unclear, they would be a complete debacle for at least a pair of major industries — oil and automobiles: 

• Around 40% of US crude oil is imported, with Canada and Mexico supplying around 60% and 11% of that respectively; sources told Reuters Tuesday that crude oil would not be exempt from the tariffs. Major oil refiner trade group the American Fuel and Petrochemical Manufacturers warned that the tariffs and a subsequent trade war “have potential to impact consumers and undercut [the USA’s] advantage as the world’s leading maker of liquid fuels.”
• Meanwhile, major US-based automakers have plants in both Canada and Mexico, and are also heavily reliant on components from both countries. The tariffs “would spell disaster for the US auto industry,” Bernstein analysts wrote in a note Tuesday (while pointing out that is why they may be unlikely); General Motors shares fell nearly 9% Tuesday, while Stellantis dropped over 5% and Ford tumbled over 2%.

Goldman Touch: In macro: Altogether, it probably means more inflation. “Using our rule of thumb that every 1 [percentage point] increase in the effective tariff rate would raise core [Personal Consumption Expenditures] prices by 0.1%, we estimate that the proposed tariff increases would boost core PCE prices by 0.9% if implemented,” Goldman Sachs’ chief economist Jan Hatzius wrote in a note. Still, it remains a bit of an open question whether the tariffs are real, conditional, or merely a bargaining chip — at least until the next after-hours post.

Wells Fargo is counting down the days to freedom. 

Reuters reported Tuesday that America’s fourth largest bank, which has been barred from adding assets to its balance sheet by US regulators since 2018, is likely to have the handcuffs taken off next year, citing three sources.

Knockin’ on Seven’s Door

The scandal that got Wells Fargo in hot water came to light in September 2016 after customers started noticing weird charges or receiving credit cards they never ordered. Turns out employees at the San Francisco-based bank were behind it: They opened millions of fraudulent accounts in the names of customers, enrolling them in financial products and services without their consent to try and meet aggressive internal sales targets.

The revelation was a massive blow to a firm that had been applauded for eschewing risks in the leadup to the 2007 subprime crisis and cast itself as a stable alternative to Wall Street greed. As then-Fed Chair Janet Yellen approached the end of her term in 2018, the central bank levied one of the most costly sanctions in history, limiting the bank to its roughly $1.95 trillion of assets indefinitely. Now almost seven years and one CEO later, this purgatory may soon end, and that’s huge for the bank:

• Wells Fargo has missed out on billions in profits since the cap was implemented while rivals have added to their business: JPMorgan Chase now has $4.2 trillion of assets, a more than 60% increase since 2018. In other words, it added almost one Wells Fargo to its balance sheet. Bank of America, now with $3.3 trillion in assets, has added roughly $1 trillion.
• Not until last month did Wells Fargo shares top their previous February 2018 high of $64 — they’re up 58% this year, currently just below $78. Meanwhile, the bank is spending $2.5 billion more per year than in 2018 on risk and control, having added 10,000 staff in the area, CEO Charles Scharf said earlier this year.

The Decision: Wells Fargo sent a third-party review of its reforms to risk and control practices to the Fed for sign-off, Bloomberg reported in September. To finally be freed of the asset cap, it will now need to pass a vote of the Fed’s board of governors.

That extra few inches of legroom you bought the time your flight lasted more than two hours was a good business while it lasted.

On Tuesday, the Senate released a report on its investigation into “junk fees” in the airline industry. According to US senators, five major airlines netted $12 billion from seat fees alone over the course of five years. A comforting thought as we head into one of the busiest travel days of the year.

Flying By the Seat of Their Pants

Tuesday’s Senate report follows the Biden Administration’s crackdown on junk fees in a range of sectors, including the airline industry. The regulatory scrutiny prompted some small adjustments from airlines — last year United made it free for parents to book seats next to their children so long as they’re under 12 years old — but the US government is not done.

The report was published by the Senate Permanent Subcommittee on Investigations, and looked at how United Airlines, financially troubled Spirit Airlines, Delta Air Lines, and American Airlines priced perks like taking baggage with you, having a little extra legroom, and sitting next to the people you’re traveling with:

• Some back-of-the-cigarette-pack math tells us that each airline was pulling in a (very rough) average of $480 million in seat fees per year, one of several types of junk fees that didn’t exist 20 years ago. 
• Earlier this year, the International Air Transport Association said that although the industry was expecting record revenue for 2024, profit margins remained thin — so eking out extra revenue from fliers could be a pretty significant booster on airlines’ financial reports.

Olé: It’s not clear whether the US government will continue to hold airlines’ feet to the fire over junk fees once the Trump administration comes in. But other countries have already started taking punitive action. Earlier this month, Spain slapped five budget airlines with a grand total of  €179 million ($188 million) in fines for what it terms “abusive practices,” which includes junk fees like charging for carry-on luggage. One of the airlines targeted, easyJet, announced this morning that it made £3.6 billion ($4.5 billion) in the full-year to October from fare add-ons, and its CEO hit out against Spain’s fine saying it’s a “highly unfair idea” that airlines shouldn’t be able to offer add-ons the way they do now. “It’s a good thing for customers and it keeps fares down,” he told CNBC.