The world reacts to Donald Trump's latest trade plans

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In today's big story, the world reacts to Donald Trump's latest trade plans, which could be a massive negotiation tactic.

What's on deck:

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The big story

Tough trade

The man who dubbed himself a master negotiator is upending the global trade market with his latest tactic.

The world is reacting to President-elect Donald Trump's new trade proposals targeting China, Mexico, and Canada. There's a lot to unpack, so let's break it down:

So, Trump finally gave us an update on his tariff plans. Wasn't this expected? He's telegraphed his plans for hammering Chinese imports, but a 25% tax on Canadian and Mexican goods was a shock. It's the first time Trump has singled those countries out, although he promised 10-20% tariffs on imports across the board while campaigning. (Another interesting wrinkle: Trump negotiated the current trade deal between Canada, Mexico, and the US.)

Ok, but what does the US even import from our neighbors? Simply put: Oil (Canada) and autos (Mexico). More broadly, Mexico exported $475 billion worth of goods to the US in 2023, and Canada sent us $419 billion in exports.

What's Wall Street got to say about all this? The US stock market didn't really flinch Tuesday. The same couldn't be said for the rest of the world. Mexico and Canada's stock markets declined, their currencies dropped relative to the US dollar, and the fear spread to European and Asian markets.

Wait, why didn't the US market react if this was a surprise? Some investors believe the latest proposal is a negotiation tactic by Trump. His Truth social post positioned these taxes as a punishment for both countries' handling of the borders they share with the US. "This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!" Trump wrote.

Will that work? It definitely got a reaction. Canadian Prime Minister Justin Trudeau said he had a "good" conversation with Trump. Mexican President Claudia Sheinbaum's response was mixed, as she floated retaliatory tariffs. But there's an incentive for both to find a solution. The US received 83% of Mexico's exports and 75% of Canada's last year.

So there's a chance none of this even happens? Maybe, but it's a high-stakes gamble. Some executives have made clear they'll have to raise prices if the tariffs are enacted. Best Buy's CEO recently said "the customer ends up bearing some of the cost of the tariffs."

Isn't there something they can do in the meantime? Companies could reroute shipments or stock up on supplies ahead of time, but changing your supply chain on the fly (especially during the holiday season) doesn't come cheap or easy. And then there's the risk that none of this comes through, and they wasted those resources for nothing.

News brief

Top headlines

3 things in markets

1. Wall Street is having a ball investing in sports. Leagues have loosened ownership rules in recent years to allow investment firms a seat at the table. At the same time, sports franchise valuations have outpaced the S&P 500. A JPMorgan report outlined the main themes investors are excited about next year.

2. Deutsche Bank has bad news about rate cuts in 2025. The bank's chief economist said the Fed will pause interest rate cuts throughout next year, predicting a drop in unemployment coupled with an increase in growth and inflation. (For what it's worth, Goldman said earlier this month there would be deep cuts in 2025.)

3. Consider this a no-fly zone for investing. Scott Wren, Wells Fargo's senior global market strategist, sees 2025 being a good year for stocks with one catch. Defensive stocks — think utilities, healthcare, and consumer staples — will have a more muted year as the rest of the market takes off.

3 things in tech

1. Leaked documents reveal Amazon's top cloud growth initiatives. AWS is focusing on at least seven areas for growth next year, according to internal documents obtained by BI. Those include healthcare, business applications, and the Middle East region. (They've also got some fun codenames.)

2. Elon Musk's longtime lieutenant takes the reins at Tesla. Omead Afshar, known for his intense attention to detail, was described as the "final boss" before getting to Musk. As Musk focuses on politics, the 38-year-old Afshar was promoted to vice president of North American and European operations to help lead his car company through the EV market volatility.

3. How companies plan to fix AI's apparent plateau. A fierce debate over whether improvements in AI progress is slowing has brewed between Silicon Valley's tech leaders in recent weeks. BI spoke to 12 leaders in the space to see how companies could overcome AI bottlenecks.

3 things in business

1. Drake's taking his rap beef from mixtapes to the magistrates. The Canadian rapper lost his summer rap battle with Kendrick Lamar. Now he's taking aim at Spotify. In a legal filing, an LLC owned by Drake claims the streamer and Universal Music Group made "Not Like Us" — Kendrick's diss track about Drake — a bigger hit than it would've been naturally.

2. Patagonia's big changes are disappointing some staffers. The beloved brand of mountaineers and Wall Street bros alike has long established itself as a mission-driven workplace nirvana. Now, it's cutting jobs and expediting service to strengthen business — and employees say the new rigidity feels antithetical to the company's ethos.

In other news

• Many digital health startups are quietly raising down rounds and closing up shop. Here's why.

What's happening today

• Bureau of Economic Analysis releases revised Q3 GDP growth figures.

The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Grace Lett, editor, in Chicago. Ella Hopkins, associate editor, in London. Hallam Bullock, senior editor, in London. Amanda Yen, fellow, in New York. Milan Sehmbi, fellow, in London.

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