The Red Sea crisis, the Houthis' ultimatum, and the ongoing trade wars are creating significant instability in international relations and global trade.

Today is day 474 of the Red Sea crisis. The Houthies issued a 4-day ultimatum on Friday for Israel to recommence humanitarian aid into Gaza. If this is not done, the Houthies will resume attacks on naval operations against Israeli-linked vessels.

The tariff whirlwind continues. Today China announced retaliatory tariffs on Canadian agricultural and food products from March 20th. This is a retaliation against the Canadian tariffs on Chinese electric vehicles, steel and aluminum products which were put in place back in October 2024.

The tit-for-tat is basically that Canada introduced 100% tariffs on EVs and 25% in steel and aluminum products. China’s new tariffs are 100% on Canadian rapeseed oil, oil cakes and pea imports, as well as a 25% duty on Canadian aquatic products and pork.

The geopolitical tariff war certainly just got even more complex with Canada now being pressured from both US and China.

Adding further to the US tariff-whiplash, having postponed some of the tariffs on Canada and Mexico on Thursday, Trump said Friday that reciprocal tariffs on Canada might come soon – possibly Monday or Tuesday.

Amongst others he was explicitly mentioning Canada’s 250% tariff on US dairy products. Given Trump’s well known fact-free approach to numbers, I would hesitate to take this number at face value – and do not have time to do a deep-dive into the various tariffs Canada impose on different types US dairy products. 

However, it should be noted in this context that US dairy production receives substantial US government subsidies – which is certainly also a trade distortion much as tariffs are. According to the US Department of Agriculture, 42% of US dairy farmers’ revenue in 2018 came from government subsidies.

The war of tariffs is beginning to make its way into the macroeconomic forecasts. As an example, Goldman Sachs just revised their US Q4 2025 GDP growth downwards from 2.2% to 1.7% whilst at the same time increasing their likelihood for a US recession within 12 months from 15% to 20%.