Hope for Canada deal, China ‘ready to fight’

Bernstein cut its earnings estimates and lowered its price target on Constellation Brands, the maker of big alcoholic beverage brands like Modelo, Corona and Pacifico.

“It’s official — 25% tariffs on Mexican imports are here … We cut our EPS estimates by ~25%, and continue STZ outperform with a new (lower) target price of $230,” Bernstein analyst Nadine Sarwat said in a note Wednesday. “We have long guided to the impact tariffs would have to our numbers, and today we take the knife to our model.”

Constellation is the most exposed name in Bernstein’s European and American beverages coverage universe, with about 84% of fiscal 2025 earnings net sales being super premium Mexican beer imports, she noted.

“Any resolution to these tariffs offers meaningful upside not included in our numbers,” she added. “But the uncertainty is not over for Constellation, namely very weak scanner data.”

— Tanaya Macheel

Bank of America has some good news for investors: the Trump Administration’s tariffs are unlikely to stay a permanent fixture.

“Zombie tariffs walk among us,” economist Carlos Capistran wrote in a Wednesday note. “These latest events are in line with our view that tariffs are both ‘alive and dead’ at the same time. On the one hand, tariffs were enacted, but on the other, comments made by Secretary Lutnick signal that there may be some relief down the road for Canada and Mexico, and as soon as March 5.”

The economist added: “We believe that today’s developments are consistent with our call that tariffs are likely temporary, and that threats of tariffs on Canada and Mexico will last until a new USMCA 2.0 is renegotiated.”

The USMCA — between the US, Mexico and Canada — is a free trade agreement that Trump signed into place during his first term, replacing the North American Free Trade Agreement, or NAFTA. While a revision to the USMCA is scheduled for mid-2026, Capistran said that Canada and Mexico would benefit by opening a full revision before that date.

— Lisa Kailai Han

Top Trump trade advisor Peter Navarro pushed back after Canadian Prime Minister Justin Trudeau accused the U.S. of imposing stiff tariffs based on false claims about the flow of fentanyl from Canada.

“It would be really useful if he just toned stuff down,” Navarro said in a CNN interview.

“He’s campaigning right now,” Navarro said of Trudeau, who announced in January that he would step down as prime minister.

After the 25% tariffs on Canadian imports — and Ottowa’s countermeasures against the U.S. — kicked in Tuesday, Trudeau slammed Trump’s move as a “very dumb thing to do.”

Trudeau also pushed back on the Trump administration’s claims about Canada’s efforts to combat fentanyl trafficking, calling them “totally false.”

Navarro on CNN also declined to offer any new details about possible compromises that the U.S. could strike with Canada and Mexico, after Commerce Secretary Howard Lutnick suggested those deals would likely come Wednesday.

And Navarro brushed off the festering uncertainty in the stock market that Trump’s tariff policies have helped cause.

“We’ve had two days of volatility in markets and everybody’s hair is on fire,” he said.

— Kevin Breuninger

The Trump administration is adamant that its 25% tariffs on Canada and Mexico are not about stoking a trade war, but are instead about waging a “drug war” against the flow of the deadly opioid fentanyl into the U.S.

But U.S. Customs and Border Protection seized a miniscule 0.03 pounds of fentanyl at the northern border in January, according to the agency’s own data.

And the amount of fentanyl seized there has consistently been a small fraction of what is intercepted by CBP agents at the U.S. border with Mexico.

For instance, 43 pounds of the drug were seized at the northern border in fiscal year 2024, versus 21,148 pounds taken at the U.S. southwest border in the same period, CBP data show.

Additionally, those 43 pounds may not all have been seized at the border itself: CBP’s website suggests the data also covers illicit drugs interdicted “between ports of entry.”

A recent Globe and Mail investigation, meanwhile, found that much of the fentanyl discovered in northern states had come from Mexico.

Trump, in his address to a joint session of Congress on Tuesday night, nevertheless said, “we need Mexico and Canada to do much more than they’ve done, and they have to stop the fentanyl and drugs pouring into the U.S.A.”

— Kevin Breuninger

Trump and Canada Prime Minister Justin Trudeau are expected to talk Wednesday, people familiar with the matter told Reuters and CNN.

The talks come a day after Trump imposed sweeping tariffs against Canada and Trudeau retaliated with levies on U.S. goods.

Trudeau directly appealed to Trump in an address Tuesday, calling the tariffs “dumb.” The prime minister accused Trump of seeking to collapse the Canadian economy in order to make it easier to annex the country. Trump has repeatedly suggested that Canada should become the U.S.’ 51st state.

“The United States launched a trade war against Canada — their closest partner and ally, the closest friend,” Trudeau said Tuesday. “At the same time, they’re talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense.”

— Spencer Kimball

Mexico President Claudia Sheinbaum told reporters that she expects to speak with Trump on Thursday, probably in the morning, according to NBC News.

Mexico has not yet declared retaliatory tariffs on the U.S., though Sheinbaum said Tuesday that those would be announced this weekend.

— Jesse Pound

Trump could exclude some sectors from the 25% tariffs imposed on Canada and Mexico, Lutnick told Bloomberg Television in an interview.

“The president gets to make the decision,” Lutnick said. “There will be some categories left out. It could well be autos, could be others as well.”

Lutnick said Trump is considering excluding sectors that are compliant with the United States-Mexico-Canada trade agreement’s content provisions.

“My understanding is the Big Three say they produce cars that are compliant under USMCA, which means they have sufficient U.S. content in them to be part of the USMCA agreement,” Lutnick said of Ford, General Motors and Stellantis. “That’s part of our discussion, and the president’s really thinking about that.”

Lutnick said he expects the White House will make an announcement Wednesday and that the changes could be “somewhere in the middle” rather than a complete rollback.

— Spencer Kimball

Trump acknowledged during a joint session of Congress that his tariffs on major U.S. trading partners will create “a little disturbance.”

“Tariffs are about making America rich again and making America great again. And it’s happening, and it will happen rather quickly,” Trump said during the address Tuesday night.

“There will be a little disturbance, but we’re okay with that,” Trump said. “It won’t be much.”

— Hakyung Kim

The implementation of Trump’s tariffs has roiled the U.S. stock market this week as investors worry the levies will hamper the economy.

The Dow, S&P 500 and Nasdaq Composite have all slid about 3% over Monday’s and Tuesday’s sessions. With that, the blue-chip Dow is on track for its worst week since the regional banking crisis in March 2023. It would also mark the biggest weekly slide for the broad S&P 500 and tech-heavy Nasdaq going back to September.

Stock futures popped Wednesday morning, however, amid mounting hopes of a compromise on Trump’s policy for import taxes. Follow live markets updates throughout the day here.

Trump could announce tariff compromise deals with Canada and Mexico as soon as Wednesday, likely involving the scaling back of at least part of the new 25% levies on goods from both countries, Lutnick said Tuesday.

“Both the Mexicans and the Canadians are on the phone with me all day today, trying to show that they’ll do better,” Lutnick said Tuesday. “And the President is listening because, you know, he’s very, very fair and very reasonable. So I think he’s going to work something out with them,” he said on “Fox Business.”

Trump, who has held up tariffs as an all-powerful negotiating tool, based the policy on allegations that the neighboring countries were failing to stem the flow of drugs and crime into the U.S.

— Kevin Breuninger, Sarah Min

Canada has appealed to the World Trade Organization over Trump’s imposition of tariffs.

Canada’s ambassador to the WTO, Nadia Theodore, said Ottawa has “requested WTO consultations” with the U.S. “in regard to its unjustified tariffs on Canada.”

“The U.S. decision leaves us with no choice but to respond to protect Canadian interests,” Theodore said in a LinkedIn post Tuesday. “This was not the outcome we hoped for. And we urge the U.S. administration to reconsider their tariffs.”

A WTO official confirmed to CNBC that Canada has requested consultations, the first step in the organization’s process to resolve trade disputes.

— Spencer Kimball

Chinese officials are taking an aggressive stance toward the U.S. tariff escalation, including a post on X by the Chinese Embassy in the U.S.

“If war is what the U.S. wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,” the post said.

Lin echoed those remarks while also calling the U.S.’ fentanyl-related explanation for the tariffs a “flimsy excuse.”

“If the U.S. has other agenda in mind and if harming China’s interests is what the U.S. wants, we’re ready to fight till the end. We urge the U.S. to stop being domineering and return to the right track of dialogue and cooperation at an early date,” the spokesperson said.

— Jesse Pound