Three Things (3/12)

Tariff Tango

The U.S.-Canada trade standoff took a dramatic turn today as President Trump walked back his plan to impose a 50% tariff on Canadian steel and aluminum, following an agreement from Prime Minister Trudeau to pause Ontario’s new tariff on U.S. electricity exports. The reversal comes just 24 hours after markets tumbled on fears of escalating trade tensions. The initial announcement sent shockwaves through global markets, driving the Dow down over 500 points and rattling sectors reliant on cross-border trade, from manufacturing to construction.

While the rollback provided some relief to investors, the episode reinforces just how unstable trade policy has become under an increasingly transactional approach to negotiations. The speed of these policy swings makes it harder for businesses to plan long-term investments, price contracts, and stabilize supply chains. The real lesson here? The era of predictable trade agreements is over, and companies operating in globally connected industries must assume that tariffs, policy shifts, and retaliatory measures are now routine weapons in economic diplomacy. The tariff reversal might soothe markets today, but the bigger shift is the unpredictability of trade policy itself. It’s time for businesses and investors to bake geopolitical risk into the equation permanently.

No More Free Rides

The airline industry is experiencing significant turbulence as Delta Air Lines slashes its revenue forecast, attributing the downgrade to rising operational costs and weaker-than-expected demand. This announcement has led to a sharp decline in airline stocks, with United and American Airlines experiencing notable losses. Conversely, Southwest Airlines' stock surged by 8% following its decision to implement checked baggage fees, a strategic move influenced by activist investor Elliott Investment Management.

This divergence in airline strategies underscores the industry's struggle to balance cost management with customer satisfaction. As operational expenses rise and demand fluctuates, airlines are compelled to explore alternative revenue streams, even at the risk of alienating price-sensitive travelers. The airline industry's current trajectory reflects a critical inflection point, where traditional business models are being tested by economic pressures and evolving consumer expectations. Stakeholders must anticipate a restructuring of airline economics, where adaptability and customer-centric strategies become paramount in navigating the challenges ahead.

Wall Street Slims Down

Bank of America has laid off approximately 150 junior investment bankers across its New York and London offices, reflecting a broader slowdown in deal-making and corporate fundraising. This follows similar moves by Goldman Sachs and JPMorgan, which have also trimmed headcount in response to weaker M&A activity and capital markets revenue. Goldman plans to cut 3-5% of its workforce, primarily targeting vice presidents, while JPMorgan has eliminated over 1,000 positions in the last quarter alone. With global interest rates still elevated and regulatory scrutiny increasing, the investment banking sector is in cost-cutting mode rather than expansion mode.

After years of record-low interest rates fueling M&A booms, the sector is now facing a reality check: big-ticket deals are harder to justify, private equity exits are slowing, and IPO pipelines are thinning out. It's a world where higher capital costs mean fewer mega deals and slower deal cycles. For the financial sector, this isn’t a short-term lull—it’s a fundamental shift in how and when deals get done. The days of deal-making at any cost are over, and banks are recalibrating for a slower, more selective market. Higher rates have changed the math, and firms that fail to adapt to a more disciplined, ROI-driven deal environment will be left behind.