CIBC’s deputy chief economist says U.S. President Donald Trump is taking on certain vulnerabilities through his tariff policies, which could weigh on stocks and spur inflation in the U.S., adding that Trump is using uncertainty as a tool.

In an interview with BNN Bloomberg Wednesday, Benjamin Tal said the investment community is “very confused at this point.” Tal’s comments come amid volatility in equity markets, with a broad sell off Tuesday after tariffs on Canada and Mexico took effect and gains Wednesday.

“Everybody is confused. We have this fog of uncertainty, and we have to try to make sense out of it. The point that I’m making is that there are some vulnerabilities to the position that President Trump is taking, he’s not a superhero at the end of the day,” Tal said.

“We know that in the past, President Trump was looking at the market as a barometer for success. You cannot have a situation in which the stock market goes down under his watch, and clearly the stock market is not liking the concept of a tariff in any significant way.”

Another aspect, Tal notes, is that tariffs on Canadian energy are likely to drive gasoline prices higher for Trump’s base. He highlighted that the U.S. consumes 21 million barrels of oil a day while producing 13 million, with most of the difference coming from Canada.

“The other factor to focus on is inflation, if you go back to his campaign speeches he was criticizing, (former U.S. President Joe) Biden and (former Vice President Kamala) Harris about inflation. The cost of living is dominating the agenda. A tariff is inflationary, if you impose a 25 per cent across the board, it will be inflationary,” Tal said.

He noted that his “walking assumption” is that during the second half of the year, much of the confusion around tariffs will clear.

“We are going to see a situation in which the weighted average tariff on Canada will be seven-eight per cent. Some sectors, maybe like dairy or forestry, will be 20-25 per cent. Some of them will be zero, maybe the auto sector will be zero, close to zero. The weighted average will be second-eight, not 25 per cent,” he said.

‘Confusion is the key word’

Regarding Trump’s overall strategy, Tal said “confusion is the key word” and says Trump is using chaos as a tool.

As an example, he said a CEO looking to expand their company may choose the U.S. over other nations to avoid potential tariffs.

“So you can get the benefit of a tariff without the cost of a tariff, that’s basically the idea behind this policy. Create as much fog as you can in order to get more people coming to the U.S. where it’s clear, that’s more or less what he is trying to do,” Tal said.

“It doesn’t mean that there will not be tariffs. There will be tariffs, but they will not last for too long.”

Tal said he thinks Trump is looking to re-negotiate the United States-Mexico-Canada Agreement (USMCA) ahead of schedule.