The U.S. is flexing its economic power — drawing retaliation

Hello, this is Hui Jie writing to you from Singapore. Welcome to another edition of CNBC’s Daily Open.

Washington has launched an economic offensive against Iran and Canada — the two countries one would normally not lump together. But U.S. President Donald Trump is taking them on at the same time, declaring repeatedly that Tehran is beaten, while asserting that Canada could not survive without the U.S.

Neither has submitted. Canada is retaliating “dollar for dollar,” Iran is working with Oman to finalize a trade route through the Strait of Hormuz — meanwhile, China is building a modest hedge against dollar-based sanctions.

Just days after the U.S. levied steep tariffs on Canada, Ottawa has announced retaliatory measures, matching “dollar for dollar” the 50% duties that President Donald Trump imposed over the weekend after a breakdown in trade talks.

Ottawa’s new tariffs encompass more than 700 U.S. goods and are worth about $20 billion, mirroring the size of Trump’s latest import taxes on Canadian wine, cement, hockey sticks and more.

Among the most significant are 50% tariffs on American steel and aluminum, doubling the current rate. Other goods that are tarriffed include dairy, seafood, appliances, wood and paper products, and clothes.

In China, the U.S. is threatening to cut businesses that help Iran evade sanctions off from the American financial system. And while Beijing can reject the demands, its biggest lenders still have strong incentives to preserve access to U.S. dollars.

But China is building a hedge, albeit still a small one, against Washington’s measures.

Peter Alexander, Shanghai-based managing director of advisory Z-Ben, told CNBC that China’s Cross-Border Interbank Payment System, or CIPS, showed it was trying to diversify from dollar-centered finance, without abandoning it altogether.

CIPS transactions have picked up since the Russia-Ukraine war in 2022, and generally grown this year, according to official figures.

Over in the Middle East, Iran looks to be shutting the U.S. out from efforts to open the critical Strait of Hormuz, as it negotiates with Oman to establish a temporary joint shipping route and a mission to clear mines from the key oil export corridor.

Oman’s foreign minister said “practical arrangements to restore safe navigation” will be announced soon, and described talks with Iran’s top diplomat, Abbas Araghchi, in Tehran as constructive.

Muscat’s reference to a mine-clearing mission also appeared to contradict President Donald Trump‘s statement earlier Tuesday that the U.S. Navy had informed him all mines had been removed from international waters in Hormuz.

Over in markets, all three major U.S. indexes rose overnight, with focus on chip stocks ahead of Nvidia‘s results.

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