In 1999’s South Park: Bigger, Longer & Uncut, the United States declares war on Canada over an obscenity-laced cartoon deemed a threat to children south of the border. In 1995’s Canadian Bacon, a US administration launches a Cold War on Canada that includes a propaganda campaign blasting Canadians’ love of mayonnaise. Truth is stranger than fiction.

Three days after trade talks between the two countries collapsed, President Donald Trump declared in a Monday social media post, “We don’t need Canada, they need us!” Doug Ford, the leader of Canada’s largest province, responded: “He can kiss my a—.” Both sides said they intend to ratchet up a trade clash that Canadian Prime Minister Carney said has put the two nations “at war.” While officials hunker down for a fight, investors are hesitant to put much stock in near-term tailwinds for potential beneficiaries.

I’m Steel Standing

In the middle of last week, things were practically chummy. Trump paused tariffs set to take effect on Wednesday, telling reporters the US and Canada reached a trade deal in which both sides made concessions. Then, late on Friday, Carney directed his negotiators to stop bargaining and leave the US immediately, alleging the Trump administration made unacceptable last-minute demands.

Without a pact in hand, Trump on Saturday placed 50% tariffs on roughly $20 billion worth of Canadian imports including wine, cement and hockey equipment. Carney vowed “dollar-for-dollar” retaliation. On Monday, Trump escalated. Starting in 2027, he said, car and truck imports from Canada will face a 50% tariff, up from 25%. Auto parts will face a new 50% tariff. Of particular note, steel imports face a sustained 50% levy. Last week, when a deal seemed almost certain, shares in US producers Nucor, Cleveland-Cliffs, and Steel Dynamics fell, as it looked like they would soon face more Canadian competition. Even though that prospect now seems farther away than Yellowknife, investors are playing it cautious:

• Nucor, Cleveland-Cliffs, and Steel Dynamics all rose multiple percentage points in early trading on Monday, but eventually gave up most of the gains. Trump’s tariffs have pushed supply onto international markets, where steel is now cheaper, while American buyers are stuck paying more.
• According to SteelBenchmarker, US hot-rolled band prices reached $1,264 per metric ton on August 12, the highest since 2022. That compares with $825 in Western Europe and a global benchmark of $500, continuing a run of record price spreads.

Three Companies: Detroit’s Big Three automakers had a tougher Monday: Shares in Ford fell 3.3%, General Motors 1% and Stellantis 3.5%. At present, the US industry has a trade surplus with Canada, which bought $30.4 billion in vehicles from the US in the first half of the year, while $24.5 billion in Canadian-made vehicles went the other way. If Carney is serious about “dollar-for-dollar” retaliation, that could be one target.

As volatility becomes the status quo for global oil markets, Exxon is embracing a new slogan: auto-drill, baby, auto-drill.

On Monday, as markets digested the potential impacts of an “Economic D-Day” waged by the US against Iran and its oil industry, Exxon revealed to Reuters that it has perfected automated drilling in the Permian Basin and, of course, plans to rapidly retrofit its more than 30 rigs across the region in the coming years.

Rigged Game

Two of the company’s rigs in the Permian Basin are now fully automated, one executive told Reuters, requiring just a single worker controlling the robotic machinery in a small office to do the exhausting work typically done by multiple humans on the rig floor. That dramatically reduces the odds of accidents and employee injury, Exxon stressed. It also, of course, will allow for a whole lot more drilling. The company said half its fleet of rigs will be fully automated by 2028, as it works to boost production in the West Texas basin by 40% by 2030. Presumably, the automation will also help Exxon achieve its previously stated goal of producing oil at a breakeven point of $35 per barrel by 2027 and $30 per barrel by 2030.

The expansion would strengthen Exxon’s Permian dominance even further:

• The planned increase is set to lift Exxon’s production levels in the Permian Basin from about 1.7 million barrels per day this year (an increase of 12% year-over-year in its own right) to 2.5 million barrels per day at the start of the next decade. Chevron, the basin’s next-top producer, has said it plans to maintain its current level of just 1 million barrels per day through 2040.
• Exports of US crude hit an all-time high of 5.7 million barrels a day in May as traffic through the Strait of Hormuz came to a near standstill. While exports contracted in June and July amid a temporary US-Iran ceasefire that reopened the Strait, the discount on West Texas Intermediate compared with Brent crude is once again widening, which analysts say will stoke US exports.

Fuel Fallout: Plans to launch an “Economic D-Day” against Iran announced by US Treasury Secretary Scott Bessent on Monday may increase demand for US oil even more. In a bid to turn Iran into an “economic outcast,” Bessent floated harsh sanctions for countries that continue to purchase Iranian oil.

The Earth revolves around the sun, and quarterly earnings revolve around Nvidia. The world’s most valuable company reports tomorrow, giving investors a peek at a balance sheet that the tech industry interprets like a tarot deck.

Analysts expect Nvidia’s fortunes to hold strong for the second quarter, with Bloomberg’s experts predicting a 96% jump in the chipmaker’s revenue compared to the year-ago period. The hyperscalers Nvidia counts on, including Amazon, Google and Microsoft, have been reporting strong cloud growth, signaling their spending isn’t slowing.

But as fears mount around massive AI spending, investors will be scouring Nvidia’s capital outflows for signs the industry can sustain its growth. Over the weekend, The Information reported on a new deal in the works between Nvidia and AI search engine Perplexity that could signal Nvidia’s spending is still ramping up.

Buying the Whole Neighborhood

Nvidia is putting its massive cash flow to work, with The Information reporting on Sunday that the chipmaker is in talks to invest in Perplexity. The fund infusion would juice Perplexity’s valuation to $30 billion, up more than 50% from its last round a year ago.

The deal would expand Nvidia’s growing role as a landlord of sorts in the AI industry:

• The deal would secure Nvidia a stake in Perplexity ahead of its planned IPO in 2028. It also gives Nvidia a foothold in inference, meaning AI that processes users’ prompts and responds with relevant outputs. In Perplexity’s case, that means generating search results. As Google has shown, curating search can be a powerful role, but rivals, including Google itself, abound.
• Nvidia also said this month it’s teaming up with Wall Street to help mobilize $500 billion toward AI infrastructure development. In addition, the chipmaker plans to line up as much as $105 billion to help SB Energy and OpenAI build an 8-gigawatt data center in Ohio (that’s enough energy to power millions of homes).

AI’s Warren Buffett: Nvidia’s earnings are starting to feel like a Berkshire Hathaway event, where people hang on CEO Jensen Huang’s every word like they did with Warren Buffett, according to Zacks strategist Brian Mulberry. Investors are paying close attention to which AI companies get Huang’s Midas touch, and which don’t.