WTF is happening now?

Your daily review of what happened since the last time we talked.

> Trade war:  On Thursday, rumors spread that Trump had raised tariffs on China to 245%. The White House denied that there was any change, but said that it was thinking of pressuring 70+ other countries not to allow China to evade tariffs by passing goods through their borders in an attempt to “isolate” China and force countries to choose between the US and China. On Friday, the US said that it was making progress on a bilateral trade deal with Japan, but posted a pic of Trump and Japan’s trade minister. Not good optics. Trump said that tariffs had brought in $21 billion in tax revenue, but the US Customs and Border Protection department estimated that the take has only been around $500 million since April 5.

> Gold:  This is where all the action has been. Gold traded as high as $3,360/ounce on Thursday, and while it’s fallen back a bit since that high-water mark, it’s still in territory that we’ve never seen before. Gold is acting like the flight-to-safety asset that Bitcoin wishes it was right now.

> Oil:  The spot price is up about 10% from the previous week’s lows on news that Iran was hit with additional sanctions. 

> DOW:  The American markets were hit hard by comments by the US Federal Reserve Chairman, Jerome Powell, that Trump’s tariff-based strategy could create a “challenging scenario” of increased inflation and increased unemployment. Powell said that the Fed would have limited tools available to help soften both of those factors at the same time, and said that there was a “strong likelihood” that inflation and unemployment would worsen for the remainder of 2025. Trump immediately said that Powell was “LATE and WRONG” about inflation, and that Powell’s “termination cannot come fast enough.” 

  MB BOTTOM-LINE:  Sometimes, for a brief moment, the chaotic implementation of bad ideas can look like 4D chess, but given enough time, the truth rises to the surface. Like a MagicEye puzzle, once you see it, you can’t unsee it. Not only is the US committing a terrible error with their strategy, but they’re lying about it to their own people, and they’re on the edge of doing something that could make things orders of magnitude worse. If Trump replaces Powell, all bets are off. Would the US become uninvestable without Powell? I’m not willing to say that, but it would definitely remove one of the few serious guardrails left that international investors have used to price investments and build trust in the long-term viability of the value of American assets. 
 

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