Tariffs Destroy Markets…

Well, we’ve reached a moment I feared we’d reach. But I will say immediately that what’s coming next will melt faces.

Our topic today: Trump’s tariffs and financial assets.

I warned that where we are is where we would land if Trump imposed tariffs.

Well, he did indeed announce tariffs on Canada and Mexico (25%), and on China (10%)… and now he’s threatening to tariff the UK and the European Union. (As I write, the tariffs on Mexico and Canada have been delayed for a month…)

The immediate result is exactly what I told you to expect: Stocks fell out of bed, and the crypto market was destroyed the same way a perfectly manicured Middle America neighborhood is destroyed by an F5 tornado.

I will announce my bias here: These tariffs are ignorant. (But hang around for a moment for the U-turn I’ll soon make, since I don’t think these tariffs are about tariffs.)

One of Trump’s stated rationales for imposing the tariffs is that Canada and Mexico “have to balance out their trade,” because Trump doesn’t like that America has trade deficits. He sees that as America losing.

What he misses is a bigger question, “Why does America have trade deficits?”

Because Americans spend money as though consumption is an Olympic sport. We are the world’s biggest consumer nation. We want and we buy everything under the sun. But we cannot make everything we want.

And no, tariffs will not change that. Ever.

Two “for instances”

1. Where does America grow all the coffee beans that Starbucks needs for 13,000 US outlets, and for tens of thousands of other eateries and gas stations in America that sell coffee?

• Where does America grow all the bananas for a country that is one of the world’s largest consumers of bananas?

American trade deficits are a function of American consumption.

If Trump wants to balance trade deficits, then focus on discouraging consumption at home with something like a VAT tax (not palatable to Americans, of course) and incentivizing savings.

Moreover, Canada has 42 million people. Mexico has less than 130 million. How are countries that are one-eighth to nearly one-third smaller than America supposed to consume at the level of 330 million US consumers? (In Mexico, in particular, the average annual income is about 8x less than in the US. How can a country that’s 200 million people smaller than the US, and where incomes are 8x smaller, balance out American consumption? That’s a head-scratcher.)

But this is where I make my U-turn…

Having seen Trump operate politically for nearly a decade now, I suspect he’s not really about the tariffs. The tariffs are just the bang-grenade he’s tossed into the discussion to get something else that he really wants instead: Lower interest rates.

History shows that DJT is a transactional human who is always angling for a selfish agenda. I don’t say that negatively—it’s just objectively who he is and how he has operated his whole life.

His billionaire success, meanwhile, is largely predicated on debt. In some ways, debt has given Trump his lifestyle, and in other ways it has shown he is impulsive in the projects he pursues and that too often end in bankruptcy.

As he has stated many times, he loves debt, and he loves low rates.

As president, he thinks he should have a say in setting interest rates—which he has also voiced on more than one occasion.

Alas, the Federal Reserve doesn’t play that game.

It’s not a government agency. It’s a semi-private institution. And it doesn’t report to the president. Hell, it barely reports to Congress, for that matter. Congressional leaders have been seeking a full audit of America’s gold holdings since the 1950s, but the Fed rebuffs those efforts.

Anyway…

Trump thinks interest rates are too high, and told the World Economic Forum meeting in Davos, Switzerland last month that he “demands that interest rates drop immediately, and likewise, they should be dropping all over the world.”

But since he has zero pull with the Fed and even less pull with global central banks, the only thing he can do to achieve his low-rate world is to blow up the playing field by imposing tariffs on friendly nations… fully expecting that they will return the favor.

And suddenly we’re in a Smoot-Hawley redux—that moment in the 1930s when two economically ignorant members of Congress figured that best way to make depressions great again was by launching a global trade war.

As Trump’s trade war plays out, he’s going to get exactly what he wants: a financial crisis that forces central banks to lower interest rates, particularly in America. Or maybe the Fed cries “uncle” and announces an emergency rate-cut based on some fabricated rationale.

On that news, crypto is going to ride a rocket to the moon and beyond.

Falling interest rates and increasing money supply are rocket fuel for crypto.

So I’d be using this moment (and I will using this moment personally) to buy Solana and bitcoin and other select cryptos at a discount.

Between now and the moonshot, owners of paper and digital assets will find it excruciating at times. Stocks and crypto are going to suffer, as they already have, and as I said they would.

Gold, however, is going to be a rock star…

The metal hit a new all-time high late last week above $2,800. As I wrote in the latest issue of Global Intelligence, this is the Year of Gold and my base-case price has gold at $3,250 before 2025 ends.

This is why I have counseled my readers to own gold since 2010. And why the new Global Intel issue is all about two gold plays that could even outpace the price of physical gold…

America is in its terminal decline stage financially, and gold will be a prime asset to own for what’s coming (more on that soon).

In the meantime, practice patience. Do not rush to dump crypto or stocks into a declining market. This decline is exogenous, based on non-economic events. It will pass and normalcy will return.

And you will want to be holding great assets, particularly in crypto, when the bull market resumes its stampede higher.

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