Another day, another vicious attack in the unending tariff wars that have engulfed the world. This time: 200 percent tariffs on all spirits coming out of the EU.
As you may have noticed, markets have found wild-assed shoot-from-the-hip tariff policies to be… distasteful.
Chart 1: One of These is Not Like the Other
Readers will know that I originally believed Trump 2.0 would be good for the markets. Boy, was I wrong. The second verse was not the same as the first. The difference? Trump’s favorite word, “tariff”.
Chart 2: Has Trump Contracted Trump Derangement Syndrome?
I ask this question not as a gilet jaunes libtard screaming into the abyss, but as a concerned citizen. Let’s unpack this Tweet.
“Globalist Wall Street Journal”. Wut? The Wall Street Journal (“WSJ”) is owned by News Corp. which is owned by Rupert Murdoch, the same guy who owns Fox News. On the news side, the WSJ is fairly balanced, but certainly pro-capitalist. On the editorial side, the WSJ is about as far right as it gets. They work day in and day out to make sure no billionaire is left behind.
The EU was formed “for the primary purpose of ‘screwing’ the United States of America”. Could this novel theory be true?
Image 1: Survey Says… Nay
So you see, the EU was formed in the wake of WWII so that these European countries would stop killing each other by the millions. Not a mention of the U.S. anywhere.
“TARIFF RELATED MONEY IS POURING INTO THE UNITED STATES”. (All caps shouting in the original.)
TRUE! But unfortunately it’s due to the Biden Crime Family. Tariff receipts have declined under Trump.
Chart 3: U.S. Tariff Receipts
Do you remember back during Trump 1.0, when he was practicing the “Art of the Deal” with China over soybeans and other low-margin goods? You’ll be interested to know that China only met 57 percent of its commitments under those agreements.
Which is another problem with tariff negotiations: it’s hard to force people to buy your goods.
Chaser
I’ll leave you with this.
We could be on the precipice of a commodities boom. As I’ve written about previously, if Trump were to be successful in significantly reducing the deficit, that would result in a lot less dollars going out into the world. If nothing changed, that would put the world into a re/depression. But, haha, the world will not sit by and do nothing. The rest of the world is super smart, and they will figure out that the best way to counter this is to… print money!
You see, if the U.S. isn’t buying their goods anymore, they can just replace those lost dollars with their own currency. (Sadly, the U.S. will still be running massive deficit spending. We just don’t have the money to pay for things, regardless of who makes them.)
In tariff land, everyone has to make everything at home, because tariffs make importing low-cost goods from the low-cost producers… impossible. So you switch to a world of high-cost production. Genius!
Look at the EU. They used to get most of their military kit from the U.S. Now they are literally spinning up an 850 billion Euro plan to ramp up their defense production.
Now do that for every industry and every basic material.
It’s wildly inflationary… and in that world, you want to own commodities.
Chart 4: Paradigm Shift?
So, where are we if Trump administration consciously decides to put us in a recession so that interest rates can go lower, maybe, probably, for their own personal game… or whatever the reason, what happens if that’s one of their targets, to put us into a recession where demand drops, where do you see commodities?