While the 25% tariffs on Mexico and Canada were more of a classic Art of the Deal since he used the same number on Columbia, Trump achieved what he wanted from both Canada and Mexico – to secure the border and to stop the drug trade that kills hundreds of American youth daily. There is no question that the United States has picked the short-stick in this draw for world trade. Especially over the past 20 years, the imbalances in world trade have grown. However, the Drug Cartels may decide to wage war on the border, fearing Trump will exterminate them economically.
What has happened is that other countries have taken advantage of the situation. Capital flowed from the United States postwar, which rebuilt the world economy. To protect their economies, they have engaged in all sorts of games. For example, American banks are barred from operating in Canada.
Canada and Mexico were a distraction in what would emerge as a Tariff War. Trump imposed a 10% tariff on China, which is more realistic because that is not part of the Art of the Deal. The real issue will be the tariff imposed on the EU. That is a serious issue insofar as a Trade War is concerned.
In the case of China, the Ministry of Finance imposed a 15% tax on certain types of coal and liquefied natural gas and a 10% tariff on crude oil, agricultural machinery, large-displacement cars, and pickup trucks. The Ministry of Commerce and China’s customs administration also announced new export controls effective immediately. They targeted more than two dozen metal products and related technologies. Those include tungsten, a critical mineral typically used in industrial and defense applications, as well as tellurium, which can be used to make solar cells. They also added two American firms, biotech company Illumina and fashion retailer PVH Group, which owns Calvin Klein and Tommy Hilfiger. They were added to China’s unreliable entities list, saying they “violated normal market trading principles.”
The real bombshell is more likely to be Europe, which has been so anti-Trump with all the media swearing Trump as a felon could never win. Interestingly, some $82 billion in gold has left the London Market and moved to NYC warehouses. Why? They fear a Trump tariff will be applied to everything, including gold. In reality, this could lead to a shortage of gold for Europe if the EU imposed tariffs on anything and everything coming from the United States, including gold.
It must be in 100oz recognized bars to be viable for the NY inventory, like this one. Our computer is projecting a choppy period for gold into April. It appears from May onward, is where we will see a trend develop. The European economy as a whole is in serious trouble. The negative interest rates from 2014 left much of the debt in a serious loss position, for banks mandated to keep reserves in government debt do not have to mark-to-market. There in lies a potential economic crisis for Europe.
Europe has been preparing for the possibility of a trade war for months. Trump has long criticized the European Union for not buying enough American cars and farm products. Trump even told the BBC that tariffs “will definitely happen with the European Union” and may come “pretty soon.” The European economy is in such dire straights the likelihood of a trade war with the United States will only lead to a steep economic decline for the EU after it has pursued this NET-ZERO climate change agenda that has shrunk its economy and imposed sanctions on Russia, courting war on that front as NATO pushes their agenda.
The cornerstone of the EU economy remains Germany. We had a Directional Change in 2024 and another in 2026. It appears this economic contraction will continue into 2027. That is when the prospects for war seem to be on schedule.
