Will Trump’s Tariffs Turn into a Nothing Burger?
It feels like markets have begun trading in anticipation of Trump’s tariffs since August. Signals are mixed (i.e. gold up, bond yields down, dollar well of its highs, stocks uncertain) as to whether Trump’s tariffs will turn out to be a Nothing Burger.
What’s a Nothing Burger?
A Nothing Burger is a slang term used to describe something that is hyped up or expected to be significant but ultimately turns out to be unimportant, unimpressive, or lacking substance. It is often used in politics, media, and discussions about controversies that don’t amount to much in the end.(from the internet)
It is not clear what the objective of imposing tariffs on the top 4 U.S. trading partners (Canada, Mexico, EU, China). Peter Navarro, the administration’s chief trade counsel, trade counselor said that tariffs had a dual purpose: “The president is fighting a drug war, not a trade war.”
Canada and Mexico
I have likened verbal intervention in the currency market, where the threat of central bank action is often more of a deterrent than the actual event, to Trump’s threat to impose tariffs. In this regard, the threat of tariffs on Mexico and Canada were quickly delayed for a month (to negotiate) as the leaders of both countries made concessions about defending the border.
Both the CAD and the MXN currencies have since rebounded sharply from an initial plunge when Trump announced that he would be imposing 25% tariffs.
China
This is a hard one to predict after Trump levied a 10% tariff on goods imported from China. In retaliation, China imposed targeted tariffs on some U.S. exports. There was hope that a call between the two leaders would diffuse the situation but as of this writing, none is scheduled.
The question is how can two strong leaders come out of this without it escalating into a trade war. If Navarro is right, perhaps cracking down on the export of fentanyl might be a face saving way out.
However, trying to forecast the outcome is beyond my pay grade. All I know is how this evolves is the key to whether Trump’s tariffs turn into a Nothing Burger.
EU
Comments from President Trump indicated that the EU is on the tariffs hit list. This has seen the EU to respond with threats to retaliate against U.S. tech companies. There have also been reports that the EU is looking for early talks to avert tariffs from being imposed. .
Given how vocal Trump has been about the U.S. trade deficit with the EU, it remains to be seen whether tariffs or even a trade war can be averted. However, given the weak state of the EU economy, a resolution that averts a trade war would seem more logical than an escalation of the situation.
So, will Trump tariffs turn out to be a Nothing Burger?
As is typical of a geopolitical crisis, markets often factor in a worst case basis and then reassess later. That has the case so far and while it is premature to make a prediction, especially given the unpredictability of President Trump, one can argue that the threat of tariffs and its net impact on global markets may turn into a Nothing Burger.
The wild card is what happens with China. If not for that it would have been easier to make a prediction.
In markets, keep an eye on the price of GOLD as an indicator as safe haven buying has seen it soar to record highs
XAUUSD DAILY CHART
Feel free to contact jay@global-vew.com with any questions or comments.
From a G-V member (Feb 4m 2025:
‘The threat of tariffs is NOT a promise or desire to wage trade war. The threat of tariffs is ONLY means to get action desired by Trump from his counterparty.
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