Executive Global
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Productivity | Strategy | Profitability
After four years of BIDEN somnambulism and legitimate, post-debate questions as to who was really in charge of DC post-2020, the 2025 Trump White House has certainly come in swinging.
And swinging can mean everything from homeruns to strike-outs. Executive orders have been flying off Trump’s desk from day-one, including recent tariffs on Mexico, China and Canada.Many, of course, are relieved to see decisive action and openly “America-first” policies out of DC, but we must be equally aware that when leadership comes out swinging, things can break.
For example, the IEEPA tariffs of late, all vestiges of the Carter era, are not just tariffs per se, but empower the US to weaponise (freeze, levy etc.) USTs held by foreign nations who don’t comply with US measures. Of course, we saw how this headline tactic backfired when weaponising the UST against a major power like Russia in 2022. Moscow simply got creative with China (oil, gold, trade) and other BRICS+ nations to find creative and effective ways to go around the “mighty” dollar.
Tariffs: Too Soon to Tell?
Early on, these threats and acts of tariff power from the US have nations scrambling, complying and/or complaining. Canada’s Chrystia Freeland is seeking to organise a similar “coalition of the abused” to get creative in counteracting Trump’s threats with some to-be-determined counter-measures of their own, but it seems that a Trump-terrified Trudeau is already doing his interim best to comply with Trump’s border security demands.
Meanwhile, Mexico’s leadership has been open with intentions to not bend to Trump. Others, however, can point to Columbia’s 12-hour about-face and ultimate capitulation to Trump’s demands in January. Thus, the primary question is this: Does the Trump White House have the power to make, enforce and “win” when it comes to playing hard-ball with nations like China, Mexico, Canada et al?
Re-Shoring: Needed but Expensive
If, like me, you wish to see a re-shoring of manufacturing back to the US, then Trump’s actions make initial sense. His tariff’s may compel US-based CEO’s who have offshored labour to get their production lines back to the US and hire locally. And there’s no denying that the $200B trade deficit Canada has been enjoying, and the $300B trade deficit the BRICS have made to their advantage, is clearly upsetting a winning and “America-first” Trump.
When companies like Apple and John Deer make their American-based executives richer by firing US workers in favour of Mexican or Chinese labor, it sure feels good to stick it (tariff-wise) to the post WTO-American C-suite who have off-shored the American dream across its once tragically porous borders. But how does this play out near term?
Love or hate Trump, his America, at least for now, ain’t so great yet. Re-shoring jobs and paying fair wages is expensive—and inflationary near-term. This is good for gold.
Lots of Sticks, Lots of Swinging, Lots of Pain?
Does the US really have the power to speak loudly and carry a big stick against nations economically stronger than say, Columbia, Iran, Mexico, Canada or Venezuela? After all, whatever we may think of China’s fragile and debt-soaked economy, its market buys 430M smart phones vs the 140M bought per year in the US. China also produces 30M cars, whereas the US builds just 10M for the same period. China also prefers buying oil in yuan and gold-- not petrodollars.
In short, who carries the bigger stick in a protracted trade war? It’s further worth noting that tariffs, as tried in 1930 under Hoover (the Smoot Hawley Act) resulted in Hoover losing the election, senators Hawley and Smoot losing their senate seats, and an already economically depressed USA losing 30% of its export levels. Will history rhyme again under Trump?
Will AI Markets Save the US?
For years, of course, the answer has been not to worry, as America enjoys massive AI and other tech superiority. But DeepSeek just reminded us that perhaps China, and not the US, can lead in AI as well? This is to be determined, but the question remains: If everyone is carrying a big stick, won’t everyone bleed? And then, of course, there’s the bond market…
The Bond Market Matters
Tariffs, after all, are just another form of dollar weaponisation to many nations already tired of being the dog wagged by the dollar tail. The foreseen and unforeseen inflationary consequences of tariffs could make an already unloved UST even less internationally loved, which means less demand for the same, which means rising bond yields beyond the Fed’s immediate control. Rising yields (i.e., debt pricing), of course, are shark fins to a debt-vulnerable economy already on the verge of (and frankly in) recession, as the steepening of a previously inverted yield curve makes clear.
Recently, however, the yields on both the 2Y and the 10Y UST have been falling, which can indicate strong signs of stagnation within the US. As alarming, a narrowly led S&P has seen days of $500B+ market cap losses on just Nvidia alone. We see how dangerously markets are flirting with a crisis on Wall Street overlapping with a media-ignored economic crisis on Main Street.
Rising yields further explain mortgage applications at lows not seen since 1995 as commercial real estate markets struggle and residential bubbles near an ‘uh-oh’ moment. As for sovereign US IOUs, on an annualised basis, they have not been able to beat inflation (which is creeping up not down) since 2020.
One has to ask: Is there true safety in the so-called 10Y UST “safe-haven.”
Banking Risk—Ignored but Not Forgotten
Meanwhile, US, European and Chinese banks flirt with clever accounting to mask horrific balance sheets as the world unknowingly drifts toward yet another media-ignored banking crisis. This is not gloom/doom data mining, but just blunt data analysis—as the recent accounting tricks at UBS make clear. As things crack and then blow up, this creates the perfect pretext for inevitable emergency liquidity from the Fed and other central banks, whose bazooka QE measures are and will be inherently inflationary and very good for gold whenever the next systemic crisis makes the headlines.
The Fed, like the Treasury Department, knows perfectly well that at some point the currency will have to be sacrificed to save the bond market. After all, the bond market is their real mandate.
No Good Options Left
Ultimately, when faced with an unprecedented public debt crisis, Uncle Sam has three choices: 1) default on the debt; 2) discover a productivity miracle, or 3) inflate or die. Option 1 won’t happen with a money printer in the corner; option 2 can’t happen once debt to GDP crosses 100% (we are at 125%) and option 3 now just becomes a matter of time and the right headline event.
Gold, Once Again to the Rescue
This, again, is very good for gold, which is not in a bull market—but simply reacting to a broken and debt-soaked fiat money system already in a bear market. Central banks, particularly in the East, have seen the writing on this fiat wall for years, which explains why they have been stacking gold (blue line in Central Bank Purchases graph) at record levels while net-dumping UST’s (red line in Central Bank Purchases graph) since 2014.
The weaponisation of the USD/UST against Russia in 2022 only made this global distrust for Uncle Sam’s IOUs all the greater, which is clearly shown in the doubling of central bank gold buying since that same year.
At the same time that trust in the UST is falling, nations are simultaneously taking physical delivery of their gold off the COMEX futures exchange, as “stand for delivery” orders are dramatically replacing the once traditional roll-over process of levered paper gold. The media will say the recent gold moves from London to the COMEX are driven by tariff fears and arbitration plays between the future’s price in NY and the cash price in London. We disagree.
The COMEX needs gold because the counter-parties on the NY exchange are now openly exercising their “open interest” right to physical delivery of the only real money asset the world has ever known: Physical gold. This dramatic demand for real rather than paper gold is a compelling and leading indicator that gold is the most trusted strategic reserve asset for storing wealth.
Simple Safety
Of course, we’ve known for years that this boring, analog “pet rock” was always a far safer, less centralised and more honest and historically-confirmed form of money than paper promises, centralised stable coins (CBDCs in sheep’s clothing) or vacant gold boxes at financially sick commercial banks. Nations and central banks out East, like sophisticated gold investors, understand that physical gold, held within one’s own name and outside of a centralised and crumbling banking system, is the only true protection from the debasement of fiat money, banking risk and geopolitical unrest.
Toward this end, the recent all-time-highs in gold in every major currency is neither a surprise nor a final peak. In fact, gold’s secular rise is still only in its first chapters as the last chapters of a debt-destroyed fiat money system nears its final act. EG
