A Tale of Two Trumps: On Hot Wars vs. Trade Wars
Tariffs kick in: He’s following through with his threat. President Donald Trump’s tariffs on dozens of countries, including a 104 percent tariff on China, went into effect today. When it comes to trade war, President Trump is showing he has nerves of steel.
The world continues to try to process what it all means—some nations with conciliation, some with alarm, some with retaliation. Trump has been boasting about how his radical actions have many nations taking notice and begging to make deals. Perhaps investors see this as a signal he’ll make those deals and the disruptions to global supply chains and risk of recession will be minimized. It seems the steep declines in global markets have stabilized somewhat. But signs of serious jitters are everywhere.
Fears remain over trade war between the world’s two largest economies. China has countered with an 84 percent tariff on U.S. goods, so far acting on its resolve to “fight to the end.” And rare earths are about to get rarer in America: China has restricted exports of the crucial minerals to the U.S., as our In Brief reports.
The European Union voted yes to retaliatory tariffs today, imposing a 25 percent levy on about $21 billion worth of U.S. goods. These include industrial goods like steel, agricultural items like soybeans and meat, and consumer products such as diamonds and vacuum cleaners. The first wave of implementation is set to begin April 15; a second on May 15. At the same time:
The EU is courting China to form a “reformed trading system” in response to U.S. tariffs. This is a major prophetic trend to watch, as our In Brief reports.
A big warning sign—U.S. treasuries in trouble: Yields on 10-year bonds are up sharply. This means the U.S. government must pay people more to persuade them to lend money to Uncle Sam. “This is a fire sale of treasuries,” one hedge fund money manager told Bloomberg. “This is like ice sculpting in a forest fire—whatever looked good a second ago is now gone.”
Normally in times of upheaval, bond yields fall as investors rush to put their money somewhere safe. Not this time. Why? Possible factors:
- U.S. treasuries are no longer considered safe. The tariffs have rocked investors’ confidence so deeply they’re not considering U.S. government debt the secure investment they once did.
- Some financial institutions or hedge funds are in trouble. They need cash urgently, and stocks are down, so they’re forced to sell bonds.
- China using its economic “nuclear option”: the world’s second-largest foreign holder of U.S. government debt dumping its treasuries on a massive scale. If China sold off a significant portion of these treasuries in a short period, it would flood the market with U.S. debt, leading to a sharp drop in bond prices and a corresponding spike in yields (since bond prices and yields move inversely). Few think China is actually doing this because of the self-inflicted damage it would cause at this point. But it has the power to do so.
Watch this trend closely.
People are “de-dollarizing”: “How Trump Could Dethrone the Dollar,” Foreign Affairs headlined yesterday. “The world’s reserve currency may not survive the weaponization of U.S. economic power.”
The value of foreign currencies against the dollar is rising. George Saravelos, global head of FX research at Deutsche Bank, said: “The market is rapidly de-dollarizing.” “We are witnessing a simultaneous collapse in the price of all U.S. assets including equities, the dollar versus alternative reserve FX and the bond market. We are entering unchartered territory in the global financial system,” he said.
Even as President Trump shows himself willing to pick fights with everyone to correct trade imbalances, he seems willing to hold peace talks with anyone to resolve other threatening issues—
Like nuclear talks with Iran: After Trump announced that these talks would happen this Saturday, it looks like Iran is willing to come to the table, albeit indirectly. “The Ball Is in America’s Court” is the headline of a Washington Post op-ed by Iranian Foreign Minister Abbas Araghchi, confirming that indirect nuclear negotiations will occur Saturday in Oman. Araghchi’s comments suggest Iran is serious, even optimistic, about the talks. What he wrote probably sounds like music in Trump’s ears:
Our proposal for indirect negotiations remains on the table. We believe that if there is true will, there is always a way forward. As recent history has shown, diplomatic engagement worked in the past and can still work. We are willing to clarify our peaceful intent and take the necessary measures to allay any possible concern. For its part, the United States can show that it is serious about diplomacy by showing that it will stick to any deal it makes. If we are shown respect, we will reciprocate it.
President Trump has previously said he wants Iran to dismantle its nuclear program under any deal. Araghchi made clear Iran is not prepared to do that. But it apparently is willing to go through the charade of peace talks if Trump is. You can be sure Iran will only agree to a deal if it means making superficial changes while continuing its Islamist empire-building. In case you missed it, our lead story yesterday morning covers the recent start of negotiations and what to expect from them.
Thus we see the tale of two Trumps:
Donald Trump when it comes to hot wars:
Donald Trump when it comes to trade wars:
Israel’s quiet war: Israeli Prime Minister Netanyahu has faced internal division in his country since winning reelection in 2022, but it appears he is finally seeing some success in his war against the “deep state,” Mihailo Zekic reports in this morning’s feature story.
Germany will have a government: The leaders of the CDU/CSU and the Social Democrats presented their new coalition agreement today in Berlin. Friedrich Merz, the leader of the CDU, is expected to be elected chancellor in early May. Boris Pistorius is expected to continue leading the Defense Ministry. The CDU will take on the Foreign Ministry for the first time in almost 60 years. A new ministry for space and digitalization will be created. The greatest agreement revolved around strengthening the military, including the reintroduction of voluntary conscription.
The most heavily debated topics revolved around the economy and migration. The coalition parties claim to have achieved a “change in migration and asylum policy,” but we don’t yet know the details. These parties’ past failures on these issues has been the main driver behind the dramatic rise of the far right. Speaking of which:
AfD is now Germany’s most popular party: In his television program on May 24, 2024, Trumpet editor in chief Gerald Flurry called the AfD “the fastest-growing political party in Germany” and said to expect it to grow even faster. At the time, the AfD polled at around 17 percent—barely over half the CDU/CSU’s 30 percent. Just over 10 months later, a voter survey now shows that the AfD has taken the lead, with 25 percent public support compared to the CDU’s 24 percent.
The AfD’s co-leader, Alice Weidel, posted on X, “The people want political change—and not a ‘business as usual’ coalition of CDU/CSU and SPD.” Germans do want change. Bible prophecy reveals that one way or another they will get it—but not in the way they expect. Read Mr. Flurry’s article in the April Trumpet “Germany Is Looking for a New Charlemagne.”
