First shots fired

The first shot has been fired - a near universal levy of 10% on goods imported by the US, and much more than that on certain countries. President Trump has declared a national emergency. The "responsive" tariffs are "to strengthen the international economic position of the United States and to protect American workers", according to a White House statement. Bullion imports are one of the few items excluded from what is being called the "reciprocal tariff". The tariff policy "simply asks other countries to treat us like we treat them. It's the Golden Rule for Our Golden Age" continues the statement. It says a 2024 economic analysis "found that a global tariff of 10% would grow the economy by $728 billion, create 2.8 million jobs, and increase real household incomes by 5.7%." A study by Yale University finds that the "average effective US tariff rate...is now the highest since 1909."

The President is first and foremost a businessman, not a politician. Hence his indifference to diplomatic protocols, the euphemistic wrapping in which most international dealings are clothed. He speaks directly, and for some this attitude is offensive, while for others it's a breath of fresh air. His genius is that he has tapped into the resentments and anger of those who have lost out to the outsourcing of jobs and the subjecting of low-income American workers to ever-greater competition with overseas workers. He has identified America's trade deficit with the world - meaning America buys more from overseas than it sells - as public enemy number 1. Last year the US ran a trade deficit of almost $1 trillion.

President Trump has taken note of this deficit. In January 2025 the US trade deficit was reached $153.26 billion, against $90.28 billion in January 2024. His main aim is to get the US to produce more goods and import less.

Not yet a war

Using tariffs to achieve this might seem a blunt instrument. Despite the world's media describing this as a trade 'war', it isn't that yet. A war requires two sides (at least). So far China (facing a 54% on imports to the US) has vowed to retaliate, and Ursula von der Leyen, president of the European Commission, says the European Union (EU) is finalizing countermeasures against the tariffs. Keir Starmer, the UK Prime Minister, has said his country's first response should not be to "jump into a trade war".

The consensus among economists is that overall economic growth is weaker in a trade squabble. But certain people might benefit from America's protectionism, notably unskilled workers in sectors that compete with imports. The UAW (United Auto Workers trade union) has welcomed the tariffs imposed on foreign-made automobiles. The White House claims that since the North American Free Trade Agreement (Nafta) took effect in 1994 90,000 US factories have closed and five million durable goods industry jobs have disappeared. It believes that, over time, production will be forced to shift from exporting sectors to import-competing ones, and that this will revitalize US industry.

But if this develops into a full-blown trade war consumption for all social categories is likely to be less than it would have been otherwise.

Over time

A key question about these tariffs is: how fast might non-US industries that are importing their goods into the US relocate their production to the US. President Trump has said there will be pain in the short term - the Yale study estimates that an average household will lose $3,800 and the overall economy will be as much as 0.6% smaller - but long term gain, with the gains from the tariffs being more than $3 trillion. The pain might be longer and deeper than the administration hopes; it takes time for companies to up sticks and move to a different country.

There are many different opinions about these tariffs and how successful they might be in achieving President Trump's ambitions. He wants to turn back the clock, but the model of manufacturing he has in mind hasn't existed for decades.

To add to the prevailing geopolitical uncertainties and realignments, we are now in a protectionist world. Some hard-nosed realism is necessary; the time for sentimental attachments is over. In the chaotic era, when stock prices are weak, there is only one form of reliable money; fiat currencies are going to become subject to extreme and swift volatility. The spot Dollar price of gold rose to more than $3,167/ounce, a fresh high, after the tariff details became known but slipped back to $3,090. Gold has been the best performing asset so far this year, rising by almost 20% in Dollar terms. In doubtful times, gold is proving its reliability.

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

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