Today in gold news, international markets are processing their thoughts on Donald Trump’s lunge into trade war territory. So far things are going as you’d expect: interest rates rising for US Treasuries, fears of inflation. Wait a minute! Were those in the script?
Somehow, when President Trump said trade wars are easy to win, he left out rising prices for consumers and decreasing demand for US debt. But markets are indicating trade wars aren’t easy to win this morning after a weekend of analyzing the last tweetstorm. Seems someone was awake in Econ 101 when they taught that higher costs mean, well, higher prices. It’s all well and good to defend local jobs. Keeping prices realistic means more people are employed closer to where consumption happens. The downside is consumers were paying a lower price before, and now they’re going to pay a higher price. That’s the definition of inflation.
Things get worse you piss off whoever the suppliers are. And the market is spooked – with tariffs now targeted for solar panels, steel, aluminum and a few other basic materials, overnight came a poke at European car makers. Sometimes these big questions don’t have easy answers, and some wars are more difficult to win than others. Ask Presidents Kennedy or Johnson about Vietnam, or Obama about Afghanistan.
Today’s featured article discusses the risks and rewards of trade wars in the current environment, and where we can expect China and Europe to hit back.