Trump’s tariff gambit: Chaos, uncertainty, and market minefields

Markets

This week kicked off with a gut punch to the tech sector, courtesy of DeepSeek’s low-cost AI model, which sent shockwaves through the AI and semiconductor heavyweights. Just as traders were catching their breath, Trump’s tariff war drum started beating louder, triggering another sell-off late in the week. Yet, despite the sabre-rattling, the broad market response has been relatively restrained—so far. When the dust settled, US equities were a mixed bag: the Dow barely managed to stay in the green, while the S&P 500 and NASDAQ both took a hit, sliding over 1% as traders scrambled to “DeepSeek,” a hedge against tariff risks.

And let’s not forget the Federal Reserve, which, for once, played the role of a market wallflower. The Fed’s on-hold announcement barely moved the needle, a stark contrast to the high-voltage reactions of recent years. Powell’s message was clear but hardly surprising—inflation remains stubborn, economic growth is steady (Q4 tracking at a solid +2.3% a.r.), and the labour market isn’t sending any distress signals. No surprises there. The real game now? Keep an eye on the tariff “bouncing ball” and observe how this potential inflationary shock influences the Fed’s policy calculus.

If these tariffs set off a consumer price inferno and trigger a savage counterstrike on US prized exports, we're in for nothing short of an economic maelstrom. Canada and Mexico are already sharpening their retaliatory knives, ready to strike back hard. Even a brief inflation shock from these emerging trade wars could sky-high long-term interest rates, forcing the Fed to stay on pause well beyond current expectations.

Currency markets have already flashed signs of volatility, and it's only a matter of time before equities and bonds join the party. Wall Street largely dismisses these tariff threats as high-stakes posturing—a ploy to tighten border controls, rein in immigration, or jump-start USMCA negotiations. But if these measures prove to be more entrenched and invasive than anticipated, financial markets could be hit with a nasty surprise, unleashing fresh downside risks for growth.

And here we are—February 1st is now D-Day. Trump has circled the date to unleash tariffs on Canada, Mexico, and possibly China (with the EU lurking in the background, though it’s unclear if they’ll be in the immediate firing line). Markets are still in the dark on the size and scope of these tariffs, and just to keep things interesting, Trump teased on Friday about a reduced rate for Canadian oil and gas—because why keep it simple? Officially, this policy is tied to the fentanyl crisis, but the fallout could be far-reaching, triggering border clampdowns, supply chain disruptions, and retaliatory action.

If these tariffs go live, buckle up—Monday could be a wild one

Trump's tariff gambit

Buckle up—President Donald Trump is set to drop the hammer on Canada and Mexico with sweeping tariffs this Saturday, and global markets are bracing for impact. The real challenge now? Deciphering the ever-shifting signals from the White House in what has become a high-stakes guessing game for investors.

In true Trump fashion, the timeline has been a moving target. On Thursday, he signalled that tariffs would take effect immediately. By Friday, Reuters reported they wouldn’t hit until March 1. Then, in a late Friday twist, the White House confirmed that Feb. 1 is indeed D-Day for these trade levies.

But beyond this whirlwind of confusion, the real wildcard is the structure of these tariffs. Will it be an all-out 25% blanket tariff on all imports from Canada and Mexico? Or will Trump opt for a gradual escalation, phasing in higher duties over time? He could even carve out exemptions for critical sectors like autos and energy, creating the illusion of a softer stance while still keeping pressure on trade partners.

And let’s not forget the bigger bombshells lurking—Trump’s next move on China and Europe remains a complete mystery. The latest chatter suggests a 10% levy on Chinese imports could be in play this weekend, allegedly tied to Beijing’s perceived role in the U.S. fentanyl crisis. This adds yet another layer of uncertainty to an already combustible situation.

Will Trump double down and further escalate the trade war, igniting fresh market turmoil? Or is this just another high-wire negotiation ploy designed to extract last-minute concessions before dialling it back? The weekend could serve as a defining moment, setting the tone for how aggressive the White House is willing to get with its protectionist agenda.

For investors, this is a full-blown market minefield where every headline and policy tweak could trigger massive swings. The uncertainty is through the roof, and the stakes couldn’t be higher. One thing’s for sure—markets will be on edge, and traders better be ready for some Monday morning fireworks.

All that glitters

The days of trekking through the Rocky Mountains in search of that glittery good stuff might be behind us, but today's gold rush is blazing with modern intensity.

Gold blasted through record highs on Friday, fueled by investor panic over Trump’s tariff tantrum and a skyrocketing bullion stockpile in New York, creating a notable supply crunch in London. The benchmark price surged to $2,817.16 per troy ounce ( on an ECN spot price), shattering Thursday’s high water mark, preceded by the October record. This locked in an 8% gain for the year—a crystal-clear sign that traders are hedging against what could be a seismic shift in U.S. trade policy.

President Donald Trump threatens to slap 25% tariffs on all imports from Canada and Mexico starting Saturday, sending shockwaves through global markets. While gold has historically dodged such duties, traders are on high alert—if this trade war escalates, the precious metal could be next in line.

Meanwhile, big-money players have been stockpiling bullion at a blistering pace. Comex gold inventories have exploded 75% since the U.S. election, with Thursday’s stockpile valuation hitting a jaw-dropping $85 billion—representing over 30.4 million troy ounces. The writing is on the wall: investors hoard gold like there’s no tomorrow.

At the core of this rally is a mass gold-buying spree by central banks, especially those in the crosshairs of U.S. sanctions. China, seeing the geopolitical chessboard shift, has been backing up the Brinks Truck on over 320 tons of gold since the Ukraine war began. Russia and central banks across the Middle East, Central Asia, and India have also aggressively increased gold reserves. Last year, the fear factor kicked in for Poland and Hungary, two nations acutely aware of what happens when geopolitical risk escalates. Poland has long sought to boost gold reserves to 20% of its holdings. Hungary’s National Bank resumed purchases in 2024 for the first time in three years, declaring that “amid increasing uncertainty... gold’s role as a safe-haven asset and store of value is of particular importance.”

The critical thing to remember when central banks buy gold is that it doesn’t just circulate back into the market—it gets locked away in vaults, collecting dust for decades. Unlike speculative trading flows, these institutional purchases are sticky, meaning they effectively remove physical supply from circulation, creating an underlying structural shortage.

And let’s not forget the elephant in the room—BRICS+ now controls 42% of global central bank FX reserves and has been spearheading a global de-dollarization movement. For the bloc, gold isn’t just a hedge—it’s the best alternative to the U.S. dollar. Trump’s recent threat to impose 100% tariffs on countries that ditch the greenback has only accelerated the gold grab, likely sparking the latest push above $2800.

Long-term evolution of brics+ Gold holdings

With the perfect storm of tariffs, de-dollarization, geopolitical tensions, and central bank hoarding, gold is riding an unstoppable wave. And while $2800 may have seemed like a milestone, it could be nothing more than a stepping stone to even loftier highs in this climate.

One thing’s for sure—this is no ordinary rally. This is the new gold rush.

Chart of the week

Signs that investors are bullish on gold

According to a recent Goldman Sachs institutional client survey, gold has emerged as the standout star for 2025, with 32% of respondents naming it the most attractive commodity investment—a dramatic surge from a mere 5% last year. In contrast, Bitcoin's allure has noticeably faded, with only 25% of investors favouring it for 2025, down from 39% in the previous survey.