Rewards1: What to Expect Next if Trump’s Tariff Gambit Escalates

What to Expect Next if Trump's Tariff Gambit Escalates

On March 18, 2020, while everyone worried about the impact pandemic lockdowns would have on our economy…

I sent this note to readers of my previous newsletter:

Friends, with the near collapse of global trade caused by the coronavirus… you can expect central banks [to] issue stadium-sized stacks of paper money to fund their respective governments.

The previous week, the S&P 500 and bitcoin had plunged by as much as 10% and 38%, respectively. It was a bloodbath.

I knew the Federal Reserve would print more money. So I told my readers to buy more bitcoin.

Sure enough – just five days later – the Fed announced its "infinite cash" policy and promised it would print unlimited amounts of money.

After the Fed turned on the money spigot, bitcoin exploded 1,688% over the next two years, just as I predicted. And as bitcoin goes, so does the rest of the crypto market.

Altcoins I recommended during this period like Status (SNT), Ethereum (ETH), and Enjin (ENJ) took off like rockets, going up 2,835%, 4,771%, and 15,041%, respectively.

While most Americans were watching their purchasing power evaporate, my readers had a chance to not only protect their wealth… But grow it by leaps and bounds.

Friends, here's why I'm taking you down memory lane…

Since President Trump imposed a new global tariff regime on April 2, we've seen pandemic-type levels of volatility.

On Tuesday, the S&P 500 dropped as much as 6% after China announced retaliatory tariffs against U.S. imports to that country.

However, the very next day, President Trump adjusted his policy to 10% universal tariffs and put a 90-day hold on reciprocal tariffs (except those against China).

That shift triggered a monster rally on Wednesday that saw the S&P 500 rise 9.4%, the Nasdaq 11.8% and the Dow up 8.7%.

Yet on Thursday, when the euphoria over the 90-day pause had faded, the market clawed back nearly all of the previous day's gains.

Look, the market has reason to worry about such steep tariffs. Investors believe the tariffs will, at best, act as a temporary drag on global trade. Or worse, trigger a recession.

That's why I refer to the tariffs as "Lockdown Lite."

Like the pandemic restrictions, tariffs could force business closures and mass layoffs. If that's the case, I expect the Fed to come to the rescue again.

Friends, I don't have a crystal ball. So I don't know how the U.S. government and its trade partners will resolve these tariff negotiations. Or when the Fed will leap in and bail out the market if the talks fail.

Regardless, I want to prepare you for the possibility the market and economy might get much worse before they get better.

The Next Chess Move Could Be a Fed Rate Cut

President Trump believes his tariff regime will level the playing field between the United States and its trading partners and reshore U.S. manufacturing operations.

Trying to reset the entire global trade regime is a historic gambit. But the president has a reputation as a dealmaker.

If he somehow pulls this off, it'll be considered one of the greatest political feats in history. If it fails, it could tip the entire global economy into a recession.

Now, my job isn't to give you political views about the administration's tariff policies. Will they work? They may or may not. I don't know.

My job is to look at how the pieces are arranged on the chessboard and best position you to counter each move.

Please understand we are in a "world war." This is as close as we can get to a "hot" war without actually firing bullets. But as bleak as things may look, I much rather countries lob tariffs at each other than launch missiles at each other.

And like many wars, the next move from the other side is usually escalatory.

On Wednesday, China retaliated with tariffs of up to 84% on certain U.S. goods. And the European Union approved tariffs to hit around $23 billion worth of U.S. imports. (However, the EU tariffs are also on pause for now.)

Friends, we have three titans staring at each other in the face. As mentioned, President Trump has already scaled back his initial tariff demands. Will that lead to an immediate cooling of tensions with the rest of the world?

Highly doubtful. If it does, then great; the rally will continue. If it doesn't, then we will have much more volatility ahead.

Here's a ray of light at the end of the tunnel for us investors: If the trade war continues to escalate, we'll see increasing political pressure on the Fed to lower rates.

As I wrote on Wednesday, when the Fed lowers rates, it's rocket fuel for riskier assets like tech stocks and cryptocurrencies.

Let's go back to the 2020 pandemic, when the Fed cut rates to near 0%. As you can see in the chart below, it ignited a rally in stocks and cryptos…

We saw a similar scenario play out in 2008, when the Fed slashed its key interest rate to zero and pumped $3.6 trillion into the economy during the Financial Crisis.

That stimulus sent the markets 133% higher over the six years.

According to betting markets, the trade war has increased the odds of the U.S. slipping into a recession this year to 62%.

This suggests the Fed will be much more aggressive in lowering rates this year. And that is wildly bullish for the assets we cover in The Digital Asset Daily.

As long as the trade war remains unresolved, expect uncertainty to persist. That means massive volatility both on the upside (as we saw on Wednesday) and downside (as we saw on Monday and Thursday).

You have to mentally prepare yourself for the reality of continued uncertainty.

Now, does that mean we sell everything and hide in a bunker until the Fed cranks up the money printer again? No. Here's why.

Don't Try to Hopscotch in the Rain

Last Tuesday, an unconfirmed rumor the Trump administration was considering a 90-day pause on tariffs sent the S&P 500 up nearly 6% in eight minutes.

That's nearly $3 trillion worth of value added back to the market in less time than it takes you to order a Big Mac at the McDonald's drive-through.

The fact the market exploded higher on just the rumor of a trade war "pause" shows you how quickly sentiment can shift. But trying to time those headline-driven moves is like trying to hopscotch in the rain.

As noted above, when the media confirmed the rumor was true on Wednesday, the S&P 500 rocketed up 9.3%.

According to data from Bank of America, there's about $7 trillion in cash waiting to come back into the market. To me, the bigger risk is to be out of the market before all of that liquidity is pumped back in.

Right now, investors are standing on the sidelines because of the uncertainty. How can you make decisions on which companies to buy if you don't know what type of economic environment they'll be operating in over the next few weeks or months?

Until the market gains some clarity, we'll continue to see massive price volatility.

But you don't want to sell and just wait in cash until the dust settles because it's a very fluid situation.

At any moment, President Trump could announce a deal with this or that country. If that happens, we'll see sentiment shift on a dime and prices zoom higher – just like we saw on Wednesday.

That's why you want to hold on to high-quality assets – and if the opportunity presents itself, buy more of them – during market weakness.

Friends, if the economy enters a recession, every asset will take it on the chin.

But you'll see a massive rescue response from the world's central banks. The Federal Reserve, European Central Bank, and People's Bank of China will flood the global economy with money. They'll print stadium-sized stacks of cash.

I believe the market will soon realize bitcoin in particular, and crypto in general, are completely unrelated to the trade war chaos going on.

These are some of the most dynamic assets in the world. They're also levered to global liquidity. So if we do enter a recession and central bankers crank up the money printers, crypto will benefit dramatically.

Let the Game Come to You!

Big T