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Nothing to see here, just normal market mechanism at play.
But then, do we need a market?
There is in fact nothing new under the sun. From tulip bulbs to AI experts, if you have the top product at the top of the bubble, the sky is the limit.
Then sooner or later, everything will come crashing down and we will all pay dearly for the hubris. This is not a prediction, just history with exactly 100% record of accuracy. But of course, "this time is different!" also has a correlation of 100%.
In reality, it is never different. This law of economics is as reliable as gravity. All the returns in the world could never pay back the investment. They didn't yesterday. They will not tomorrow.
When you reach this point, the horizon is counted in months, not years. In 2025, we entered choppy waters. In 2026 and beyond, it will be the maelstrom.
Silicon Valley’s AI talent war just reached a compensation
milestone that makes even the most legendary scientific achievements of
the past look financially modest. When Meta recently offered AI
researcher Matt Deitke $250 million over four years (an average of $62.5
million per year)—with potentially $100 million in the first year
alone—it shattered every historical precedent for scientific and
technical compensation we can find on record. That includes salaries
during the development of major scientific milestones of the 20th
century.
The New York Times reported that Deitke had cofounded a
startup called Vercept and previously led the development of Molmo, a
multimodal AI system, at the Allen Institute for Artificial
Intelligence. His expertise in systems that juggle images, sounds, and
text—exactly the kind of technology Meta wants to build—made him a prime
target for recruitment. But he’s not alone: Meta CEO Mark Zuckerberg
reportedly also offered an unnamed AI engineer $1 billion in
compensation to be paid out over several years.
We try not to be swayed by the market ups and downs or words and "announcements" which tend to have even less meaning but eventually when facts pile up, trends begin to appear and our future to take shape.
Martin Armstrong is a libertarian and tend to be on the pessimistic side. But he is also an intelligent and experienced analyst and his comments bear weight.
What Trump says on a daily basis should be taken with a grain of salt; nuclear submarines are positioned to launch at all time, not to look for giant octopus in the abyss. So his statement as such means nothing, except that he is pissed and completely under the sway of the Neo-cons who dominate the narrative in Washington. And this alone should be a cause for extreme nervousness.
In normal times, all this would be worrying. But these are not normal times. The US dollar is being challenged, and the debt of developed countries is unsustainable. Something will break sooner or later. The right place for a black swan right now is Ukraine. Europe and the Globalists have put all their bets on the war going on forever to weaken Russia, although after 3 years the exact opposite is taking place. Conversely, a giant real estate bubble is bursting in China while trade relations around the world are fraying and the global supply chain is at risk. We are playing with fire in a very dry forest...
Less than two weeks ago, legendary financial and geopolitical cycle
analyst Martin Armstrong warned his “Socrates” predictive computer
program showed a “100% Chance of Nuclear War.”Since
then, a war of words has flared up between President Trump and Russia,
and he said Russia “has entered very dangerous territory.” President
Trump then, “Orders US nuclear subs repositioned over statements from ex-Russian leader Medvedev.” “After Trump sends nuclear subs near Russia, Putin responds with hypersonic threat — what Oreshnik missiles can do.”
If this is not enough to confirm some sort of nuclear exchange is
coming soon, add what Secretary of State Marco Rubio just warned this
past week. Rubio said, “In case of war with the US, Russia will rely on tactical nuclear weapons due to the weakness of its army.”A top Russian official also “Issues nuclear annihilation warning”
and said Russia would “hit back with a devastating blow.” Keep in
mind, all this happened in the last few days. On Friday, “gold signaled
war” by exploding up $73 an ounce, up more than 2% in a matter of hours. Is
the gold market seeing this nuke war talk and responding? Armstrong
says, “Oh, yeah! You look at gold, and you see what is happening. Oil
is pointing more towards September. . . . Gold keeps trying to get
through the highs. This is not the major high. Hate to tell you, it’s
not. Gold is showing, Up. Every market I look at, it’s the same
thing. We have a panic cycle, and it’s not just for war in 2026. Go to
our site and look at the euro, and there is a panic cycle for 2026.
It’s everywhere. Why the computer has been correct is you cannot
forecast any market in isolation. You can’t. It’s all connected.”
Armstrong says you won’t have to wait until 2026 for his “Panic
Cycle” to begin. His computer has long pointed to August 18, 2025, and
that is about two short weeks away. Armstrong says, “Honestly, this is
turning into a grade school fight. I don’t know what Trump expects.
He’s hurling insult after insult, and there is no possibility of peace
anymore. It’s one thing to do tariffs and sanctions against Russia.
Now, he is saying we are going to put sanctions on anybody that even
deals with Russia. This is economic war. It’s as simple as that. . ..
We don’t even have anyone to negotiate on behalf of the West. It’s
dead, completely dead.”
Armstrong thinks neocons have built a wall around President Trump so
nobody with different advice regarding NOT starting a nuke war can get
through. Is Martin Armstrong being blocked by the neocons surrounding
President Trump now? Armstrong says, “I believe so. I even wrote to AG
Pam Bondi, and I did not get a response. I have written to presidents
and heads of state, and I get responses. Not this time. . .. This is
escalating, and he (Trump) is not in a good position. I don’t know what
the hell he is doing. He seems to have crossed to the other side.”
As discussed earlier, the US trade deficit was unsustainable, but is this really the best way to solve the problem?
Will the tariffs oblige companies to restructure their supply chain and bring manufacturing back to the US as the Trump administration expects or conversely wreck it and lead to a significant contraction of international trade as some economists believe?
To understand better the dilemma, let's invert the problem: You are a Japanese manager and have three factories supplying the US market, one in Nagoya, one in Tijuana and one in Houston. What should you do? Transferring your production to the US would be expensive, complex and considering the haphazard way the decisions on tariff was taken very risky since the tariffs may change again without notice. Cheap products made in Mexico will probably be the most badly impacted. You must already plan to reduce production and see how much demand goes down. Conversely, high end products made in Japan may not be impacted at all. The 15% rate for Japan, represents less than 5% of the final price which the on-going devaluation of the Yen will quickly compensate. As for mid range products made in America from imported parts, a higher price may impact sales but what can you do about it? Very little in fact. The parts coming from Japan are made by a subsidiary which doesn't have the capital to build a factory in the US. No change then?
It is only a simple example but it shows the difficulty of changing overnight the structure of your supply chain. In the end, most companies can and will do nothing. A small minority who can procure parts in the US will do so. The resulting extra demand will be insignificant. Most will do nothing and expect devaluation of their currencies to compensate for higher prices which is exactly what will happen further infuriating Trump. And in the end, the American consumer will have to pay more and therefore consume less.
The US will be stuck between a rock and a hard place: Inflation of essential products that Americans can't stop buying and deflation for all the rest, all the not so essential items they can do without. The rest of the world, will necessarily see lower demand which for many countries like Europe, Japan or Canada will mean recession and therefore less demand for imported products including American products which prices will go up thanks to a higher dollar.
We were already entering a recession. Now with the new tariff, one is guarantied. The good thing is that every single country will have a scapegoat to put the blame on. If you just focus on this aspect, then yes, the strategy is not complete nonsense. Harsh days ahead nonetheless.
Late
on Thursday, just ahead of the August 1 deadline for tariff
renegotiation, President Trump announced a slew of new tariffs, including a 10% global minimum and 15% or higher duties for countries with trade surpluses with the US, forging ahead with his unprecedented effort to reshape international commerce.
First,
the silver lining: baseline rates for many trading partners remain
unchanged from the duties Trump imposed in April, which may ease
investors’ worst fears - although with the S&P sitting at record
highs it is difficult to claim anyone had any fears about anything -
after the president had previously said they could even double. Yet
Trump's decision to raise tariffs on Canadian goods to 35% threatens to
inject fresh tensions into an already strained relationship.
Trump
signed the new tariff directive just hours before his prior Aug. 1
deadline for higher tariffs to kick in on scores of trading partners. As
Bloomberg reports, most tariffs will take effect after midnight on Aug
7, to allow time for US Customs and Border Protection to make necessary
changes to collect the levies.
Taken together, the result will be significantly higher tariffs on goods from almost all US trading partners. The
average US tariff rate will rise to 15.2% if rates are implemented as
announced, according to Bloomberg Economics, an increase from 13.3%, and
significantly higher than the 2.3% it was in 2024, before Trump took
office.
Major industrialized economies, including the European
Union, Japan and South Korea, accepted 15% duties on their products,
while charges on items from Mexico, Canada and China are even bigger.
Today's announcement notwithstanding, Trump is expected to unveil separate tariffs on imports of pharmaceuticals, semiconductors, critical minerals and other key industrial products in the coming weeks. Other details are also forthcoming, including so-called “rules of origin” to decide which products are transshipped, or routed through another country, and thus would face at least a 40% rate,
a senior US official told Bloomberg, adding that a decision will be
made in the coming weeks. The senior US official said there is no date
yet when revised auto tariff rates would be implemented.
Thursday’s
order was signed behind closed doors without the fanfare of Trump’s
April tariff rollout, during which he brandished placards with rates
during a Rose Garden event. Since then Trump has faced criticism for
overpromising on trade deals after he and aides vowed to broker numerous
agreements, with at least one pledging “90 deals in 90 days.”
In the end, imports
from about 40 countries will face the new 15% rate and roughly a dozen
economies’ products will be hit with higher duties, either
because they reached a deal or Trump sent them a letter unilaterally
setting import taxes. The latter group has the highest goods-trade
surpluses with the US.
Some of those were expected, such as a 25% levy on Indian exports that Trump announced this week on social media. Others included charges of 20% on Taiwanese products and 30% on South African goods. Thailand and Cambodia, two countries that were said to have struck a last-minute deal, received a 19% duty, matching rates imposed on regional neighbors including Indonesia and the Philippines. Vietnam’s goods will be tariffed at 20%, according to the WSJ.
Trump’s
deals with the EU, Japan and South Korea would lower duties on their
vehicle exports to 15% from the general rate of 25%.
In a separate order, Trump
followed through on his threat to hike tariffs on exports from Canada,
one of the US’s largest trading partners, from 25% to 35% for
goods that do not comply with the U.S.-Mexico-Canada Agreement. That
change excludes goods that are covered under the North American trade
pact he negotiated in his first term. That stood in contrast to the
90-day extension Mexico received to negotiate a better
agreement. Earlier in the day, Trump wrote on Truth Social that he
agreed to extend for 90 days the existing tariffs on Mexican goods. He said a 25% fentanyl tariff, a 25% tariff on cars and a 50% tariff on steel, aluminum and copper would remain in place.
Still other nations are set to be hit with even higher tariffs. Trump has pledged to hike tariffs to 50% on Brazil over its digital policies and legal action against former President Jair Bolsonaro, a Trump ally.
The
lower 10% and 15% rates are expected to apply to a wide range of mostly
smaller- and medium-sized economies that Trump showed little interest
in bargaining with one-on-one. He had signaled in recent days there were
simply too many countries to cut individualized deals with all of
them. Some smaller states, however, were hit with the highest rates,
including Syria at 41%, as well as Laos and Myanmar and 40% each, both preferred hubs of Chinese transshipments.
The tiny African nation of Lesotho, however, which had been reeling from Trump’s threat in April to impose a 50% duty, instead received a 15% rate.
That change puts the landlocked mountainous kingdom at an advantage
against the far larger country that entirely surrounds it, South Africa.
One
big exception from this week’s deadline is China, which faces an Aug.
12 deadline for its tariff truce with the US to expire. The Trump administration has signaled that is likely to be extended. No final decision has been made but the recent US-China talks in Stockholm were positive, the official said.
There
were signs that Trump’s order took some partners by surprise. Taiwan’s
cabinet said in a statement its rate was temporary, and that the US levy
is expected to be reduced after more talks, which had been delayed by
scheduling conflicts.
The announcement brings to a close, at least
for now, months of wait-and-see about how Trump would set his
country-based tariffs, which he billed as the centerpiece of his plan to
shrink trade deficits and revive American manufacturing. Trump twice
delayed his so-called reciprocal tariffs, first announced in April, to
allow time for negotiations, first after markets panicked and then as
foreign governments bargained to get better terms from the US.
“U.S.
customs officials will face challenges implementing the EO,
particularly with the different tariff rates now applied across the
world,” said Wendy Cutler, a former US trade negotiator. “The seven day
breathing period before implementation will help, but importers should
expect start up problems at a minimum.”
Some analysts were worried
that today's announcement will spark another round of selling similar
to the post-Liberation day dump. “The reality is that we’re still going
to see higher tariffs than pre-Liberation Day and we’ll start to see
some economic impact of that in the months ahead,” said Shane Oliver, a
Sydney-based chief investment officer at AMP Ltd. “There’s still
uncertainty about China, Mexico has been delayed by another 90 days and
details around sectoral tariffs are also yet to come.”
Others just
can't wait to move on: “With the biggest economies having either
already made a deal, had a postponement or been hit with another tariff
hike that will probably be eventually negotiated lower (Canada), many
traders seem to prefer to keep the focus on US NFP as the next likely
catalyst for broad USD movement,” said Sean Callow, a senior analyst in
Sydney
“I would have thought 10% baseline tariff was a positive surprise for risk, worth
at least a little bounce on Aussie and the like, given Trump’s recent
comments have referred to 15% or higher” Callow said, adding that
“perhaps the main uncertainty had already been removed on the likes of
South Korea, Japan, India and, for now, China.”
Asian stocks came
under pressure after Trump announced the new rates, with the MSCI Asia
Pacific Index dropping 0.5%, led by losses in South Korea and Taiwan.
Futures on the S&P 500 slipped 0.1% while those for European stocks
retreated 0.4%. The Taiwan dollar and Korean won led declines in
currency markets, while the Swiss franc edged lower after the nation’s
products were hit with a 39% charge, one of the few nations that saw its
rate go up. The Canadian dollar held steady in the face of higher
rates.
Four
months after President Trump stunned the world and rattled global
markets by unveiling "Liberation Day" tariff rates, his latest revisions
(read here),
announced Thursday, and set to go into effect in a week, sparked fresh
global equity futures selling early Friday morning. With an average
tariff rate of 15%, the world now faces the highest US levies since the Great Depression days of the 1930s,
and these rates are roughly six times higher than one year ago and will
certaintly lead to further rejiggering of supply chains.
The
new tariff rates are set to take effect in just seven days, starting at
12:01 a.m. ET. A baseline 10% tariff will apply to imports from most
countries.
Here's what you need to know:
10% Global Minimum Tariff imposed across all imports.
Canada: Tariff raised to 35% (from 25%), but goods under USMCA remain exempt.
Switzerland: Tariff increased to 39% (from 31%); Swiss officials criticize the change, citing divergence from prior draft terms.
40 Countries: Imports face a 15% tariff.
12+ Economies: Hit with even higher duties.
China & Mexico: Deadline delayed by 90 days.
The list:
The
multi-month wave of tariff threats sparked front-loading of exports,
supporting many Asian economies and shielding US consumers from price
spikes. However, that could all change...
Commenting on this is
Raghuram Rajan, former India central bank governor and chief economist
of the International Monetary Fund, who is now a professor at the
University of Chicago Booth School of Business, told Bloomberg TV
earlier today, "For the rest of the world, this is a serious demand
shock," adding, "You will see a lot of central banks contemplating
cutting as the rest of the world slows."
