The shoe has finally dropped.
“It’s midnight!!! Billions of dollars in tariffs are now flowing into the United States of America!” President Trump announced on Truth Social, moments after the higher rates kicked in. Yet, to many people’s surprise, markets barely flinched. Global equities rose across the board—U.S., EU, Japan, China—all higher. Only India lagged.
Why so calm? Partly headline fatigue, but mostly clarity. Markets dislike uncertainty more than bad news; once the rules are clear, companies can plan, invest and move forward.
Japan offers a textbook example. After talks with U.S. Cabinet officials in Washington, Japanese negotiators secured two key assurances: goods already taxed at 15% or more would face no additional duty, and all other tariffs would be capped at 15%. Both sides even agreed on how to interpret the fine print. Within days, the European Union struck a similar deal.
The response was immediate. Japan’s TOPIX index climbed past 3,000, and the Nikkei 225 is now within striking distance of its all-time high—this despite political uncertainty after the recent Upper House election. Clarity clears the runway.
But tariffs aren’t the only front where history is echoing. The U.S. Cabinet has been increasingly vocal about the Federal Reserve, with President Trump pressing Chair Jerome Powell to cut rates and loosen financial conditions. Striking déjà vu.
We noted back in early 2024 that today’s inflation backdrop already looked uncomfortably like the 1970s, when America endured three distinct waves of rising prices. Now, the parallels are multiplying.
On August 15, 1971, President Nixon declared a national emergency under Proclamation 4074, slapped a 10% ad valorem duty on all imports and ordered Treasury Secretary John Connally to suspend the dollar’s convertibility into gold—effectively dismantling Bretton Woods. Nixon also leaned on Fed Chair Arthur Burns to ease policy ahead of the 1972 election. Burns resisted…until he didn’t, and inflation’s next wave was set in motion. Still, the parallels to that era—tariff shocks and political heat on the Fed—are uncomfortably close.
The “Nixon shock” shredded the dollar’s purchasing power, in gold terms, by nearly 95% over the next decade. Today, gold is again hovering near record highs, its uptrend intact. As financial writer Jim Grant once observed, “Gold ought not to trade as an inflation hedge, but as an investment in monetary disorder, of which the world has plenty.”
And right now, disorder is something the markets have in abundance.