Trump Tariffs-A Different Take to Find the Signal Through the Noise

Why Tariffs Are Widely Misunderstood and Their Short, Medium, and Long-Term Effects on Markets and Asset Classes

Feb 03, 2025

I write this commentary specifically for investors and business owners navigating what I called years ago the coming “Next World Order”. One thing is for sure, that order is now fully in play and the next few years will tell us how that all settles out.

The last 11 days of January 2025 under the new administration were packed with action and a pace that America hasn’t operated from in a long while. The rest of Q1 is going to be no different as the first 100 days of the Trump administration are going to put many new dynamics in play that markets haven’t seen in decades as global trade faces a complete reshaping.

Tariffs are sparking heated debates, F.U.D. (fear, uncertainty, and doubt), but their true implications—especially when implemented by a global reserve currency hegemon like the U.S.—are mostly misunderstood. Make no mistake it is a BOLD (and risky strategy with the disruption it represents to the status quo), but here’s why tariffs matter, not only for short-term political goals but for long-term economic strategy, so that you can have something different to think about then you will hear in the overly politicized mainstream media and intellectual dark web of financial podcasts.

Understanding the Triffin Dilemma

The U.S. dollar’s status as the world’s reserve currency gives the U.S. an “exorbitant privilege” in global trade and finance. However, it comes at a cost:

• The dollar is structurally overvalued because it must serve as the financial reserve for other nations.

• The U.S. is compelled to run persistent trade deficits to provide the world with dollars.

• To sustain this system, the U.S. borrows beyond its means, creating long-term fiscal instability.

Tariffs, in this context, are not merely protectionist tools; they are part of a larger strategy to adjust these structural imbalances. For example, tariffs can create a temporary trade shield while policymakers negotiate new multilateral agreements to weaken the dollar’s dominance longer-term, potentially echoing a “Plaza Accord 2.0.” By weakening the dollar systematically after the recalibration of deficits and D.O.G.E. cuts to the drunken-sailor spending, the U.S. (under the Trump administration) seeks to make exports more competitive and reduce the economic strain of its reserve currency obligations.

Tariffs as a Temporary Fix with Long-Term Goals

Tariffs are often misunderstood because they appear as blunt instruments of trade policy, especially when amplified by the blunt delivery style of our Commander In Chief. In reality, they can serve as:

• Negotiation Tools: The U.S. could use tariffs to pressure foreign nations to reduce their dollar reserves, shifting global demand for U.S. Treasury holdings.

• Economic Recalibration: By doubling down on Treasury Bill funding instead of long-term debt, the U.S. government lowers refinancing risks while simultaneously managing currency and inflationary pressures.

However, tariffs come at a cost:

• Higher initial inflation, as both producers and consumers absorb added import taxes.

• Strain on international trade relationships, particularly with nations dependent on U.S. markets.

Trump’s Focus on Lowering Yields and Real Estate

Former President Trump’s interest in tariffs aligns with his broader economic goals and experience with real estate development, particularly the drive to lower long-term interest rates (e.g., the 10-year Treasury yield). Why? Lower rates benefit debt-heavy industries like real estate—a critical sector in the U.S. economy especially given the record amount of maturing CMBS ($2.2T between 2025-2027) that faces the U.S. market and could benefit from an opposing force to create price stability and less volatility in that asset class.

This strategy has a cascading effect:

• Tariffs raise short-term costs but set the stage for lower long-term yields by weakening the dollar and enhancing U.S. export competitiveness.

• A weaker dollar makes U.S. real estate more attractive to foreign investors, further supporting asset prices.

The “Flight to Safety” Asset to Own: Bitcoin

In a world where reserve currency dominance is challenged, Bitcoin emerges as a hedge against the weakening dollar and as an uncorrelated asset to other risk assets (equities, etc) as the volatility will be steep in the coming year. While tariffs drive inflation and currency devaluation, they simultaneously push prudent investors toward decentralized, finite assets like Bitcoin. This dynamic was absent during the 1970s stagflation era but is a key differentiator in today’s on-chain economy.

As both sides of the trade imbalance equation (importing nations and exporting nations) seek stability, Bitcoin’s appeal grows. The long-term result? Higher prices for Bitcoin as both a store of value and a transactional medium for digital and real-world assets (RWAs/tokenization) that trade hands using Bitcoin’s settlement layer as the ultimate global ledger.

The Bigger Picture Beyond the Finger Pointing and Rhetoric

Tariffs are not just about protecting domestic industries; they are tools of economic warfare and strategy. By weaponizing tariffs, the U.S. under Trump aims to:

• Maintain its dominant economic leadership while mitigating the structural disadvantages of reserve currency status.

• Force foreign nations to absorb more of the inflationary burden tied to global trade imbalances and negotiate the next world order under the US dollar hegemony.

• Secure a pathway to lower yields and a weaker dollar, supporting U.S. export growth and asset markets like real estate.

What Happens if the Bold Strategy Fails?

Tariffs are being dismissed by many in the media as short-term measures or economic nuisances. However, when deployed by a global hegemon like the U.S., they are part of a sophisticated, if controversial, strategy to recalibrate global financial systems, which is what Trump promised to do. Without taking a political or moral view of this strategy or the President leaning into it, investors should recognize the deeper implications, particularly the potential long-term impacts on inflation, real estate, and alternative assets like Bitcoin. Understanding tariffs in this broader context equips you to position your portfolio strategically for the decades ahead. Remember unlike humans, money has no feelings, it just moves towards where it can best multiply itself and away from where it will be decreased. Understanding where capital will flow next is the name of the game and positioning your portfolio in front of that wave is the way to ensure you hold on to more of your wealth as these things play out.

Potential Outcomes of Trump’s Strategy:

Positive Scenarios:

• Economic Rebalancing: If the strategy leads to a controlled depreciation of the dollar, it could make U.S. exports more competitive, potentially reducing the trade deficit.

• Strengthened Domestic Industries: Tariffs might protect emerging industries, allowing them to grow without foreign competition.

Negative Scenarios:

• Trade Wars: Retaliatory tariffs from other countries could escalate into trade wars, harming global economic growth.

• Inflation: Higher import prices due to tariffs can lead to inflation, reducing consumers’ purchasing power.

•Global Instability: Significant disruptions in trade can lead to global economic instability, especially in countries heavily reliant on U.S. trade.

In summary, while a combined tariff and deficit reduction strategy aims to manage the demand for U.S. dollars and mitigate the challenges of a strong reserve currency, it carries significant risks. Careful consideration of global economic interdependencies and potential retaliatory actions is crucial to avoid adverse outcomes.

Yours in wealth and health,

~Chris J Snook

Sources:

Triffin Dilemma and Reserve Currency Theory](https://www.imf.org/external/np/exr/center/mm/eng/mm_sc_03.htm)
Historical Context of the Plaza Accord](https://www.brookings.edu/articles/the-international-monetary-system-is-it-fit-for-purpose/)
Impact of Tariffs on Inflation: Federal Reserve Analysis](https://www.federalreserve.gov/econres/notes/feds-notes/the-impact-of-tariffs-on-us-prices-and-inflation-20190313.htm)
Bitcoin as a Hedge Against Fiat Currency Devaluation](https://www.coindesk.com/markets/2021/05/20/bitcoin-as-an-inflation-hedge-a-brief-analysis/)
The Dollar: The World's Reserve Currency](https://www.cfr.org/backgrounder/dollar-worlds-reserve-currency)
De-dollarization: The End of Dollar Dominance?](https://www.jpmorgan.com/insights/research/de-dollarization)
Trump Tariffs: Tracking the Economic Impact of the Trump Trade War](https://taxfoundation.org/trump-tariffs/)