Big Wins

‘We started at 10% and we ended at 10%.’

— Commerce Secretary Howard Lutnick on the U.K. trade deal

May 12, 2025 — Donald Trump scored a big win on Friday. His first trade deal.

At least, that’s what the media said.

And then, this morning another big win was announced. NBC:

The United States and China said Monday they had agreed to a 90-day pause on most of the tariffs they have imposed on each other since last month, in a major step toward easing a trade war between the two powers that has rattled the global economy. U.S. tariffs on Chinese imports will be cut to 30% from 145%, while China’s levies on U.S. imports will be cut to 10% from 125%, the two countries said in a joint statement.

That’s right. Start a ‘Trade War.’ Then, back off…and a ‘Big Win’ for your team.

You’ll recall that POTUS had to retreat from a trade war when the stock market began to collapse. Thereafter, he sought a negotiated settlement with America’s many trading partners. The war was over, followed by a little give…a little take — including much bluff and bombast for political purposes. And then the Trump Team announced a Big Win.

Back at the end of Trump’s first term opinions were still divided. The liberals still thought he was a grifter and a clown; and after the riot at the Capitol, they believed his political career was at an end. The ‘conservatives,’ meanwhile, quickly realized that their man Trump was their ticket to success…at least in the primaries. They labelled any criticism of the Big Man as a mental problem — Trump Derangement Syndrome.

But the nation survived Trump I. And when it was over, the Deep State was deeper than ever, debt was higher than ever, and the feds bumbled on as before.

Some believe it was thanks to the ‘adults in the room’ who restrained the chief executive that Trump I was not more ‘disruptive.’ Others believed that the restrainers had kept POTUS from realizing his glorious mission. They went to work to make sure that didn’t happen again.

And so…here we are in Trump II. And this time we see the naked Trump, with a whole caste of half-wit enablers — Bondi, Hegseth, et al — rather than the devious restrainers of Trump I. And this unclothed emperor is not a pretty sight.

The ‘deal’ cut with the UK was typical of the ‘wins’ won by the Trump Team generally. It leaves trade with the UK “worse than the pre-Trump status quo,” says Scott Lincicome, of the conservative Cato Institute.

Free trade is a feature of the win-win economy. It favors no one in particular and everyone in general. Prices go down and quality increases as people are allowed to compete for customers. Trade managed by political hacks is another thing altogether. It is win-lose…or lose-lose, favoring the cronies…those with the best lobbyists…and the most political clout. Particular industries, investors, and/or consumers win…and everyone else loses. The Hill tells us about some of the losers in this deal:

“The U.S. automotive industry is highly integrated with Canada and Mexico; the same is not true for the U.S. and UK,” American Automotive Policy Council President Matt Blunt said in a statement.

Each of the three companies have factories in the United States but still forecast major setbacks due to the president’s tariffs, given the auto industry’s highly integrated supply chains across North America.

Last week, GM said levies could scrape as much as $5 billion from its profits this year, while Ford expects to take a $1.5 billion hit, The Associated Press reported.

The outcome of the ‘Trade War’ should have been obvious. It had been rehearsed, in public, back in Donald Trump’s first term. In 2017, he went to war with Canada and Mexico. He ranted and raved about the North American Free Trade Agreement, NAFTA, as if it were the devil’s own work, and declared a ‘trade war.’

Critics complained that he was an economic ignoramus…stupid…or even crazy. MAGA supporters defended him, saying it was just a negotiating tactic…or that he was ‘playing 3D chess,’ whatever that was.

And then, facing a total breakdown in America’s most important cross-border trade, Team Trump called off the war and settled down to negotiate. The result? Something that could have been the twin of the NAFTA, separated at birth, but now returned! USMCA took the place of NAFTA. And America’s trade deficit of $63 billion with Canada and Mexico in 2017 got worse, exploding to over $200 billion today.

Big win? Not exactly. He now says the USMCA — the deal made by his own trade honchos — is a rip-off for the USA.

Will the ‘big win’ against the UK be much different? US businesses and consumers have been trading amicably with Britain for a long time. Buyers and sellers work out whatever deals they want, subject to modest tariffs imposed by the feds. The details of the new deal are not all in but the gist of it is that instead of paying a tariff of less than 2% (weighted average) on imports from the UK, American consumers are going to pay 10%. More than five times as much.

One of the big complaints from the tractor states is that the Brits and Europeans, generally, don’t buy enough US farm products. Tariffs are very low…or even non-existent. But hey-ho, they say there are ‘non-tariff barriers’ to US agricultural exports.

We got a first-hand look at some of those barriers on Saturday, when we went to visit some of our crops in the flat, hot northeastern part of Salta province.

“You’ve got to be very careful about how you use pesticides,” explained the agronomist who consults with us.

He was holding a pod with sesame seeds in it, breaking out the little seeds to show us.

“The best seeds…at the best prices…go to the European market”, he explained. “But the Europeans are picky about pesticides. If there is too much, they won’t buy. Their standards are higher than anywhere else…but they also pay more than anyone.”

Our agronomist was describing how ‘non-tariff barriers’ work. They are not tariffs at all. They are simply consumer choices. Europeans don’t want to eat pesticides.

Another ‘non-tariff barrier’ that Donald Trump deplores is Europe’s value added tax (VAT). Again, it has nothing to do with trade and doesn’t discriminate against US products. It is just a sales tax making everything more expensive, including home-grown products.

These things are as obvious to the trade negotiators as they are to us. There are some legitimate concerns…but most of it is just political theater. And now the Trump Troupe puts on a show. With the UK, it negotiated a 10% tariff — a 400% penalty to be paid by American consumers.

On Saturday, the Jefe de Todos los Jefes said he thought 80% would be about right for China…and by Monday morning, negotiators got the tax on US consumers down to 30%.

So, look for more ‘big wins’ as trade declines, prices go up, and people get poorer.

Regards,

Bill Bonner
Bonner Private Research and Grey Swan

P.S. from Addison: Media coverage of the trade wars is more about Trump being an agent of chaos than anything substantial pertaining to deals that might be beneficial to investors. As such, the news cycle is best treated as entertainment.

According to trade ambassador Jamieson Greer, the behind-closed-doors discussion for a trade agreement with China has as much or more to do with non-tariff barriers — like currency manipulation — than they do with discussions over dolls and baby strollers.

We’ll be digging into the yuan and Beijing machinations over the past decades tomorrow. Stay tuned…

Your thoughts? Please send them here: addison@greyswanfraternity.com

‘We started at 10% and we ended at 10%.’

— Commerce Secretary Howard Lutnick on the U.K. trade deal

May 12, 2025 — Donald Trump scored a big win on Friday. His first trade deal.

At least, that’s what the media said.

And then, this morning another big win was announced. NBC:

The United States and China said Monday they had agreed to a 90-day pause on most of the tariffs they have imposed on each other since last month, in a major step toward easing a trade war between the two powers that has rattled the global economy. U.S. tariffs on Chinese imports will be cut to 30% from 145%, while China’s levies on U.S. imports will be cut to 10% from 125%, the two countries said in a joint statement.

That’s right. Start a ‘Trade War.’ Then, back off…and a ‘Big Win’ for your team.

But the nation survived Trump I. And when it was over, the Deep State was deeper than ever, debt was higher than ever, and the feds bumbled on as before.

“The U.S. automotive industry is highly integrated with Canada and Mexico; the same is not true for the U.S. and UK,” American Automotive Policy Council President Matt Blunt said in a statement.

Each of the three companies have factories in the United States but still forecast major setbacks due to the president’s tariffs, given the auto industry’s highly integrated supply chains across North America.

Last week, GM said levies could scrape as much as $5 billion from its profits this year, while Ford expects to take a $1.5 billion hit, The Associated Press reported.

Big win? Not exactly. He now says the USMCA — the deal made by his own trade honchos — is a rip-off for the USA.

We got a first-hand look at some of those barriers on Saturday, when we went to visit some of our crops in the flat, hot northeastern part of Salta province.

“You’ve got to be very careful about how you use pesticides,” explained the agronomist who consults with us.

He was holding a pod with sesame seeds in it, breaking out the little seeds to show us.

Our agronomist was describing how ‘non-tariff barriers’ work. They are not tariffs at all. They are simply consumer choices. Europeans don’t want to eat pesticides.

On Saturday, the Jefe de Todos los Jefes said he thought 80% would be about right for China…and by Monday morning, negotiators got the tax on US consumers down to 30%.

So, look for more ‘big wins’ as trade declines, prices go up, and people get poorer.

Regards,

Bill Bonner
Bonner Private Research and Grey Swan

We’ll be digging into the yuan and Beijing machinations over the past decades tomorrow. Stay tuned…

Your thoughts? Please send them here: addison@greyswanfraternity.com

Here we sit — investors, analysts, retirees, accountants, even a few masochistic economists — gathered beneath the leafless monetary tree, rehearsing our lines as we wait for Jerome Powell to step onstage and tell us what the future means.

Spoiler: he can’t. But that does not stop us from waiting.

Tomorrow, he is expected to deliver the December rate cut. Polymarket odds sit at 96% for a dainty 25-point cut.

Trump, Navarro and Lutnick pine for 50 points.

And somewhere in the wings smiles Kevin Hassett — at 74% odds this morning, the presumed Powell successor — watching the last few snowflakes fall before his cue arrives.

With U.S. stocks trading at about 24 times forward earnings, plans for capital growth have to go off without a hitch. Given the billions of dollars in commitments by AI companies, financing to the hilt on debt, the most realistic outcome is a hitch.

On a valuation basis, global markets will likely show better returns than U.S. stocks in 2026.

America leads the world in innovation. A U.S. tech stock will naturally fetch a higher price than, say, a German brewery. But value matters, too.

As copper flowed into the United States, LME inventories thinned and backwardation steepened. Higher U.S. pricing, tariff protection, and lower political risk made American warehouses the most attractive destination for metal. Each new shipment strengthened the spread.

The arbitrage, once triggered, became self-reinforcing. Traders were not participating in theory; they were responding to the physical incentives in front of them.

The United States had quietly become the marginal buyer of the world’s most important industrial metal. China, long the gravitational center of global copper demand, found itself on the outside.

Under the frost-crusted shrubs, the bears are sniffing around for scraps of bloody meat.

They smell the subtle rot of credit stress, central-bank desperation, and debt that’s beginning to steam in the cold. They’re not charging — not yet. But they’re present. Watching. Testing the doors.

Retail investors, last in line, await the Fed’s final announcement of the year on Wednesday. Then the central planners of the world get their turn: the Bank of England, Bank of Japan, and the European Central Bank.

Treasuries just suffered their worst week since June. And in Japan — the quiet godfather of global liquidity — something fundamental is breaking.

Silver continues its blistering ascent. Gold and bitcoin have settled in at $4,200 and $92,000, respectively.