In early April 2025, Trump's 10% comprehensive tariff policy triggered a global economic storm. From the failure of gold as a safe haven to the evaporation of $5.4 trillion in US stock market value, followed by protest waves and urgent business negotiations, this crisis resembles a high-risk game testing investors' judgment. This article will analyze the logic behind the chaos from four perspectives: financial chain reactions, Trump's "economic revolution", social and business pushback, and historical lessons and investment prospects.
I. Financial Chain Reactions Under Tariff Impact: Why Did Gold Fail to Defend?
With Trump's tariffs landing, global stock markets evaporated $6.6 trillion, with US stocks losing $5.4 trillion in two days, and 400,000 accounts significantly shrinking. Surprisingly, gold, a safe-haven asset, was not spared, dropping 1.9% on April 5th. What caused this?
The answer lies in the chain effect of leveraged trading. Futures markets amplified US stock declines through high-leverage, triggering "margin calls" for investors, who sold high-liquidity assets like gold to meet margin requirements. Gold ETF holdings dropped 2.3% that day, confirming this pressure. This short-term sell-off is driven by trading sentiment, not macro trends. Once the market stabilizes, funds may flow back to gold, but currently, the safe-haven logic has been overturned by liquidity needs.
Meanwhile, WTI crude oil dropped below $60 per barrel, weakening inflation expectations. With significant weight in US CPI, oil's price decline offset tariff-induced price pressures, pushing the Fed's rate cut expectations to 5 times. Balancing inflation and recession, the Fed leans towards stable growth. This suggests that short-term safe-haven assets may be under pressure, but rate cut expectations might benefit bonds and growth stocks.
II. Trump's "Economic Revolution" and Wall Street's Shock: Hoover's Lesson
Trump's stance on the crisis was clear. On April 5th, he claimed on Truth platform: "This is an economic revolution, and we will win." He implied the stock market crash was intentional, aimed at reshaping trade dynamics. However, this gamble caught Wall Street off guard.
Treasury Secretary Bessent, once seen as a financial bridge, faced potential resignation on April 6th due to "absurd tariff calculations". MSNBC revealed he merely analyzed scenarios in White House meetings, with decisions led by Peter Navarro, Howard Lutnick, and Jamieson Greer. Wall Street found no help, with JPMorgan predicting US GDP growth dropping to -0.3%, sounding a recession alarm.
Hoover's historical precedent provides a mirror. In 1929, ignoring financial consortium opposition, Hoover pushed the Smoot-Hawley Tariff Act, raising tariffs to 59%, triggering a global trade war that exacerbated the Great Depression. Trump's all-in approach is similar, but his team exchanged a 20% US stock drop for a dollar drop to 101 points, 5 rate cut expectations, and avoided substantial recession (April 5th employment data remained robust). This aligns with his weak dollar, low-interest-rate goals, but supply chain disruptions and stock price collapses have left businesses suffering. Investors must be wary: short-term policy dividends may mask long-term risks.
III. Social Pushback and Correction Pressure: Market Signals Emerge
Market turmoil quickly ignited social anger. On April 6th, the "Let Go!" movement swept over 1,000 cities globally, protesting tariffs, federal layoffs, and Musk's Doge department. At Washington's National Mall, slogans like "Penguins Against Tariffs" and "Make My 401k Great Again" directly pointed to the policy's impact on the middle class. Tesla became a target due to Musk's alliance with Trump, with showrooms in the US and Europe frequently attacked, and boycott sentiment high.
The business world chose more direct action. On April 5th, tech journalist Kara Swisher revealed that a group of tech and finance leaders visited Mar-a-Lago to "discuss common sense" with Trump. These individuals, who once donated millions to his campaign, now face trillions in losses and view Musk as a potential pressure point. Meanwhile, Bessent's resignation rumors and proposals like Senator Chuck Grassley's tariff power bill show internal and external pressures forcing Trump's team to face correction choices. Texas Senator Ted Cruz warned: "Comprehensive tariffs will destroy jobs and devastate the economy." The policymakers' confidence is facing severe real-world challenges.
IV. Learning from History and Investment Choices: Avoid or Buy the Dips?
Is this storm a technical adjustment or a prelude to substantial recession? The answer depends on policy space and correction ability. The Fed still has about 400 basis points of rate cut room (assuming current rate of 4.8%), with 100 basis points saved in interest far exceeding Musk's Doge department's fiscal tightening. If economic data doesn't worsen comprehensively, asset plunges might offer dip-buying opportunities. However, research funding cuts (like NIH) and global retaliatory tariffs might weaken US long-term competitiveness, with Hoover's trade war consequences as a warning.
The political dimension is equally crucial. The 2026 midterm elections are Trump's concern; if both houses' majority shifts, his policies will struggle. This might explain his urgency to create "achievements" in the short term. Currently, Trump team's correction speed—like Mar-a-Lago meeting results—will be the next phase's indicator. If they can balance short-term volatility with long-term goals, this "economic revolution" might have a turning point; if repeating Hoover's mistakes, consequences are unpredictable. Investors can consider these strategies:
- Short-term: Focus on bonds and defensive stocks under rate cut expectations, avoid high-leverage assets.
- Mid-term: If policy correction succeeds, undervalued US stocks and gold might rebound.
- Long-term: Beware of trade war escalation, diversify investments to emerging markets to hedge risks.
Conclusion
Trump uses tariffs as a chess piece to reshape economic landscape, but market volatility and social pushback expose his strategy's fragility. His team demonstrates market manipulation ability, but Hoover's lesson reminds us that stubborn self-confidence can be costly. Your next investment step depends on balancing short-term chaos and long-term trends. Understanding the game is key to finding opportunities in crisis.
