- The “America First” policy focuses on protecting national interests
- Trade wars have led to deterioration in US-Canada and EU relations
- Economic uncertainty caused by tariffs and budget deficits ($1T+)
- Inflation remains a challenge (Truflation 1.68, Fed doubts sustainable decline)
- Markets are volatile due to Trump’s surprise decisions (dips after tariff news)
- Gold (15M+ ounces on Comex) and Bitcoin attract investors as protective assets
- Raising taxes and issuing money are undesirable measures for Trump
- The US can use Bitcoin to manage government debt, but how exactly?
- Asset diversification is the best way to adapt to a volatile situation
We have seen an abundance of events, such as drastic US budget cuts, stock and crypto market volatility, ongoing trade tariff exchanges, and rather pessimistic inflation data reports. Whether this is what most people expected over the long haul from the arrival of Donald Trump, especially seeing the optimism in the markets after the first few days of his victory – I don’t think so. But whether it can be unequivocally called a failure, or whether it’s a risky but inevitable cost on the road to something bigger – maybe. Let’s break down the key moments we’ve seen lately.
Donald Trump’s Policies
As usual, I’ll start with politics, because in many ways it sets priorities and conditions for the measures we further see in the economy and other areas. Donald Trump’s policies are what is known as America First, but what does that mean?
You can read more about his speech in the Senate, where he lists and comments on all the initiatives of his presidency, criticizes the previous policies of the Democrats on those very points, and offers an alternative. But in brief, he puts American interests at the center and expands the set of tools with which these interests can be defended and developed in foreign policy. He also prioritizes business interests and the enabling environment for them, as well as households and the environment that makes goods and services affordable and efficient for them.
But moving from the basics to the details, we can see how the Trump administration is taking steps that all businesses may not like and many households may suffer. In particular, the trade wars and tariffs he is imposing have had some good results at first, for example when it helped secure U.S. interests regarding Colombia. However, with other players, especially Canada and Europe, we’ve seen some pretty serious resistance – and it doesn’t seem like such a tempting idea anymore.
For example, Ontario Premier Doug Ford spoke with CNN:
“Absolute chaos created by one person, Donald Trump.”
But he has announced a whole series of retaliatory measures that also involve critical infrastructure like the supply of electricity.
It goes beyond Mexico and Canada, European Commission President Ursula von der Leyen said:
“We deeply regret this measure. Tariffs are taxes. They are bad for business and even worse for consumers.”
Beyond condemnation and dissent, however, the European Union will raise tariffs on U.S. beef, poultry, bourbon and motorcycles, bourbon, peanut butter, and jeans.
For one thing, it challenges political relationships with allies, and you know, I’ll add a bit of my personal opinion here. The US-Canada relationship has been built over decades, and Trudeau’s phenomenal speech does make sense. The U.S. and Canada have been on the same side in a number of challenges, helped out when there were problems, and so on, and is it fine that just one person cancel it? Even taking into account the unfairness in trade terms that Trump is talking about – in all these decades, doesn’t Canada deserve more thoughtful measures to correct that? I’ll leave that question open.
However, objectively speaking, it makes you wonder, somewhat for Donald Trump, the ends justify the means and in his interview in which he was asked if America expects a recession he indicated:
“I hate to predict things like that. There is a period of transition because what we’re doing is very big, we’re bringing wealth back to America, that’s a big thing. There are always periods of … it takes a little time, it takes a little time, but I think it should be great for us, I mean I think it should be great.”
Economic Factors
All of this has a direct impact on the economy, and here, too, things are very mixed. On the one hand, we saw that the shares of many American companies, especially infrastructure, experienced growth after the announcement, for example, that Donald Trump is resuming the development of oil, gas, and metals in the United States.
On the other hand, trade wars and sudden movements add uncertainty, and markets don’t like that. We have already seen several moments when the market was red after every news about tariffs imposed by Donald Trump.
But that is what it is and it’s similar to what Trump calls a transition, implying certain economic risks and costs. And he will probably continue down this path for several very important reasons.
One is the U.S. national debt, the servicing of which could be $1.5T by the end of the year. Investors are showing less and less interest in U.S. debt because they fear the government will not be able to pay it back, so they are buying fewer government bonds. For example, the 10-year Japanese government bond yield has crossed above 1.50% for the 1st time since the Financial Crisis and this may cause Japanese markets and investors to start bringing money home.
The other is that the fight against inflation is still going on and the average American is feeling it very strongly. Yes, central banks are saying that the inflation victory has almost happened, and the Truflation shows an even 1.68 as of this writing. But these numbers are not necessarily accurate, as there are several ways to calculate them, as well as concerns about it.
For example, BlackRock CEO Larry Fink warns that he believes inflation could rise in the next 6-9 months:
“I think if we all are becoming a little more nationalistic — and I’m not saying that’s a bad thing, you know, it does resonate with me — that it’s going to have elevated inflation.”
Another one is the budget deficit exceeding $1T, which DOGE is trying to fight, but its measures can also have side effects. It’s already causing layoffs, and not just in the public sector. The hiring rate dropped to 3.6% in December, the second-lowest in 10 years.
This leads us to the logical conclusion that we need to replenish national reserves, but the economic model the world is in offers a limited number of options for this.
- To make another money emission, but this is accompanied by an increase in inflation and, as a consequence, an increase in interest rates.
- Raise taxes, both internal in the form of income taxes and external in the form of trade tariffs and so on.
- Trade natural resources, technology, or specific goods and services.
- Borrow money through government bonds, but it has to be paid back later and with interest.
Which of these options are available to Donald Trump? Trump makes one of his key goals to reduce inflation and interest rates, so the option of issuing money is not an option. Raising domestic taxes, such as income taxes – Trump is on the contrary seeking to reduce is not suitable either.
In general, Donald Trump seems eager to avoid Liz Truss’s path, which has led to bad consequences. She increased public spending during her brief tenure as UK Prime Minister in 2022 and proposed an aggressive economic stimulus plan that included tax cuts worth around £45 billion, including the abolition of a rise in corporation tax and income tax cuts for the wealthiest. A freeze on energy prices for households and businesses required huge public spending.
What did this lead to?
1. Panic in the financial markets Investors lost confidence in the British economy, causing the pound sterling to plummet.
2. Rising bond yields due to fear of increased government debt, the cost of borrowing for the UK government rose sharply.
3. intervention by the Bank of England the central bank was forced to urgently intervene and buy back bonds to avert a financial crisis.
4. Political instability due to the catastrophic reaction of the markets Liz Truss was forced to resign Kwasi Kwarteng and then resigned herself after only 44 days in office.
Thus, investors are investing in something more independent of government collateral, and of course, this is where gold comes in. While stocks and bonds fall, rise, and fall again in times of uncertainty, gold purchases are exceeding all indicators and over 15 million ounces of gold have been transferred to Comex vaults in 2025.
Of course, this includes digital gold, Bitcoin, which is also being systematically bought by the big players, even though its price depends on a lot of factors and it is experiencing a lot of volatility right now. But I’m going to say one interesting version, which is just a guess, but it deserves attention.
As an option. Or not?
Donald Trump says he’s going to use Bitcoin to deal with the national debt, but how exactly is he going to do that? What if the Trump administration, through its initiatives, first accumulates a huge amount of it and drives up the price of Bitcoin like never before, and then makes a big sell-off?
Then crypto markets and crypto investors will experience a big shock, but this may affect traditional finance only indirectly, as decentralized finance remains quite isolated and self-sufficient, and this is an advantage the US can turn into a disadvantage. So they will pay off their sovereign debt, and they will raise their credit rating to unprecedented levels as the only country that has paid it off. And probably then it will strengthen the dollar more than any other currency and its dominance will become absolute, as well as the belief in it.
It sounds like a tactically big win, but strategically a huge loss, because decentralized finance will not lose its key advantages and probably even after such a shake-up will be valuable in a huge number of uses, and whoever takes it as a basis will probably win in the long run. But still, the unexpected intentions and sudden movements of Trump, as well as the fact that he may use controversial means to achieve certain goals – makes it necessary to consider a variety of scenarios.
Conclusion
What do we have so far? The world’s largest economy is not in the best of condition and is also awaiting some sort of major transition, and is experiencing several ups and downs per week in the markets for stocks, bonds, and other assets.
Sharp decisions add momentum to these spikes, and many are going into gold, even decentralized assets like Bitcoin, as well as Ethereum, Solana, Cardano, XRP, and others, are experiencing volatility.
Of course, things could level off relatively quickly, Donald Trump’s goals turn out to be exceptionally well-intentioned, and the side effects turn out to be less sweeping. But there are always alternatives and it is worth considering them too.
To do this, you should always assess the situation comprehensively, diversify risks, and adapt your strategy to daily changes.
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