- Will the trade war be followed by a war with Iran?
Trump’s arbitrary and unpredictable tariff policy is sending stock markets into a tailspin, but he believes that a ‘golden age’ has now dawned for the US. He is now challenging countries to take countermeasures that could lead to a global trade war. China was one of the first countries to react, imposing a 34% tariff on many US products. This led to shock and panic selling not only on Wall Street, but on almost all global stock markets and commodity markets. The stock markets in Eastern Europe were also affected to some extent, but remained clear outperformers this year. Now the question arises as to whether the trade war will be followed by a war with Iran. The question also arises as to whether Trump can make ‘commodity deals’ not only with Ukraine but also with Russia.
Andreas Männicke gives his assessments of the new opportunities in Eastern Europe in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 248, but now also in the new BRICS-TV, episode 2 at www.YouTube.com. You can also register for the new BRICS TV channel on YouTube for free and order the new stock market letter BRICS Trends by emailing info@eaststock.de. You can watch the second BRICS TV video ‘Trump against the BRICS’ here: https://www.youtube.com/watch?v=_zN-qTv0xz4. Please also register if you are interested in a new BRICS newsletter. You can also read an introduction to the BRICS topic in VTAD News No. 42. Here is the link to the new BRICS analysis from December 2024: https://www.vtad.de/wp-content/uploads/2024/11/vtad-news-42.pdf
Trump sends stock and commodity markets tumbling
On 3 April, US President Donald Trump announced the list of import tariffs for a number of countries on so-called ‘Liberation Day’, although the system was not entirely clear and transparent. An import tariff of 10% has now been set for all countries. For Great Britain it remained at 10%, but the EU has to pay 20%, China 34% and Vietnam as much as 51%. Incidentally, Russia is not on the list of punitive tariffs, which is remarkable. Instead, he decided on punitive tariffs for an island where there are no exports, only penguins. But that already speaks volumes for the arbitrariness.
How long will Musk remain Trump’s advisor?
His advisor Elon Musk is currently on a collision course with Trump, as he is putting forward different proposals to those implemented by Trump. Elon Musk has even proposed a free trade agreement and no tariffs with the EU. Musk also has problems with the new tariffs if he wants to produce Tesla in China. There are now many protests in the US both because of the cutbacks in the authorities by Musk and because of Trump’s nonsensical tariff policy. One wonders how long Trump and Musk will remain good (business) friends and when the rift will come. Musk wants to focus more on his job as a businessman and put the advisory role on the back burner, which has discredited itself among the population due to his radical measures. Many Tesla are now burning in the USA and not only there…! The protest movement ‘Hands off’ will continue.
Why is Trump doing such nonsense?
Trump has the ‘1 trillion US dollar problem’, which he now wants to solve rigorously with a crowbar, which is clearly the wrong approach. The USA has had a chronic current account deficit of USD 1 trillion for years, but also a budget balance deficit of USD 1 trillion, and that with an extremely high national debt of over USD 36 trillion. In addition, the USA spends almost USD 1 trillion on armaments (defence?) in order to continue playing the role of world police and keep countries under control. Trump is right to see China as the main problem, as rival number one in the fight for a new world order, where the USA will no longer play the sole leading role. That is why Trump is now trying to get Russia on board too, in order to break the China-Russia alliance, although this will not be easy for him.
The USA needs raw materials, low interest rates and a reduction in the high deficits
Trump knows full well that he will need a lot of raw materials in the future if, above all, the technology companies are to continue to grow. That is why he now wants to make ‘raw material deals’ with Greenland, Ukraine and Russia and take them on board the (almost sinking) US ship. These are also strategic and geopolitical considerations, which are perfectly understandable.
This year, around USD 2 trillion of corporate bonds and over USD 2 trillion of real estate loans in the US will have to be refinanced or extended at higher capital yields of over 4%. In addition, USD 10 trillion of US government bonds will have to be refinanced by the beginning of next year. Trump also wants to cut taxes, which seems like squaring the circle. Trump is trying to balance the chronic deficits with a rigid tariff policy, but this could backfire if the US faces higher inflation and a recession as a result of a continued trade war.
Per aspera ad astra?
Trump believes that other countries have previously robbed the US and created unfair trading conditions. Trump’s aim is to persuade foreign companies to set up production facilities in the US. At the same time, Trump signalled that he is in principle willing to talk. This was similar to his first term in office. So Trump does want to make deals. Whether these deals will really lead to an increase in prosperity in the medium term or even to the promised ‘golden age’ in the US remains to be seen. However, many analysts and experts initially expect an increase in inflation and recessionary tendencies in the US. So ‘per aspera ad astra’ (= through adversity to the stars)? Central bank chiefs, i.e. Powell for the Fed and Lagarde for the ECB, are now similarly concerned. Four interest rate cuts are now expected in the US if recessionary trends emerge.
Bond yields are already falling at the long end.
The only thing that had risen significantly were bond prices at the long end. The T-bond future rose in the US and the Euro-Bund future from 118 to 121 and even more the Bund future from 129.2 to 130.4. This means that the yield at the long end fell noticeably. However, the recovery began earlier, after Merz’s rather idiosyncratic ‘whatever it takes’ speech and his initiation of a debt orgy of 1 trillion euros had previously caused the Euro-Bund future to slump from 132 to 127, resulting in a bond crash.
The price slump has now almost been made up again by the Trump crash on the stock market. Ten-year yields in Germany initially rose from 2.4 to 2.8% and have now almost fallen back to their pre-bond-crash level. The yield on US government bonds fell from 4.2 to 4.0%. However, this was also a consequence of the stock market crash on 4 April, with investors reacting along the lines of ‘get out of equities and into high-yield government bonds’, which this time were the ‘safe haven’.
Commodity markets also plunged due to the weak US dollar.
Gold also fell slightly by 2.3% to 3,036 USD/ounce, but silver plummeted by as much as 6.4% to 29.7 USD. However, energy commodities also saw particularly heavy losses, with Brent crude falling by 5.2 per cent to USD 66.3 per barrel, due in part to OPEC’s decision to increase oil production from April onwards. All industrial commodities also trended very weakly, with copper and nickel in particular falling by 5 to 6 per cent on 4 April. The US dollar was also very weak, falling to 1.100 EUR/USD, and has now recovered slightly to 1.09 EUR/USD. However, cryptocurrencies such as Bitcoin (B/C) held up well on 4 April, stabilising at just under 83,000 BTC/USD. So there has not (yet) been a sell-off here, as there has been in the stock and commodity markets.
The worst is yet to come
However, the whole thing is not over yet, as there may now be a series of countermeasures. On the other hand, the geopolitical risks that Trump has threatened, such as a war with Iran, are already looming if Iran does not sign a nuclear agreement in line with US demands. With Trump, everything comes with a warning, but no one really believes it and is later surprised by the hard facts. The war in Ukraine could still escalate if a ceasefire is not quickly agreed and Macron/Stamer actually sends its own troops to Ukraine or even if the designated German Chancellor Merz still releases German Taurus missiles to launch against Russia, which would mean a strong risk of escalation.
Stock markets in free fall: ‘Vola’ rises sharply!
On 3 and 4 April, following the announcement of the tariff hammer, there was a real sell-off on the global stock markets, but it was particularly severe on 4 April. The VIX index (volatility index) on the S&P index rose by 100% from 25 to 50 on 3/4 April. Here, with VIX long positions, one could have quickly doubled one’s capital in two days. However, this was not triggered by panic selling by private investors, but mainly by the futures exchanges, i.e. by new short contracts and the liquidation of long positions, which then dragged the spot markets down with them. Private investors hardly sold at all, but were just surprised at the low prices on 4 April. In terms of market technology, however, the price slump was very significant because important support lines were breached, such as the S&P 5500 index and the DAX 22,000 index. It was quite clear that a sell-off and crash could occur if these levels were breached (see the timely warning in the EAST STOCK TRENDS market letter (www.easztstock.de), especially if this chart breakout to the downside is imitated and supported by historically high tariffs.
On 4 April, the S&P index consequently fell by 5.9% to 5075 index points, the NASDAQ Comp. index by 5.8% to 15,588 index points and the DAX by 6% to 20,347 index points. This means that the S&P index is now down 13.5% since the beginning of the year and the NASDAQ index is even down 19.15%, while the DAX was still able to salvage a slight gain of 3%. However, the DAX had already reached its high for the year with a gain of 17.5%, so that here too the price losses are considerable.
Eastern European stock markets remain clear outperformers even after price losses
Most Eastern European stock markets also experienced severe price losses of 6% on average on 4 April. Only the Baltic stock markets and the Slovakian market remained very stable, with losses of only 1%. In general, the Eastern European stock markets once again clearly outperformed. The CECE index (with Poland, Hungary and the Czech Republic on board) rose by 4 April, the CECE index (with Poland, Hungary and the Czech Republic on board) had risen by 9% since the beginning of the year, the PTX index from Poland by 13.7%, the CTX index from the Czech Republic by 10.5% and the HTX index for stocks from Hungary by 8.2%. The best performance, however, was still delivered by the UTX index for equities from Ukraine, which has risen by 55.2% since the beginning of the year. Far too few western investors, however, are taking advantage of the clear outperformance opportunities that are available in Eastern Europe.
First inform, then invest
Find out now in detail about the background and development of the Ukraine/Russia crisis, but also the future recovery potential of undervalued equities in Eastern Europe. There are also new opportunities in the Baltic states, Southeastern Europe and the CIS republics (Kazakhstan, Georgia), with the respective stock indices all up in 2023. In 2023, 12 stock exchanges from Eastern Europe were among the 30 best-performing stock markets in the world, with five clearly outperforming the DAX. In 2024, 9 stock exchanges in Eastern Europe were once again able to outperform with a strong plus. And at the beginning of the year, there were already 4 stock exchanges in Eastern Europe that clearly outperformed the DAX. So it’s still worth looking beyond the end of your nose to Eastern Europe.
So order a trial subscription now (3 issues by email for just €15) of the monthly market letter EAST STOCK TRENDS (EST), which includes another Ukraine/Kazakhstan special and a dividend special, as well as lots of background information and new investment suggestions, such as the ‘share of the month’ and lucrative certificates at www.eaststock.de, there under Börsenbrief. The last EST was published on 28 March 2025.
TV/Radio Notes: On 5 February 2024, Andreas Männicke was interviewed by Carola Ferstl on Money Talk about gold, commodities and the new opportunities in Eastern Europe. On 5 December 2024, Andreas Männicke was interviewed by Heinrich Leben on Börsenradio Networks about the new opportunities in Eastern Europe, particularly in Ukraine after the end of the war. You can download all radio and TV interviews in the video archive at www.eaststock. de, including the last video in EastStockTV, episode 248. By the way: Have you already subscribed to the new YouTube channel – BRICS TV, in addition to the YouTube channel EastStockTV? Here is the link to the second BRICS TV video: https://www.youtube.com/watch?v=_zN-qTv0xz4
Reading note: In the new issue of VTAD News No. 42, Andreas Männicke provides a detailed report on BRICS as a new investment opportunity. Here is the link to the article: https://www.vtad.de/wp-content/uploads/2024/11/vtad-news-42.pdf
Seminar note: If you are interested in new Eastern Exchange seminars ‘Go East’ or a BRICS seminar in Frankfurt/M or other cities, please contact the EST editorial team (www.eaststock.de). If you are interested in Eastern stock market webinars and BRICS webinars, please also register.
You can now also order Andreas Männicke’s free newsletter with the latest news about the world and Eastern stock markets and the BRICS at www.eaststock.de. Please also register at info@eaststock.de if you are interested in a new BRICS newsletter from Andreas Männicke.