Goldman Sachs says Trump II tariffs alone would shave 1 per cent off eurozone growth, leaving aside a host of secondary effects. This is growth that Europe does not have to spare. It is already stagnating, with loan demand dead and fiscal tightening on the way.

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The German Economic Institute (IW) in Cologne says the double blow of Trump tariffs and Chinese counter-tariffs would cost Germany €150 billion ($246 billion) by 2028, cutting annual economic growth by 1.4 percentage points of GDP. This pushes Germany towards economic depression. The Institute said that the US would be hit hard by the blow-back from its own tariffs, losing 1 per cent of total output over the first two years.

“People here are getting seriously worried about what may be coming. We are not prepared,” said Samina Sultan, co-author of the report.

Germany is already reeling from a cascade of economic shocks: the loss of its sweetheart gas deal with Russia; the loss of UK market share after Brexit; failure to see EVs coming, and therefore the loss of its car market in China; and failure to see the Sino-American showdown coming, leaving it exposed to the crossfire. It has coped well, but there are limits.

Germany is today paying the price for a mercantilist economic model. It has long relied on the demand of others – and a current account surplus of 8 per cent of GDP – to sustain its prosperity, rather than generating home-made growth. The bigger your export surplus, the harder you fall when the world goes feral.

IW says Europe would not fare much better than Germany under this Trumpian world order, and that implies a second Lost Decade for countries that have never fully recovered from the last one.

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Imagine what this would do to the politics of France, where Marine Le Pen’s National Rally has just won a higher share of the vote than Labour in Britain, is by the far the biggest party in parliament, but is shut out by a cynical cordon sanitaire. It merely has to bide its time while its enemies deal with the horrors coming their way.

What happens in Italy as the pump-priming stimulus of the Superbonus runs out? What happens in Austria, close to following Hungary over to the dark side? At what point do the AfD on the Right, or Sahra Wagenknecht on the Left, unseat Germany’s venerable Volksparteien?

The Trump II shock might finally force the EU to do all the things it needs to do to turn its unstable half-built house into a viable superstate construction, with an EU treasury able to back up the euro and to fund a military-industrial complex worth the name. Right now it is doing no such thing. Brussels is ordering governments to retrench. Germany is even less likely to agree to joint debt or fiscal union now that France has gone off the rails.

I strongly doubt that Europe will rise to the military and strategic challenge in any united way if the US walks away from Ukraine. The EU is more likely to fracture, with Poland and the Nordics pitted against a string of states willing to accept a Faustian deal with the Kremlin, while others bleat like sheep.

Short oil, buy gold

Trump II lifts oil supply but lowers oil demand, ceteris paribus. The US Energy Department says US output will hit a record 14 million barrels a day (b/d) next year as advances in seismic technology keep extending the life of fracking. Trump wants America to drill until it drops.

This will collide with a fall in demand caused by his own policies: the economic hit to global GDP; and the reduction in trade shipping. It will collide with overcapacity among OPEC states, no longer willing to hold back 3 million b/d to prop up prices while Texas steals share. It will collide with a global glut of long-term oil projects coming on stream.

Reimposing oil sanctions on Iran will not change the equation, if they are even enforceable. And no, Trump will not stop the rollout of EVs in America now that Elon Musk is his big friend.

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The way to “short” peace is, as ever, to buy gold bars. If you think Bitcoin is a safe store of value in a world where anything digital can be hacked, you have a touching faith in the crypto gospel.

Betting on deflation is counter-intuitive. Trump’s taxes on American consumers raise prices (foreigners don’t pay the tariff, whatever he believes). But this effect may be overwhelmed by the global convulsions of the tariff war, which would crush demand and accelerate the fall in goods prices already underway as China tries to export its way out of a Keynesian liquidity trap.

“Far from inflationary, any new trade war launched by Trump will be a substantially deflationary event,” says Michael Hartnett, Bank of America’s investment guru, who notes that fund managers are massively underweight bonds – a contrarian buy-signal.

The global economy is weaker today than it was before the Trump I tariffs in 2018, and China is no longer able to act as a buffer.

“It will take far less to push the world into a deflationary recession,” he said.

He may be right. That may also be the least of our problems.

The Telegraph, London