Author: Luke, Mars Finance

In early April 2025, Trump set off a global economic storm with a 10% comprehensive tariff policy. From the failure of gold safe-haven to the evaporation of 5.4 trillion US dollars in the market value of US stocks, to the wave of protests and emergency mediation by the business community, this crisis is like a high-risk game that tests investors' judgment. This article will analyze the logic behind the chaos from four aspects: financial chain reaction, Trump's "economic revolution", social and business backlash, and historical lessons and investment prospects.

1. Financial chain reaction under the impact of tariffs: Why did gold fall?

Trump's tariffs were implemented, and global stock markets evaporated $6.6 trillion. The U.S. stock market lost $5.4 trillion in two days, and 400,000 accounts shrank significantly. Surprisingly, gold, a safe-haven asset, was not spared, falling by 1.9% on April 5. What's the reason?

The answer lies in the chain effect of leveraged trading. The high leverage in the futures market amplified the decline of US stocks, and investors' floating losses triggered "margin calls". In order to avoid forced liquidation, they sold highly liquid assets such as gold to make up for margin. The sudden drop of 2.3% in gold ETF positions on the day confirmed this pressure. This short-term sell-off is driven by trading sentiment rather than macro trends. When the market stabilizes, funds may flow back to gold, but at present, the logic of risk aversion has been overturned by liquidity demand.

At the same time, WTI crude oil fell below $60 per barrel, weakening inflation expectations. Crude oil has a significant weight in the US CPI, and its price decline offsets the price pressure of tariffs, prompting the interest rate futures market to push the Fed's interest rate cut expectations to five times. In the trade-off between inflation and recession, the Fed is more inclined to stabilize growth. This suggests to investors: short-term safe-haven assets may be under pressure, but the expectation of interest rate cuts may be good for bonds and growth stocks.

2. Trump’s “Economic Revolution” and Wall Street’s Confusion: Lessons from Hoover

Trump's attitude towards the crisis is clear. On April 5, he declared on the Truth platform: "This is an economic revolution, and we will win." He hinted that the stock market crash was "deliberate" and aimed at reshaping the trade pattern. However, this gamble caught Wall Street off guard.

Treasury Secretary Benson was considered a bridge to the financial world, but on April 6, it was reported that he might resign due to "ridiculous tariff calculations." MSNBC revealed that he only analyzed scenarios in White House meetings, and the decision-making was actually led by Peter Navarro, Howard Lutnick and Jamieson Greer. Wall Street had nowhere to turn, and JPMorgan Chase predicted that US GDP growth would fall to -0.3%, sounding the alarm for recession.

Hoover in history provides a mirror. In 1929, Hoover ignored the opposition of the consortium and promoted the Smoot-Hawley Tariff Act, raising the tariff rate to 59%, triggering a global trade war and ultimately exacerbating the Great Depression. Trump's gamble today is similar, but his team exchanged a 20% drop in the US stock market for a dollar drop to 101 points, five interest rate cuts, and did not trigger a substantial recession (April 5 employment data was solid). This is in line with its weak dollar and low interest rate goals, but supply chain disruptions and stock price plunges have caused companies to complain. Investors should be alert: short-term policy dividends may mask long-term risks.

3. Social backlash and pressure to correct mistakes: Market signals are beginning to emerge

Market turmoil quickly ignited social anger. On April 6, the "Let Go!" movement swept more than 1,000 cities around the world, with protesters opposing tariffs, federal layoffs, and Musk's DOGE department. On the National Mall in Washington, slogans such as "Penguins Against Tariffs" and "Make My 401k Great Again" pointed directly to the impact of policies on the middle class. Tesla became a target because of Musk's alliance with Trump, and showrooms in the United States and Europe were frequently attacked, and boycott sentiment was high.

The business community chose more direct actions. On April 5, technology reporter Kara Swisher revealed that a group of technology and financial leaders went to Mar-a-Lago to try to "discuss common sense" with Trump. These people who once donated millions to his inauguration are now facing trillions of losses and regard Musk as a potential target of pressure. At the same time, rumors of Bessant's resignation and the tariff power bill proposed by Republican Senator Chuck Grassley and others show that internal and external pressures are forcing the Trump team to make corrective decisions. Texas Senator Ted Cruz warned: "Comprehensive tariffs will destroy jobs and hit the economy hard." The confidence of policy implementers is facing severe challenges in reality.

4. Learning from history and investment decisions: hedging or bargain hunting?

Is this storm a technical adjustment or a prelude to a substantial recession? The answer depends on policy space and error correction capabilities. The Federal Reserve still has about 400 basis points of room to cut interest rates (assuming the current interest rate is 4.8%). The interest saved by cutting interest rates by 100 basis points far exceeds the fiscal tightening of Musk's DOGE department. If economic data does not deteriorate across the board, the asset crash may be a good opportunity to buy at the bottom. However, cuts in scientific research funding (such as NIH) and global retaliatory tariffs may weaken the long-term competitiveness of the United States. The consequences of the trade war in the Hoover era are a lesson for the past.

The political dimension is equally critical. The 2026 midterm elections are a hidden worry for Trump. If the majority in both houses is lost, his policies will be difficult to implement. This may explain his motivation to rush to produce "results" in the short term. At present, the speed at which the Trump team corrects its mistakes - such as the results of the Mar-a-Lago talks - will be the vane for the next stage. If short-term shocks and long-term goals can be properly balanced, this "economic revolution" may have a turnaround; if Hoover's mistakes are repeated, the consequences will be unpredictable. Investors can consider the following strategies:

  • Short term: focus on bonds and defensive stocks amid expectations of rate cuts, and avoid highly leveraged assets.
  • Medium term: If policy corrections are successful, undervalued US stocks and gold may rebound.
  • Long term: Be wary of an escalation in the trade war and diversify investments into emerging markets to hedge risks.

Conclusion

Trump used tariffs as a chess piece to try to reshape the economic landscape, but the fragility of his strategy was exposed in the market shock and social backlash. His team demonstrated its ability to manipulate the market, but the lesson of Hoover reminds us that the cost of self-will can be high. Your next investment step depends on the balance between short-term chaos and long-term trends. Only by understanding the game can you find opportunities in the crisis.