Black Swan in the White House

Scenario Analysis on Trade Tariffs

Apr 13, 2025

“Don’t be Weak! Don’t be Stupid! Don’t be a PANICAN.”

- Donald J. Trump, 2025 -

Today, we’re shining a light on one of the most chaotic variables in the market right now: Trump’s new tariffs.

Why? Because as an investor, you need to be ready for market disruptions. Not just the usual day-to-day noise, but the kind of unexpected curveballs that can either crush your portfolio—or hand you once-in-a-decade opportunities.

We believe these tariffs could fall squarely into Black Swan territory.

For those unfamiliar: a Black Swan is an unpredictable, rare event with massive consequences—something that seems obvious only in hindsight. The term was popularized by Nassim Nicholas Taleb in his 2007 book The Black Swan, and no, it has nothing to do with ballet. Think 2008 financial crisis. Think COVID. Think stuff that nobody saw coming—until it was everywhere.

Trump’s tariffs might just qualify. They’re sudden, broad, aggressive, and introduced into a world economy that’s already on edge. Few anticipated the U.S. slapping sweeping tariffs on both allies and rivals at once. And yet—here we are.

The impact? Potentially massive. Global trade flows are being reshuffled, supply chains disrupted, and political alliances strained. We’re not talking about a minor policy shift. We’re talking system shock. And yes, once the dust settles, you’ll hear analysts retroactively “predicting” it. That’s how Black Swans work—surprising in the moment, explainable in hindsight.

Why does this matter for you? Because traditional financial models don’t prepare you for this stuff. They assume normal distributions, predictable cycles, manageable volatility. But markets don’t crash because of the expected—they crash because of what no one saw coming.

Taleb argues that it’s these rare, extreme events—not the steady trends—that actually shape history. Innovations, revolutions, financial meltdowns: all Black Swans. Which means the biggest risk in your portfolio isn’t what you know—it’s what you can’t possibly predict.

So what do you do about it?

You build investment strategies that are robust to the unknown. You don’t try to guess the next Black Swan. You position yourself to survive (and maybe even thrive) when one hits.

But to do that, you first need to understand the event itself—and that’s what today’s article is all about. We’re breaking down how these tariffs could affect the global economy and the geopolitical landscape.

Let’s get into it.

A Sneaky Strategy?

Let’s rewind for a second. Why are these tariffs happening in the first place?

Trump says it’s simple: protect American industry by taxing foreign goods and forcing companies to bring production back home. Classic playbook. The tariffs target countries where the U.S. runs a trade deficit—China, yes, but also close allies. It’s pitched as an economic shield, a way to bring jobs back to American soil.

But let’s be real—we’re not buying the whole “America first” narrative at face value.

We think there might be something else going on. Our theory? These tariffs are a way to engineer a recession—or at the very least, create a flight to safety in the bond market. If panic sets in, demand for U.S. Treasuries spikes, interest rates fall, and boom: suddenly it’s a lot cheaper to refinance America’s trillion-dollar debt pile.

Are we 100% sure? Of course not. Trump is about as predictable as a broken roulette wheel (trust us, we can’t even predict a roulette that is fully operational). But we wanted to give you our lens, so that you’re fully in sync with where we’re going next.

Because if this is about rate manipulation via market disruption, the implications run deep. And that’s exactly where we’re heading next.

Geopolitical Impact

ALLIANCES AND RELATIONSHIPS

The geopolitical consequences of Trump’s tariff strategy could be nothing short of disastrous.

Let’s start with the existing alliances. After the earlier Ukraine tensions, this is shaping up to be round two—another sharp blow to transatlantic relations. By unilaterally imposing hefty tariffs on so-called “allies,” Trump is putting serious strain on the U.S.–EU alliance. And let’s be clear: retaliation is already on the table. Several European leaders have hinted that if Trump follows through, they’re ready to strike back with countermeasures. That kind of tit-for-tat escalation could easily push diplomatic ties to a historic low.

Trade, after all, is built on trust—and trust hates uncertainty. Between Trump’s unpredictability (pause or no pause, deal or no deal) and these broad-stroke tariffs, confidence in the stability of the U.S. as a trade partner is quickly evaporating. That’s pushing the EU to either turn inward—focusing on its own economic resilience—or look outward toward more reliable partners.

And that brings us to China. These tariffs aren’t just targeting the EU; they’re aimed at the global stage, with China front and center. What’s Beijing doing in response? A full-scale charm offensive—especially toward Europe. They’re positioning themselves as the “grown-up in the room,” a stable and pragmatic alternative to the current volatility in Washington.

In a worst-case scenario, the EU may pivot more decisively toward China—both economically and diplomatically. That could put serious pressure on the U.S. economy, but more than that, it would mark the beginning of a deeper shift in the world order. One where the so-called “Global West” no longer speaks with one voice.

Multilateral institutions like the World Trade Organization (WTO) are also feeling the pressure. Trump’s unilateral approach undermines the very foundation of international trade governance. If more countries begin to sidestep institutions like the WTO and lean into retaliatory politics, the result will be a fragmented world where everyone plays by their own rules. That’s a dangerous precedent.

Meanwhile, other geopolitical blocs are watching this unfold in real time. Countries in Latin America, Africa, and South-East Asia risk becoming collateral damage. They might be forced to choose sides—or find themselves cut out entirely as trade routes are reshuffled. That uncertainty could add fuel to already simmering regional instabilities.

This is also accelerating a shift within Europe itself. The EU is being forced to rethink its own strategic autonomy. In Brussels, calls for less dependence on U.S. political whims are growing louder. And this time, it’s not just about tariffs or retaliatory trade policies—it’s about building real independence in areas like technology, defense, and energy. That’s not just an economic pivot—it’s a long-term geopolitical transformation.

Bottom line? This isn’t just a trade story. It’s a structural shift in how power is distributed—and contested—across the globe.

TRADE FLOWS

Sanctions could dramatically reshape global trade flows—possibly for the worse.

Let’s start with the big picture. One very real possibility is that the global pie simply shrinks. We won’t put a number on it, but it’s not hard to imagine that short-term deglobalization could hurt the global economy as a whole. Higher tariffs suppress investment, erode trust in international cooperation, and risk creating a structurally lower growth path. Less efficient supply chains and a breakdown in longstanding trade partnerships could weigh on productivity for years to come.

That said, there’s also a more constructive scenario: economies adapt. In this view, global trade doesn’t die—it gets rerouted. Countries rewire their supply chains, new partnerships emerge, and eventually, the system settles into a new (albeit slower-growing) equilibrium.

We’ve seen this before. During the 2018 U.S.–China trade war, tariff walls between the two countries didn’t just cut trade—they reshuffled it. Many goods subject to tariffs still made it to market—they just went through different routes. Some nations stepped into the gap, taking over production or redirecting exports. China found new buyers. The U.S.? It didn’t see a surge in domestic manufacturing, but it did ramp up imports from countries like Vietnam. (Just one more reason we’re skeptical of the “America First” narrative.)

Meanwhile, new trade alliances gained momentum. While Washington was busy announcing tariffs, the rest of the world moved on. The remaining members of the Trans-Pacific Partnership pushed forward without the U.S., ratifying the CPTPP. The African Union launched its continental free trade agreement. The vacuum left by the U.S. was quickly filled. Slowly but surely, the architecture of global trade began to shift—toward a multipolar world, where power and influence are increasingly decentralized.

This shift cuts both ways. On the one hand, it shows the system’s resilience: trade finds a way. On the other hand, it hints at a deeper fragmentation—a world drifting away from the integrated, rules-based global market we once knew.

The most extreme outcome? Full decoupling between the U.S. and China. And we’re not just talking about tariffs anymore. This is a full-scale economic and technological separation. Trade, data, tech standards, finance—each side builds its own ecosystem, actively reducing interdependence.

This isn’t a short-term spat. It’s a structural break between the two largest economies in the world.

In short: globalization brought us integration, efficiency, and collaboration. Decoupling could bring us fragmentation, duplication, and rivalry. It’s not just an economic transformation—it’s a geopolitical paradigm shift. And for long-term investors, it could reshape everything from innovation cycles to power balances to portfolio returns.

Economic Impact

Now, let’s dive into the ripple effects these tariffs might unleash. The first-order effects are pretty straightforward: importing certain goods gets pricier, so companies eat the extra cost — and guess who picks up the tab in the end? Yep, us. Consumers. We pay more at the checkout. If you're curious for a deeper dive into how those first-order effects work, we’ve got you covered [link to article]. But for now, let’s zoom in on the second-order effects — and more intriguingly, whether Trump’s so-called “Sneaky Strategy” is already in play... or ever will be.

BOND YIELDS

Remember how we said bond yields are the key to shrinking that Everest-sized interest bill the US faces every year? Here's how that works: lower bond yields today mean the government can issue new debt at cheaper rates tomorrow. And there are two main ways to drive those yields down:

Investors pile into bonds, pushing up prices and dragging down yields. This usually happens when markets get spooked and people go hunting for a safe haven. As a result, stock prices tend to take a hit — classic flight-to-safety behavior. Quick, instinctive, reactive.
The Fed cuts interest rates, which trickles down into lower yields on bonds. This is more of a slow-burn move, typically rolled out when the Fed sees storm clouds (read: a recession) on the horizon. It's a longer-term play to grease the economic wheels.

Since my crystal ball is currently in the shop, let’s focus on the first route: the good ol’ panic-driven bond-buying spree. But here’s the twist: as Image 1 illustrates, US bond yields haven’t followed the script. Not only have they not dropped — they’ve actually gone up, and did so before the tariff pause was announced. Meanwhile, German and Chinese yields are sliding, and Japan is showing a modest bounce back since April 7th.

Image 1: Long-Term Bond Yield - Data Source: MarketWatch

So, how’s that “Sneaky Strategy” holding up? Spoiler: not great. Sure, it’s early days in what we’ll call The Great Tariff Show, and the grand finale is still a long way off. But for now, the lack of love for US bonds — especially while equities are tumbling — raises two possibilities:

Investors aren’t panicking. They’re just reassessing equity values based on lower expected cash flows, thanks to the tariffs. In this scenario, cash isn’t fleeing to bonds — it’s chilling on the sidelines, waiting for stocks to find their floor.
Or… investors no longer see US bonds as a safe haven. If that’s true, we’ve got a much bigger problem on our hands. It suggests that trust in the US as a financial rock is eroding. Some evidence of this? German and Chinese bond yields have dipped, hinting at growing confidence in those markets. But here’s the catch: those dips are minor compared to the cash exodus from equities, which suggests a lot of money is either moving into alternative assets or just sitting on the bench for now.

Either way, the game being played is a risky one — and the stakes are rising.

TRADE BALANCES

The second goal — the political one — is all about Making America Great Again… by dragging industry back onto home turf. And wow, if there were awards for Most Overused Word of the Week, “deficit” would be taking home the gold. It’s been thrown around so much lately, and always in the same doomsday tone — like the mere existence of a trade deficit is some kind of economic crime. So, let’s clear the fog a bit and go back to basics: a trade deficit just means that country A is importing more value from country B than it exports to them. That’s it. Meanwhile, country B ends up with a surplus. It’s not black magic, it’s just Econ 101.

Trump’s play here is simple: make imports more expensive so companies start sourcing locally. The idea is that if foreign goods become pricier, businesses will scramble to find domestic suppliers, which in turn boosts local production and creates jobs right here in the U.S. Sounds great in theory — and in some cases, it actually could work. Certain industries might thrive under this kind of shift, and the job creation might even outweigh the extra costs of tariffs, resulting in a net win for society.

But — and it’s a big but — assuming that everything should be made domestically just for the sake of it? That’s a slippery slope into inefficiency. Picture this: you live in a small village with five companies and one bakery. The bakery, as you might expect, makes bread. But instead of ordering lunch from the bakery, each company decides to turn its own employees into amateur bakers — all to keep lunch “in-house.” The result? Bad bread, and a total waste of talent. A silly example, sure, but it makes the point: forcing everything to be domestic just because you can isn’t always smart economics.

That said, it’s a move that fits snugly into the broader political narrative of Making America Great Again — and it might just be serving Trump’s larger strategy more than the economy itself.

Final Remarks

At the end of the day, these tariffs aren’t just a line item on a policy agenda — they’re a wildcard with global consequences. Whether they’re a genuine attempt to rebuild American industry, a covert maneuver to drive down interest rates, or simply another unpredictable turn in the Trumpian saga, one thing is clear: they’ve introduced a level of volatility that investors cannot afford to ignore.

We’re not here to tell you what’s going to happen — because frankly, no one knows. But we are saying this: be alert, stay nimble, and don’t underestimate the ripple effects of a policy move that’s already rattling markets, shaking alliances, and rewriting the rules of the global game.

This isn’t just economics. It’s strategy, power, and uncertainty — all rolled into one chaotic package.

And that? That’s exactly why we’re watching it so closely.

💬 What’s your take on the “Sneaky Strategy”? Smart play or economic roulette? Drop your thoughts in the comments — we read every one.