Remember Trump’s Art of the ? It works.
Two weeks ago, I noted that markets had reached “Peak Chaos” and that Trump’s tariff strategy would follow predictable patterns from his own documented playbook in The Art of the Deal. Today, as the July 9 deadline is due tomorrow with exactly the outcomes I anticipated, it’s worth examining what worked—and what this tells us about the path ahead.
When Predictions Meet Reality
On June 24, I wrote: “The 60-70% extension rate emerges from practical politics: Trump needs enough ’wins’ (countries that make concessions) to demonstrate his strategy’s effectiveness, while maintaining enough pressure (non-extension countries) to keep his threats credible.”
The reality? Trump pushed the deadline to August 1 and granted what amounts to extensions to most major trading partners while maintaining pressure on smaller economies. As Treasury Secretary Scott Bessent indicated, the administration expects about 12 trade deals—far from the original “90 deals in 90 days” promise, but precisely the selective approach I outlined.
I also wrote: “Trump’s documented need for concrete results rather than permanent chaos becomes crucial for July predictions… ’You can’t con people, at least not for long… But if you don’t deliver the goods, people will eventually catch on.’”
This played out perfectly. Instead of maintaining maximum uncertainty, Trump provided the policy clarity markets needed by sending specific tariff rate “letters” to countries and pushing back the deadline. As I wrote: “Having established maximum confrontation credibility; July tariff decisions will likely demonstrate resolution capabilities.”
The Strategic Extensions Framework Validated
My analysis specifically anticipated this pattern: “selective extensions for cooperative partners, targeted implementation against non-cooperative countries, and enough policy resolution to allow him to claim victory while providing markets the certainty they require.”
The evidence is overwhelming:
- Cooperative partners like the UK and Vietnam secured deals
- Major economies like the EU, Japan, and Canada received effective extensions through the August 1 deadline push
- Smaller economies like Bangladesh (35% to 35%), Bosnia (35% to 30%), and Cambodia (49% to 36%) face maintained or slightly reduced but still punitive rates
- Framework agreements with China demonstrate exactly the “wins” Trump needs while maintaining leverage
Peak Chaos Theory Confirmed by Market Response
Most importantly, my core thesis about reaching “Peak Chaos” has been validated by market behavior. I wrote: “When maximum geopolitical escalation fails to drive further USD weakness, it suggests the currency has already priced worst-case scenarios and is positioned for fundamental reassertion.”
The market response to Trump’s tariff letters and deadline extension has been notably calm compared to the April panic. price hasn’t surged despite ongoing trade uncertainty, and the USD has begun stabilizing from its extreme oversold levels.
As I predicted: “From the USD Index’s 9.5% oversold condition, Trump’s documented preference for winning requires delivering results rather than maintaining permanent uncertainty.”
The Art of Strategic Patience
What I learned from initially being wrong about the USD’s immediate response was crucial: “Markets needed to price maximum chaos before fundamentals could reassert themselves.” That chaos pricing is now complete.
Trump’s approach continues following his documented philosophy. As I quoted from The Art of the Deal: “I never get too attached to one deal or one approach… I keep a lot of balls in the air, because most deals fall out, no matter how promising they seem at first.”
The selective extension strategy and framework agreements demonstrate this principle perfectly—maintaining multiple negotiations while securing concrete wins where possible.
What’s Ahead: From Strategic Extensions to Economic Fundamentals
Looking toward August 1 and beyond, the Peak Chaos framework suggests we’re entering a new phase where economic fundamentals should reassert themselves more strongly. Here’s what I anticipate:
Continued Selective Pressure: Countries that haven’t secured deals by August 1 will face the stated tariff rates, but negotiations will continue. This maintains Trump’s credibility while providing ongoing opportunities for resolution.
USD Fundamental Support: As policy uncertainty diminishes and tariff implementation proceeds (even selectively), the fundamental USD-supportive mechanisms I outlined should strengthen. Reduced import demand and compressed trade deficits create mechanical dollar support.
Gold Vulnerability Persists: The failure of maximum geopolitical uncertainty to sustain safe-haven flows suggests precious metals remain vulnerable to USD strength and economic fundamental reassertion.
Market Focus Shift: Rather than pricing institutional chaos, markets should increasingly focus on the actual economic impacts of implemented tariffs—which tend to be USD-positive but meaningfully growth-negative.
Implications for Economic Growth
At the scale Trump is implementing—10% baseline tariffs plus country-specific rates ranging from 20% to 50%—the growth effects are likely to be substantially negative, not merely modest adjustments. The comprehensive nature of current tariffs creates multiple growth drags simultaneously:
Consumer Purchasing Power Erosion: Higher prices on imported goods represent a direct tax on consumption, reducing disposable income for other spending. When tariffs affect everything from clothing to electronics to automobiles, the cumulative impact on household budgets becomes substantial.
Supply Chain Disruption Costs: Companies across multiple sectors face significant cost increases and must restructure operations that were optimized over decades. This transition period typically reduces productivity and delays investment decisions as businesses navigate uncertainty.
Retaliatory Tariff Impacts: The research shows that China, the EU, and other major partners could introduce (regardless of what is currently said during negotiations) counter-tariffs on US exports, directly hitting American producers and exporters. This creates a two-way drag on economic activity.
Investment Uncertainty: The scale and speed of tariff implementation create business planning challenges that often result in delayed capital expenditure and hiring decisions. Companies tend to wait for clarity rather than commit resources during major trade policy shifts.
Productivity Losses: Forced shifts away from efficient global supply chains toward less efficient domestic alternatives typically reduce overall productivity during the transition period.
Historical precedent supports these concerns. The academic research on Smoot-Hawley and other major tariff episodes shows meaningfully negative growth effects when tariffs reach current comprehensive levels. We’re talking about potential impacts on hundreds of billions in trade flows across virtually every consumer and industrial category, far exceeding the targeted approach of Trump’s first term.
This actually strengthens the case for USD strength over time, as it suggests the Fed may need to maintain restrictive policy longer to combat tariff-induced inflation even as growth slows—a classic stagflationary setup that often supports the dollar through higher real yields.
Implications for Commodities
The combination of growth-negative tariff impacts and USD strength creates particularly bearish conditions for industrial commodities, validating the bearish outlook I’ve maintained on and mining stocks (yes, they both rallied in the previous months – but so was the case before the 2008 top, after which they both plunged):
- Demand Destruction Mechanics: Meaningful economic slowdown directly reduces industrial demand for copper, steel, aluminum, and other base metals. Construction, manufacturing, and infrastructure spending all face headwinds from higher input costs and reduced economic activity. When companies face margin pressure from tariffs, they typically reduce expansion plans and defer equipment purchases.
- Dollar Strength Amplification: As USD strength reasserts itself from oversold levels, it creates additional downward pressure on dollar-denominated commodities. Foreign buyers face higher local currency costs even before considering underlying demand reductions, creating a double impact on global commodity markets.
- Supply Chain Reshoring Paradox: While tariffs are intended to encourage domestic production, the transition period creates net demand destruction. Companies reduce overall activity rather than immediately reshoring, leading to lower total metal consumption during the adjustment period. Building new domestic capacity takes years, while demand destruction happens immediately.
- China Retaliation Effects: Chinese counter-tariffs on US agricultural and energy exports reduce American economic activity in these sectors. China might boost its economy with metal-heavy infrastructure spending, but this usually can’t make up for the broader drop in global demand.
- Historical Precedent Validation: During the Smoot-Hawley, copper prices collapsed 65% from 29.5¢/lb in 1930 to 10.3¢/lb by 1933 as global trade contracted. While current conditions differ, the mechanism—trade war leading to industrial demand destruction—remains fundamentally the same.
- Stock Amplification: Mining stocks typically move 1.5-2.5 times the magnitude of underlying commodity price changes, meaning even modest commodity weakness translates to significant equity declines. The combination of lower copper prices and reduced mining company margins from higher input costs (due to tariffs) creates a particularly challenging environment.
This creates a particularly bearish setup for copper, which I’ve been tracking closely in recent analyses, as well as broader pressure on industrial metals. The combination of USD strength and demand destruction represents a classic “double whammy” for commodity-exposed equities, reinforcing the bearish thesis for mining stocks that has been a key theme in the analysis.
Notably, precious metals face different but equally challenging dynamics. While they might benefit from economic uncertainty, the failure of maximum geopolitical escalation to sustain gold rallies, combined with potential USD strength and higher real yields necessitated by Fed policy responses to tariff-induced inflation, suggests gold and silver remain vulnerable among the industrial commodity weakness.
The Broader Strategic Context
Trump’s August 1 framework validates the core insight from my analysis: “Having achieved maximum pressure through Iran strikes and tariff threats, Trump can now afford the strategic clarity that markets require—and that his own political narrative demands—to demonstrate concrete negotiation victories.”
The selective extensions and concrete deals provide exactly the “demonstrable results” his documented preference for winning requires while maintaining enough pressure to keep future negotiations credible.
This suggests we’re transitioning from the chaos-pricing phase to the fundamental reassertion phase, with important implications for the USD Index, gold, and commodity markets in the weeks ahead. This likely means not just paper gold or paper silver, but also physical metals’ prices – they might decline with a delay, but they are also likely to move lower.
The economic headwinds from comprehensive tariff implementation, combined with dollar strength from trade flow changes, create a particularly challenging environment for industrial commodities and mining stocks while potentially supporting the USD through higher real yields as the Fed responds to stagflationary pressures.
The Peak Chaos Theory Confirmed
Technically, the USD Index is on the verge of breaking above its declining resistance line – the one that prevented it from rallying for months. Will the breakout be successful this time? This is likely given the Peak Chaos theory.
It’s simply time for this to start. Another week or two wouldn’t make a difference from the long-term point of view but given that the USDX rallied right after its monthly reversal (the USDX tends to reverse close to the turn of the month), this could really happen this time.
And the implications of the above for commodities and precious metals would be bearish – likely significantly so.
Just as the Peak Chaos theory now suggests.