Currency traders are losing confidence in some of the most widely touted ‘Trump trades’. What happened to the big market swings?

As the meme goes, nothing ever happens. There’s plenty of noise, but no major events that transform the world as we know it.

A lot has happened in recent weeks, but does it really amount to Something? The January US jobs report – which saw fewer jobs added than expected – offered an early hint that the economy may not be running as hot as some anticipated. Since then, the President of and Vice President of the United States publicly clashed with Ukrainian President Zelensky at the White House, with the US subsequently announcing a pause in military aid to Ukraine.

Trump also announced a long-awaited (by crypto boosters) ‘crypto strategic reserve’, which saw digital asset prices rapidly spike – and then (evidence for the nothing ever happens hypothesis) rapidly return to their pre-announcement levels.

This means (trade) war

Then the bombshell. Trump announced 25% tariffs on Canada and Mexico, with additional tariffs expected on China. A shock move than no one could have anticipated, unless you listened to the words Trump was saying.

Yeah, I voted for Trump but I never thought he’d be so foolish to actually move forward with 25% tariffs given the well-documented history of how the Smoot-Hawley Tariff Act of 1930 triggered the onset of the Great Depression as global trade flows dried up. pic.twitter.com/s2v5hvbC4u

— Gary Black (@garyblack00) March 3, 2025

The Canadian dollar and the Mexican peso dropped to their lowest levels in a month. Global stocks fell. Gold extended its gains. And investors are tentatively looking to Treasuries. Meanwhile, European defence stocks are having a moment, as EU leaders ponder the strategic necessity of rearmament.

Maybe it’s finally happening?

Taking a high-level view, it certainly seems to be happening: China has announced 10-15% increases on tariffs on certain US agricultural goods, Canada’s Justin Trudeau vowed billions in retaliatory tariffs and Mexico’s Claudia Sheinbaum said her country has robust contingency plans up their sleeve. Meanwhile, some prominent US voices call for America to leave NATO, while the White House is rumoured to be drawing up a plan to offer Russia sanctions relief. UK Prime Minister Keir Starmer, by sharp contrast, claimed Europe is “at a crossroads in history” and must stand with Ukraine.

The only certainty…

Are we at the beginning of the end of the global trade as we know it and a major realignment in geopolitical strategic alliances?

Maybe. But with Trump, the watchword is unpredictability.

Ukraine says it is still prepared to sign a minerals deal with the US. And Trump may still see a way to wield the threat (now reality) of tariffs to secure deals.

As economist Brad Setser points out in a valuable Twitter thread, one plausible route would be to bring the US-Mexico-Canada (USMCA) Trade Agreement renegotiation forward.

Two potential paths to de-escalation that I see: One is announcing low reciprocal tariffs on Canada and Mexico in April and then reducing the applied tariffs to these levels; the other is pulling forward the 2026 USMCA renegotiation … https://t.co/9a7IaD7vRe — Brad Setser (@Brad_Setser) March 4, 2025

Are we witnessing the art of the deal in action, culminating – who knows – in a Nobel Peace Prize for Trump for ending the Russia-Ukraine war?

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