Donald Trump may have ‘borrowed’ the phrase “Make America Great Again” from former President Ronald Reagan who campaigned with the slogan in 1980, however the current US President’s policies better reflect that of Richard Nixon.
That was the reference during ABC Refinery Global Head of Institutional Markets Nicholas Frappell’s presentation today (6 May) at the RIU Sydney Resources Round-up in Sydney. While discussing gold in the context of a “world of barriers and hyper-uncertainty”, Frappell likens Trump’s tariffs policies and its effect on gold to that of Nixon some 54 years ago.
Frappell says the “whole situation kickstarted the floating exchange rate system we know today” by Nixon’s policies and trade embargoes, which in the 1970s ultimately led to a massive shock to the US economy.
Frappell says gold and the world are now in a period of extraordinary uncertainty, one in which “newsflow will be more important than ever” and one where Trump’s trade policies are creating stagflation and accelerating global volatility.
“Tariffs raise prices and act as a tax on the domestic consumer, which will hit America’s highly consumption-led economy,” ABC Refinery’s Global Head of Institutional Markets says.
In these circumstances, the Fed is likely to prioritise inflation under the current administration.
Frappell cautions that tariffs on China in particular act as a trade embargo in practical terms and are creating trade barriers that will re-order the world, adding ultimately, “failure is approaching fast”.
During his talk, Frappell references Goldman Sachs analysts forecasting how US tariffs on Chinese goods could lead to 16 million jobs in China being lost, particularly in manufacturing for the retail and wholesale sectors.
“If high US-China tariffs were to persist and Chinese exports were to fall precipitously, labour markets would surely feel the pressure,” Goldman Sachs said in a 27 April research report.
Finishing his presentation on day one of RIU, Frappell quotes American Presidential assistant to Richard Nixon, HR Haldeman, from the Watergate senate hearings in 1973.
“Once the toothpaste is out of the tube, it is awfully hard to get it back in.”
The quote and idiom refers to a situation where something has been said or done that cannot be taken back. It’s like squeezing toothpaste out of a tube – once it’s out, you can’t put it back in.
In this context, Trump’s politics and actions have consequences that are unlikely to be undone – anytime soon at least.
The RIU Resources Round-up is being held from 6-8 May in Sydney. Mining.com.au is an official media partner at this year’s event.
Write to Adam Orlando at Mining.com.au
Images: Stock
