Blain’s Morning Porridge April 11^th 2025: A Week is a Long Time in Politics and Markets

 “It was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity”

The irresistible force of Trump has hit the immovable rock of Economic and Market Reality. The inconsistencies of Trump’s tariff policies – the centre-plank of his economic understanding – have been exposed as bogus. It begs the question – What Next? Which is why markets are braced for even more dislocation.

It’s Friday, and it’s a long time since I had a proper rant. It really is time to get stuff off my chest…. So here we go… what do I really think….. I will be accused of disrespect and Trump Derangement Syndrome, but as we now know the real sufferers of that dread delusional condition are those who simply won’t acknowledge the damage Trump’s bluff and bluster hodgepodge of policy mistakes have done to America and the global economy.

These are truly extraordinary times:

• On Wednesday we saw one of the most spectacular relief rallies of all time, triggered when Trump bowed to the bond market, stood down tariffs to 10% (25% on autos) for everyone except Russia (which remains on zero), but declared Trade War on China with 145% tariffs.
• On Thursday, the relief quickly fizzled as markets digested the implications.
• This morning, Friday, the slide has resumed – markets collectively judging there is a fundamental problem, questioning the sustainability of dollar markets, and rising uncertainty on offramps and future friction.

The outlook is trending towards increasingly murky. There is zero chance markets will simply shrug off the inevitability of events since January 20^th 2025. There is massive and building concern around the USA and its investibility.

• Trump blinked Wednesday because his plan evaporated when the Treasury market punched him in the face. Refinancing risk is now writ large across the US economy – which could see rising rates and stagflation accelerate the trade-induced recession Trump has initiated. The dollar may have lost its lustre as a consequence – with massive future implications. Trump may have trapped the USA in a negative feedback loop of refinancing risk, rising rates, imported price-volatility, and stagflation, failing every promise he made to voters.
• The impact of a closed-door 125% tariff war with China is bound to disrupt supply chains, and will negatively impact US consumers and manufacturers – with consequences for sentiment and ultimately profits. Global recession remains a high probability event.
• There is no obvious off-ramp for Trump to dial down the damage his China Trade war will create. He fundamentally misunderstood that China is not going to back down.
• A US credit-crash is developing as investors see rising risks of default in leveraged and junk financings, putting much of corporate America under threat, with likely consequential crises for Private Equity and Capital. Activity across US capital markets has effectively stalled.
• Trump has negatively impacted the credibility of the US. 10% tariffs and 25% auto-tariffs remain in place, infuriating America’s now former allies. Trump’s comments about foreign leaders queuing to “kiss-his-ass” will simply have confirmed the revulsion most foreign leaders privately feel for him.
• Far from being cowed, Europe may up the ante with demands for “balance” and threaten a retaliatory swipe on US Tech firms. European politicians are increasingly saying what they think about US perfidy re oil, gas, and Ukraine.
• America First sells well to the MAGA faithful. Less well elsewhere – especially to foreign investors in US debt.
• China can inflict significant tariff and supply chain pain on the USA. Rare Earths is just one aspect the US will struggle to cover. (While the US has inflation, Europe may experience an element of deflation as China redirects goods from the US to other markets.)
• Ultimately most wars (hot, cold or trade) are about energy. China lacks the energy self-sufficiency of the USA, but the steep falls in oil prices are keenly felt in the Middle East. It’s not inconceivable Saudi and others will cut production to push up prices, and trade oil priced in RNB to China – whatever Trump threatens.

I am sure there are multiple other points of economic conflict I’ve missed – but I’m sure you get the drift. Trump has put the US in a terrible position.

There is a growing realisation what the problem is – simply put its Donald Trump.

Everything, absolutely everything, that is roiling sentiment, destabilising trade and markets is about Trump. Every single irrational decision, market stumble, and rising fears about uncertainty and unpredictability boil down to one single factor – Donald J Trump squatting in The White House.

I said I’d say it like I see it; in my 40 years in financial markets we’ve never, ever been so-in-thrall to the actions of a single man before. And never a man with so little self-awareness of the damage he’s doing. Never a man so obviously unsuitable for the role of most-powerful human on the planet. Never a man so likely to fulfil the adage: power corrupts and absolute power corrupts absolutely.

Viewed from afar, the USA is no longer the nation we once knew. When did it morph from the Land of the Free to one where a president can neuter the media, crush any that disagree with him, where free-speech is a commodity to be bought and sold, where legal firms are quashed for representing the other side, where innocent residents are deported on a whim, where bankers are told to remove references to Trump’s multiple policy mistakes from presentations to avoid offending him. That is not America – that sounds like Imperial Rome from Decline and Fall.

Increasingly, even staunch Republican traders and investors in the USA are beginning to see through Trump’s smaltz – that was abundantly clear in the email reaction to my comment about the Bond Market punching Trump in the Mouth yesterday. They realise Tariffs were a terrible idea. They see the costs its imposed on the US. Many are wondering how it happened… Eyes are being opened.

And as they open, what they see is a USA that is increasingly perceived abroad as more and more like a banana republic being milked by a kleptocracy of chancers seeking opportunities around a deranged mad-king’s throne.

The conflicts of interest at the heart of Trump’s second administration would be a disgrace in any nation, but have thus far passed without comment in America, buried in Trump’s blizzard of executive orders (Make Showers Great Again, being the crusade he sees fit to prioritise as the Treasury market widened 10 bps!) Whatever happened to truth and justice? Oh, Trump has stuffed the supreme court and his billionaire bosses supporters will outspend anyone who challenges him with lawfare.

On Wednesday, moments before Trump unveiled his “decision” to scale back tariffs, US stock indices spiked upwards. Someone clearly had leaked the news. Whoever made the trades made off like Idi Amin’s proverbial finance minister. Later on a videoed White House meeting Trump bragged about his friends who made billions on the trade. 4 hours before the announcement he’d written on Truth Social: “This is a great time to buy!” The optics are terrible.

Of course it’s not just Trump. Elon Musk’s future wealth is directly linked to his multiple undelivered promises that Tesla will offer autonomous Full Self Driving. It doesn’t work as well as other systems, and it’s been repeatedly turned down by the regulator. As head of DOGE, Musk oversaw the sacking of over 30 National Highways Traffic Safety Admin workers from the “office of vehicle automation safety”. No conflict of interest there then?

Wearing his DOGE hat Musk has mounted similar attacks on workers at the Federal Aviation Authority and the Federal Communications Commission, both of which has investigated Space X’s practices. Meanwhile, Space X has signed new multi-billion dollar contracts with the government. Far from saving the USA trillions, Musk told Cabinet y’day its on course to save $150 bln in 2026!

Trump’s business empire of social media, crypto and his remaining real estate presents multiple conflicts of interest. Little things during his first administration – like charging his secret service protection team rent in his properties – were small scale. Trump V2 is industrialising the art of the steal to have US, and now global tax-payers, fund him. He’s hit paydirt from his pump-and-dump Meme coin scam, while Truth Social is worth billions despite losing millions of dollars with few subscribers outside his core support and axed journalists.

The facts are simple:

• At least half of American’s understood Donald Trump was a deeply unsuitable man for president.
• Half the rest probably thought so to, but as real Republicans were willing to bet on him being better than the poorly chosen, fudged alternative to Joe Biden.
• The remainder bought into the fervid promises of rebuild and prosperity Trump unveiled to them. These MAGA supports have now absorbed the Republicans – and they are convinced by the Trump mythos.

When the MAGA faithful realise how deeply they’ve been betrayed, and sold to Trump’s cabal of tech lords as future feudal serfs in reshored manufacturing plants… well it will be too late.

The Democrats are proving incapable of mounting any joined-up opposition to Trump – still stunned by how Trump defeated them last November. I once wrote the dismal performance of the UK’s Conservative Govt from 2010-2024 was entirely the fault of the opposition Labour Party for failing to effectively oppose it. The Dems look even worse!

To understand why its happened, we have to understand Trump. And yet again I’m indebted to David Murrin who posted a marvellous analysis of why and how Trump dominates the narrative. In a brilliant article “The Art of Stealing a Nation” he does a deep dive into Trump’s Narcissism, his roots as an entitled rich boy, his multiple bankruptcies, his ability to make money even as his firms failed by making others pay for his mistkes, and the construction of the Trump myth of wealth and success, which eventually led to the White House.

Let me give you a very brief taste:

“A US president does not operate in a controlled media bubble; policies must function in the real world, where consequences are unavoidable. When narcissistic delusion meets geopolitical and economic reality, the result is inevitable: failure, chaos and collapse”

As I write the US 10-year, the most important number to watch at present, is back up a 4.42%. Be nervous.. very nervous..

On that… have a great weekend.. I’m off for a swim and then back to the day job…

Bill Blain

Author Morning Porridge

Founder Windshift Capital

Partner Shard Capital