19.01.26 - Tariff threats are back
Fresh tariff headlines emerged over the weekend, with US President Donald Trump announcing plans to impose 10% tariffs on NATO nations involved with Greenland, escalating to 25% as of 1 February. Affected countries include Denmark, Norway, Sweden, Finland, France, Germany, the UK, and the Netherlands.
Should no agreement be reached by 1 June, additional tariffs of up to 25% were flagged.
In response, the European Union is reportedly preparing retaliation measures of up to USD 100 billion, including tariffs and market restrictions on US companies.
Markets:
US markets closed today; futures trading ~1.5% lower
EuropeEurope: equities down more than 1%
Asia: only minor losses - however with Japan 10-year yield jumping to 2.27%
Commodities: strong rally continues:
Gold +1.7%, close to USD 4’700/oz
Silver +4%, above USD 93/oz
Cryptos: losing ground, giving up most gains since the start of the year amid de-risking
Volatility: VIX Future jumps from below 16 above 19
Currencies: clear safe-haven demand
CHF and JPY both stronger
USD and EUR both weaker
My View: As mentioned in my last comment, these headlines once again hit over the weekend, when markets are closed. This time, US markets are even closed on Monday — a familiar pattern that often buys time for negotiations, limits immediate reactions, and hopes investors remain calm.
However, the outcome is far from clear.
Is this another strategic escalation by President Trump to force concessions? Possibly. But the determination to push the Greenland issue appears real, not just rhetorical.
Europe’s tools remain limited. The region is structurally deeply dependent on the US and other major trading partners and lacks a unified voice, strategic autonomy, technological leadership, and military strength. This episode once again highlights the fragility and fragmentation of the European Union in a world increasingly driven by power politics.
President Trump’s approach is consistent: demonstrate strength, leadership, and dominance on the global stage.
Attention now turns to the World Economic Forum (WEF) in Davos, where world leaders meet this week. If any venue can deliver temporary clarity or a political off-ramp, it is likely there — though expectations should remain realistic.
Positioning – as an investor
Is this another TACO trade moment?
The “TACO trade” (Trump always chickens out) refers to markets buying risk assets on political or policy threats, assuming they will ultimately be softened, delayed, or reversed.
I am not playing this card. The risk-reward is clearly skewed to the downside:
Limited upside from current levels if adding fresh exposure
Significant downside if negotiations fail or rhetoric turns into action
From a portfolio perspective, capital preservation matters more than chasing rebounds at this stage.
ETFMandate Portfolio positioning:
The ETFMandate portfolio is already positioned for market stress:
Long volatility exposure
Short positions in crowded trades and high-beta stocks
Significant allocation to commodities
Fully hedged in EUR and USD against the Swiss franc
Zero allocation in bonds
High cash quota
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