It’s Liberation Day once more, however on a a lot smaller scale

It looks like we’re doing Liberation Day again.

Japan and South Korea — two of the United States’ strongest allies — were hit with 25% universal tariffs. Those are the first two of up to 12 letters expected to be sent today to US trading partners.

The market reaction has been to sell US stocks, buy the US dollar and buy gold. The latter is one of the more interesting ones as it was one of the best Liberation Day trades in the first episode.

In the April 2 announcement it initially fell $170 as risk assets were routed but then quickly turned around to gain more than $500 and hit a record high of $3498/oz just before the TACO Trade hit.

The key in this Trump letter is that the tariffs don’t start until August 1, which is beyond the Japanese lower House elections, something that Treasury Secretary Scott Bessent could be a trigger for negotiations. Some in Congress also said months ago that they wanted trade negotiations wrapped up by Labor Day.

So all of this is likely just posturing and that’s why the market reaction so far has been measured rather than some of the panicky stuff we saw in April. At the same time, Trump doesn’t appear to be angling to get tariffs back to 0% in a ‘reciprocal’ deal. Rather he wants the US to charge everyone at least 10% while others will charge US exporters 0% for market access. That’s a big ask.

In the longer term, the US is damaging its trading and political relationships and that’s a catalyst for de-dollarization and parking sovereign reserves in gold instead.