MacroVoices #480 Louis-Vincent Gave: What Comes Next After The Trade War Dust Settles

Episode Summary

Executive Summary: Macro Voices episode 480 centers on Louis Vincent Gave’s view that Trump-era tariff volatility is reinforcing a broader capital rotation out of the U.S. and into Europe, Asia, and commodities. He argues the U.S. is moving toward 10% tariffs broadly and 25%-40% on China, which is mildly inflationary and dollar-negative, while structural de-dollarization, stronger non-U.S. markets, and low energy prices support global growth. The post-game says equities remain vulnerable, but the next major leg likely comes later in 2025.

Main Topics: Trump tariffs and trade policy uncertainty (Priority: 5/5): Gave argues the eventual tariff settlement is likely to be broadly 10% on most countries and 25%-40% on China. He sees the stop-start tariff process as inflationary, supply-chain disruptive, and a driver of capital and market instability rather than a clean policy endpoint. Capital rotation away from the United States (Priority: 5/5): A central theme is that foreign investors no longer see the U.S. as the only attractive destination. Gave says capital is ‘coming home’ to Europe, Asia, and Latin America, aided by stronger local markets, weaker dollar dynamics, and reduced confidence in U.S. policy consistency. Global market leadership outside the U.S. (Priority: 4/5): Gave highlights stealth bull markets in Europe, Latin America, and parts of Asia, contrasting them with the flat U.S. equity market. He suggests this may be more than cyclical and could reflect a structural decline in U.S. asset exceptionalism. Gold, de-dollarization, and commodity stockpiling (Priority: 5/5): Gold’s role as a reserve asset is reinforced by de-dollarization, central-bank buying, and the search for alternatives to Treasuries. Gave remains constructive on gold but prefers rotating some exposure into oil and copper, expecting broader commodity stockpiling over time. China’s economy: real estate weakness, industrial strength (Priority: 5/5): Gave argues China is simultaneously dealing with a property bust and a manufacturing/industrial boom. Policy has shifted from resisting U.S. pressure to stimulating consumption and birth rates, while China continues to gain industrial competitiveness and export strength. Energy, nuclear power, and future competitiveness (Priority: 4/5): The discussion emphasizes energy as a key macro input. Gave sees low energy prices as supportive today, but believes future winners will be countries with stronger energy policy, especially China, while uranium and nuclear-related equities are beginning to regain momentum. Technical market post-game: equities, dollar, oil, gold, uranium, rates (Priority: 4/5): Patrick and Eric frame the current technical setup as a delayed rather than canceled correction. Equities may stay range-bound into summer, the dollar’s bounce appears corrective, oil may be forming a base, gold is at a pivotal support near 3,200, uranium is improving, and Treasuries remain weak.

Key Arguments: Tariff policy appears likely to settle near 10% on most trade partners and 25%-40% on China, which is less extreme than the initial shock but still inflationary and disruptive. The U.S. dollar may weaken rather than strengthen under tariff pressure, contradicting the common assumption that protectionism automatically boosts the currency. Soft data in the U.S. continues to suggest recession risk, but hard data has not yet confirmed it; fiscal expansion could delay or prevent recession, as it did in 2022-23. Unlike the prior U.S. exceptionalism era, foreign investors now have credible alternatives: Europe, Latin America, and parts of Asia are showing strong asset performance. The U.S. is losing some of its structural appeal because policy rules are changing too often and because other regions are no longer ‘sucking wind.’ De-dollarization is real: central banks and institutions are diversifying away from Treasuries into gold, mega-cap U.S. equities, and increasingly possibly other commodities. Gold is expensive on many historical ratios, but demand from central banks and ETFs makes it different from prior top-cycle blowoffs; Gave would not short it outright. Gave is more constructive on energy and copper than on gold at current levels, preferring to own producers and miners as global trade and stockpiling trends expand. China’s industrial policy has shifted from defending against U.S. pressure to stimulating domestic consumption and employment, with local authorities and banks driving implementation. China’s competitiveness is so high that either the renminbi must rise or tariffs will continue to accumulate; otherwise global trade imbalances remain extreme. The post-game suggests the equity selloff is not over, but the most likely timing has shifted later into summer or early fall rather than immediately. Treasury markets remain vulnerable because fiscal imbalances are worsening even as long bonds continue to distribute rather than stabilize.

Data Points: S&P 500 weekly change: up 464 basis points, trading at 5,892.58%? - Opening Macro Scoreboard summary; indicates the S&P 500 was up strongly week over week at the May 15 close. U.S. Dollar Index: 101.89, up 197 basis points - Weekly Macro Scoreboard; dollar staged a relief rally off April weakness. WTI crude oil: 63.15, up 900 basis points - Weekly Macro Scoreboard; crude rebounded off support and is being watched for a potential double bottom. RBOB gasoline: 213, up 545 basis points - Weekly Macro Scoreboard; gasoline prices bounced with crude. Gold futures: 31.88, down 551 basis points - Weekly Macro Scoreboard; gold suffered its first breakdown below the 50-day since December after a double-top retest. Copper futures: 4.65, up 65 basis points - Weekly Macro Scoreboard; copper was modestly higher. Uranium: 71.55, up 251 basis points - Weekly Macro Scoreboard; positive price action continued in uranium. U.S. 10-year Treasury yield: 4.54%, up 27 basis points - Weekly Macro Scoreboard; yields broke out toward April highs. Tariff regime expectation: 10% on pretty much everybody; China between 25% and 40% - Louis Gave’s base case for the eventual trade-policy landing zone. China tariff shock scenario: 130% cited as the extreme feared starting point - Used to explain why markets initially panicked before the Geneva ceasefire and revised expectations. U.S. twin deficits: 12% of GDP - Gave says the U.S. still needs foreign capital inflows to sustain the system. Latin American debt performance: 11% to 15% YTD - Gave cites strong returns in Latin American debt markets. Latin American equity performance: about 25% YTD - Gave highlights broad bull markets in Brazil, Chile, Colombia, and Mexico. Asia equity performance: Hong Kong and Korea up about 15% - Example of non-U.S. equity strength. Europe equity performance: typical European index up 20% or more - Evidence supporting the idea of stealth bull markets outside the U.S. Chinese trade surplus: $1.1T to $1.2T - Gave says China’s external surplus is extraordinarily large and implies the renminbi is undervalued. Gold-oil ratio: about 55 barrels of oil per ounce of gold - Used to show gold’s relative strength versus energy. China births: 18 million in 2018 vs 9.5 million last year - Gave uses this to illustrate a severe demographic decline. China tourism spending during Golden Week: up 6.9% - Cited as a sign that consumer demand is improving. U.S. mortgage rates in China comparison: China mortgage rates fell from 6% to 3% - Used to explain improved housing affordability and consumer conditions. Gold vs weekly earnings: over 3 weeks of average weekly earnings per ounce - Compared with a historical norm of about 1.2 weeks. U.S. total market cap increase: from $40T to $60T in three years - Gave describes the extraordinary rise in U.S. mega-cap valuations. Gold price target: $5,000 in the next 12 months seen as plausible - Gave’s view on potential upside despite gold being expensive. Potential oil price threshold: $75 per barrel - Gave argues many energy producers become far more profitable above this level.

Pivotal Quotes: "when China enters a room, profits walk out" — Louis Vincent Gave: His shorthand for China’s deflationary competitive impact on corporate margins and global pricing power. "the first reaction of a European pension fund, a Taiwanese insurance company, is to say, look, you know what? I'm going to bring my money home and I'll figure out later what I do with it" — Louis Vincent Gave: Explaining the ongoing capital repatriation trend away from the United States. "J.D. Vance came to Munich to break up with Europe" — Louis Vincent Gave: His colorful description of U.S.-Europe security rhetoric and its implications for European reserve and commodity behavior.

Implications: Listeners should expect continued policy-driven volatility, a weaker structural case for U.S. exceptionalism, persistent gold and commodity demand, and stronger relative opportunities in non-U.S. equities, energy, and select metals as capital rotates home and de-dollarization advances.