Liberation day (Weekly summary 29/03/2025)

There have been quite a few interesting events to analyze this week, and below I list the most noteworthy news. Let’s get started:

• U.S. consumer confidence plummeted in March to its lowest level in over four years, reflecting a broad-based deterioration in economic expectations amid growing fears of a recession and higher inflation, fueled by new tariff measures threatened by the Trump administration.

  According to the Conference Board report, spontaneous comments from survey respondents reveal increasing concern about trade and tariff policies, as well as economic and political uncertainty. The expectations index—which measures consumers’ short-term outlook on income, business, and employment—fell 9.6 points to 65.2, the lowest level since March 2013 and below the 80-point threshold historically seen as a signal of an impending recession. Although Trump noted this week that not all announced tariffs would take effect on April 2—and that some countries might be granted exemptions—he also made it clear that new tariffs on imported cars are on the way, further heightening uncertainty.

  

   

  However, despite the pessimism, data has not yet shown a drastic change in spending behavior, which remains the most relevant factor for markets. Some consumption indicators, such as the intention to purchase appliances or vacation planning, even rose—possibly due to anticipatory buying ahead of potential price hikes driven by tariffs. Interest rate cuts, which have translated into lower mortgage rates, also boosted new home sales in February (+1.8%).

  Meanwhile, 12-month inflation expectations rose to 5.1%, the highest level since May 2023. Although Jerome Powell downplayed this spike as a temporary signal, these short-term expectations could shape a more structural trend if they persist.

• In a 2022 study, Federal Reserve economist Colin Weiss analyzed the impact of the decision to freeze Russian assets following the invasion of Ukraine on the global perception of the dollar as a reserve currency. The study highlights a crucial point: approximately three-quarters of official foreign reserves held in U.S. assets belong to countries with military ties to Washington.

  While the dollar is no longer reserved exclusively for political allies with direct military dependence on the U.S.—as was the case from the 1960s to the 1980s—these countries remain the main holders of dollar reserves. Weiss distinguishes between formal allies (such as NATO members), informal alliances (through defense agreements or joint exercises), and specific financial ties (such as countries with currencies pegged to the dollar).

  In a highly fractured geopolitical landscape, Weiss’s analysis estimates that the potential risk of politically motivated dollar reserve divestment could reach $800 billion, representing just over 6% of total global reserves in the currency. Even in an extreme scenario of de-dollarization driven by conflict, the dollar would lose some prominence but not its status as the dominant reserve currency.

  

   

  In recent years, we’ve seen more and more central banks stockpiling gold, with an insatiable appetite despite rising prices—surpassing the $3,100/oz mark this week. While calls for a sudden and accelerated de-dollarization are exaggerated, the tailwinds for this precious metal are undeniable, and in my opinion, we are closer to the beginning than the end of this historic cycle.

  

   

• Trump has officially announced an aggressive shift in trade policy with the imposition of 25% tariffs on all car imports, set to take effect on April 3 at 12:01 a.m. (Washington time). Initially, the tariffs will apply to fully assembled vehicles, but starting May 3, they will extend to key components such as engines, transmissions, electrical systems, and other parts—with the possibility of further expansion if the White House deems it necessary. The president has been unequivocal in labeling these tariffs as “permanent,” ruling out any negotiated exemptions. The only path to partial relief is for importers under the USMCA (Mexico and Canada), who will be able to certify the U.S. content of their vehicles so that the tariff is applied only to the non-U.S. portion of the car’s value.

  This measure hits hard brands with 100% offshore production, such as Jaguar Land Rover, Volvo, Mazda, Volkswagen, Hyundai/Kia, and BMW. The most exposed countries include Mexico, Japan, South Korea, Canada, and Germany—the main car exporters to the U.S.—which together accounted for the majority of the over $240 billion in car and light truck imports last year.

  

   

  As mentioned, the impact of the new tariffs will fall heavily on foreign brands that rely heavily on vehicles manufactured outside the U.S., with Hyundai-Kia emerging as one of the most affected. But they’re not alone. Other manufacturers such as Volkswagen, Mercedes-Benz, Renault-Nissan-Mitsubishi, and BMW have over 50% of their U.S. sales covered by imported vehicles, making them direct targets of the tariff.

  Even Toyota, which has a significant manufacturing presence—four assembly plants and several engine factories in the U.S.—still imports nearly 50% of what it sells in the American market, despite being the world’s largest carmaker. Detroit’s Big Three aren’t exempt either. General Motors, for instance, imports key models like the Chevrolet Silverado pickups from Mexico and Canada, and the popular Chevy Trax and Equinox—compact and family SUVs with over 200,000 units sold each in 2024—from South Korea and Mexico.

  The global auto supply chain, built over decades around efficiency and cost optimization, is now clashing head-on with a protectionist trade policy that rewards reshoring and punishes global efficiency.

  

   

  At the same time, Trump is threatening domestic manufacturers with retaliation if they raise car prices in response to the tariffs—pure Chavista style. Certainly not the kind of policies one would expect from a supposed champion of free markets…

• Cerrejón, a subsidiary of the Anglo-Swiss commodities giant Glencore, has announced a sharp cut in its thermal coal production in Colombia. The company plans to reduce output by between 5 and 10 million tons annually, bringing its total production down to a range of 11 to 16 million tons—well below the 19 million recorded in 2024.

  The reason is clear: international prices for seaborne thermal coal are no longer sustainable. In other words, the margins no longer justify the volumes. With this decision, Cerrejón aims to prioritize profitability over scale. From a business perspective, it’s a logical defensive move in a context of depressed prices and high volatility in the coal market.

  This chart shows how, in commodity markets, prices rarely fall below the 90th percentile of the cost curve, because when more than 10% of producers are burning cash, production quickly adjusts (as we’re seeing now), and prices find a new equilibrium. My view is that if we’re not already at the bottom of the cycle, we’re very close.

  

   

• This week we’ve seen a full sweep of declines in U.S. crude and refined product inventories: -3.34 million barrels of crude, -0.75 million in Cushing, -1.44 million of gasoline, and -0.42 million of distillates. Physical spreads continue their recovery cycle and reflect the underlying fundamentals of crude, where it’s now clear that we won’t see any surplus in Q1—and likely not in Q2 either.

  

   

  In fact, Goldman Sachs has already warned that if prices don’t rise (or worse, if they drop further), the expected growth from non-OPEC producers would take a major hit; at $60/bbl, that growth would shrink by over 40%.

  

   

  Producers show a wide range of opinions about future commodity prices, with considerable variability that increases the further out the forecast goes. Still, the median of those responses is notably positive and rising—standing in contrast to the more pessimistic forecasts from many major investment banks.

  

   

  In that same survey, participants made it clear: “drill baby drill” and lowering energy prices are incompatible. The final line says it all: $70/bbl is the new $50/bbl.

  

   

  The Trump administration’s new offensive against Venezuela is reshaping the regional energy and geopolitical landscape. The imposition of a 25% tariff on any country purchasing Venezuelan oil or gas has a dual purpose: economically pressure the Maduro regime while sending a clear message to third parties—primarily China and India—that have maintained energy ties with Caracas. The tariff acts de facto as a secondary sanction, very much in line with the approach of Trump’s first presidency. However, the move is accompanied by a strategic extension for Chevron, which gains an additional seven weeks—until May 27—to wind down its operations in the country. This softens a potential collapse in export volumes to the U.S., secures revenue for Chevron from already committed shipments, and avoids an immediate disruption in the heavy crude flows the U.S. relies on. It’s a surgical move: punish Maduro without overly harming U.S. commercial interests.

  At its core, this policy reflects a delicate internal balance within the U.S. government: on one side, hardliners pushing for maximum pressure on Caracas; on the other, more pragmatic voices concerned about leaving the field open to players like Russia, Iran, or even China.

  But the move could also trigger unintended geopolitical consequences. By discouraging buyers like China and India—which together absorb more than half of Venezuela’s oil exports—the market could redirect that demand toward Russian oil, which continues to be offered at attractive discounts. In other words, the measure could end up strengthening Moscow’s energy resilience instead of isolating it. Paradoxically, a policy designed to punish Caracas could end up benefiting Vladimir Putin.