Tariff tensions escalate as gold and oil prices rise together; geopolitical risks and policy shocks reshape the global asset landscape

In mid-January, the global financial markets are at a delicate tipping point. The Trump administration’s tough tariff policies and Europe’s countermeasures have intensified trade conflicts, while the dramatic geopolitical developments in Iran and the Middle East have sparked a risk-averse wave. Gold prices temporarily approached the $4,700 mark, and crude oil remained steady above $59 supported by geopolitical premiums. This is not just commodity price fluctuation but a signal of the reordering of the global economic order.

Reflections of Tariff Strategies in Financial Markets

The market’s initial response was straightforward. Trump issued tariff threats against countries opposing U.S. annexation of Greenland, breaking the early-year calm. The EU immediately activated retaliatory measures, with multiple countries planning to impose tariffs on €93 billion worth of U.S. exports. This tit-for-tat policy quickly translated into shifts in capital flows.

U.S. stock markets closed roughly flat last Friday, but all three major indices posted weekly declines. The S&P 500 fell 0.38% to 6,940.01, the Nasdaq dropped 0.66% to 23,515.39, and the Dow Jones declined 0.29% to 49,359.33. Healthcare stocks led the decline, down 0.8%, while semiconductor indices rose 1.2%. This reflects deeper market considerations about industrial policies—public perception is increasingly aware that the Trump administration’s support for chip manufacturing is being exposed.

Commerce Secretary Ruttnik’s remarks revealed this intent clearly. He issued an “either-or” ultimatum to South Korea’s memory chip manufacturers: build plants in the U.S. or face tariffs of up to 100%. This is a blunt expression of industrial policy and signals a restructuring of the global chip supply chain. U.S. exports include $125.7 billion in aircraft, $89.6 billion in petroleum products, and $84.9 billion in crude oil, forming a new export triangle. Notably, gold exports surged about 1.5 times to $62.6 billion, entering the top five, while car exports fell from $51 billion to $45.3 billion, dropping out of the top five. This structural shift is not accidental but a true reflection of U.S. trade policy adjustments.

Gold, Silver, Platinum, and Palladium Dance as Safe-Haven Premium Rises Amid Geopolitical Risks

The precious metals market shows divergence but points in the same direction: continued safe-haven demand. Spot gold briefly hit a record high of $4,668.96 per ounce in mid-January, with potential to reach $4,700. Despite a correction last Friday, down 0.5% to $4,592.29, gold still gained about 1.9% last week, marking a second consecutive weekly increase.

Analysts note that the drivers behind this rally are multifaceted. On one hand, protests in Iran have subsided, and signs of U.S.-Russia mediation suggest easing geopolitical tensions. On the other hand, escalating U.S.-Europe trade frictions and the Federal Reserve’s hawkish stance provide new support for gold. Markets expect the Fed to hold rates steady through the first half of the year, with the first rate cut possibly in June. Under this backdrop, analysts still see potential for gold prices to reach $5,000 this year, though significant corrections may occur along the way.

Silver performed even better, dropping 2.9% to $89.65 per ounce in a single day but rising over 12% on the weekly chart. However, JPMorgan warns that silver faces risks from easing supply outside the U.S., ETF outflows, and weakening demand, which could lead to sharp corrections later. Platinum fell 3.3% to $2,330.67, and palladium declined 0.6% to $1,790.78.

Crude Oil Markets Fluctuate Between Supply Risks and Short Covering

Oil prices more reflect market sentiment than fundamentals. U.S. crude settled at $59.44 per barrel, and Brent at $64.13, both retreating after last week’s gains. The Friday rebound was mainly driven by short covering ahead of the long weekend—investors avoided holding short positions during the holiday to prevent sudden shocks.

The real risk lies in geopolitics. Although protests in Iran and Trump’s military threats pushed oil prices to multi-month highs, tensions eased, and prices sharply retreated over 4% last Thursday. U.S. Special Envoy Wittkoff outlined four clear conditions for Iran: restrict nuclear enrichment, reduce missile arsenals, handle nuclear material stockpiles, and constrain regional proxies. This list signals U.S. firmness but also leaves room for negotiations.

Markets remain wary of the potential escalation from the U.S. Navy’s aircraft carrier Lincoln’s scheduled arrival in the Persian Gulf next week. The Strait of Hormuz carries about a quarter of global oil shipments; a blockade would trigger a global energy crisis. Another variable is Venezuela’s potential increased supply—if U.S. sanctions are relaxed, sanctioned Venezuelan oil could re-enter the market, offsetting some geopolitical risks.

Dollar Index Rises Amid Policy Expectation Adjustments

Currency markets reflect a reassessment of Fed chair prospects. Trump praised economic advisor Haskett and expressed hope he remains in position, which directly dampened bets on Haskett replacing Powell as Fed chair. As a result, the dollar index rose 0.06% to 99.41, while the euro fell 0.1% to $1.1594.

The dollar’s strength is also supported by robust employment data. Last week’s U.S. jobs report exceeded expectations, further delaying the first rate cut to June. Current market consensus favors Federal Reserve Board member Waller as the leading candidate for chair, seen as more independent and hawkish than Haskett, providing additional support for the dollar.

The yen’s movement tells a different story. The yen appreciated 0.3% to ¥158.16 against the dollar amid warnings from Japan’s Finance Minister about possible intervention to address yen weakness. Markets are increasingly focused on the Bank of Japan possibly raising interest rates earlier than expected to combat yen depreciation-driven inflation. Analysts believe intervention risks rise sharply when USD/JPY approaches 160–162, providing a clear risk management boundary for shorts.

Trump Returns to the Stage, Davos Becomes Policy Launchpad

On the international political stage, President Trump will personally lead a delegation to the World Economic Forum in Davos, Switzerland. The lineup includes top officials: Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, Energy Secretary Chris Wright, Trade Representative James Griell, and Middle East envoy Steve Wittkoff. This is not just a routine visit but a policy rollout. Trump plans to present new housing and affordability proposals—his first public appearance at Davos since returning to the White House for a second term.

EU retaliatory measures are accelerating. The Financial Times reports that several EU countries are considering tariffs on €93 billion worth of U.S. goods or restrictions on U.S. companies entering the EU market. These figures are carefully calculated as part of the EU’s strategic economic response.

The rapid shift in U.S. trade structure also reflects the immediate impact of second-term policies. Data shows that in the first year of Trump’s second term (January–October 2025), hydrocarbons and gold became the main growth drivers, while traditional exports like cars declined significantly. Aircraft exports remain dominant at $125.7 billion, followed by petroleum products at $89.6 billion and crude oil at $84.9 billion. Gas exports increased to $67.2 billion, moving up to fourth place. Gold exports surged about 1.5 times to $62.6 billion, entering the top five. This structural change is closely linked to Trump’s protectionist trade policies and tariffs.

On the international institutional front, the U.S. is restructuring its relationship with the WHO. The U.S. is set to formally withdraw but has not yet paid overdue dues. WHO spokesperson stated that the U.S. has the right to withdraw but must settle its arrears. The total owed for 2024 and 2025 is approximately $260 million. According to WHO rules, a member can only withdraw one year after submitting a formal notice.

Domestic Focus: Record Electricity Consumption and Policy Benefits for Tech SMEs

Domestically, positive signals emerge. The National Energy Administration announced that in 2025, China’s total electricity consumption will surpass 10 trillion kWh for the first time, reaching 10.4 trillion kWh, a 5% increase year-over-year. This is the first time a single country’s total electricity consumption exceeds that of the U.S., and it surpasses the combined annual consumption of the EU, Russia, India, and Japan. This data reflects China’s steady economic operation and industrial upgrading.

Industrial support policies are also evolving. The Ministry of Industry and Information Technology recently revised the “Management Measures for the Gradient Cultivation of High-Quality SMEs,” including tech-based SMEs into the scope of high-quality SME cultivation, alongside innovative SMEs, forming the foundation of high-quality tech and innovative small businesses. The new measures will be implemented from April 1, 2026, providing clearer support frameworks for tech innovation enterprises.