by Louis Navellier
January 28, 2025
The biggest Trump wildcard is tariffs, namely, how many and how big? China is expected to be the biggest loser in the tariff rollout, as I suspect that our allies might scramble to “make a deal” if Trump implements tariffs with a nearby deadline, such as February 1st. As I have repeatedly said, President Trump likes to use tariffs to make our allies uncomfortable, so he can negotiate from strength. So far, the dates for when the tariffs will be rolled out have not been clarified, so perhaps President Trump wants to start negotiations with other countries before this week. Interestingly, the British pound, Canadian dollar, Mexican peso and euro have all been down relative to the U.S. dollar based on this tariff uncertainty.
February 1st is coming very soon, and that is the day on which punitive 25% tariffs are set to be imposed on Canada and Mexico if undocumented migration and fentanyl flows are not stopped to the Trump Administration’s satisfaction. A U.S. border agent was recently killed after a traffic stop on the Canadian border, and President Trump said that “Canada’s a very bad abuser” in reference to migrants and drugs.
Naturally, there will be emergency delegations from both Canada and Mexico striving to appease the Trump Administration before Saturday, February 1st. Although both Canada and Mexico have said that they will retaliate against any tariffs, that is not the ideal solution, since the Trump Administration simply does not worry about such retaliations. In other words, I do not expect a “Mexican standoff,” but rather a complete surrender, since otherwise the economic consequences are horrific for both Canada and Mexico.
President Trump has also said that he will impose a 10% tariff on all Chinese imports, effective February 1st, in response for China sending fentanyl to Canada and Mexico. Frankly, I suspect that China is relieved that the tariff is only 10%, since tariffs of up to 100% had been threatened previously. A 10% tariff on Chinese goods is not expected to be inflationary, since the U.S. dollar is so strong vs. the Chinese yuan.
There is no doubt that Europe remains nervous about potential tariff threats by President Trump, but it is obvious that the U.S. is standing by to sell more LNG to Europe and that Trump wants big European manufacturers to move more of their operations to America for cheaper energy, no tariffs and other advantages. Bloomberg published an article last Wednesday entitled, “One by One, World Leaders in Davos Fall in Line in Trump Era.” Finnish President Alexander Stubb said, “Listen to what President Trump has to say and act accordingly,” adding that, “A country like Finland will certainly do that.”
Clearly, President Trump wields a lot of influence, and most countries seem to be eager to do business with the U.S. now, especially since the euro-zone is now in a recession. Argentina President Javier Milei was also full of praise for Donald Trump’s promised “golden age” after attending the inauguration.
Europe can rise out of its recession more rapidly if Ukraine and Russia stop fighting and energy flows return to normal. Trump appointed retired General Keith Kellogg as a special envoy to Ukraine. General Kellogg’s goal is to end the Ukraine war within 100 days. Meetings between President Trump and Russia’s Vladimir Putin are also in the works. Recent sanctions on oil tankers are crippling Russia’s crude oil exports, so President Trump will likely use economic pressure to try to end the war in Ukraine soon.
One of President Trump’s many executive orders was to withdraw from the Paris Climate Accord. The reaction to that at the World Economic Forum was muted, probably because the right-wing political movement in Europe is fueled by a revolt against high electricity prices, especially in Germany, with the rising influence of the AfD party that wants to revive Germany’s nuclear reactors as energy sources.
Speaking of Germany, the ZEW Indicator of Economic Sentiment, which tracks expectations for the next six months, collapsed over five points to 10.3, which was well below the economists’ consensus estimate of 15. To say that the mood in Germany is dire is an understatement. The German election next month may help stop the negative sentiment, especially if the AfD party becomes part of the ruling coalition.
Since Europe desperately needs U.S. LNG, President Trump has signed executive orders to unleash more natural gas production, boost LNG shipments and crude oil exploration. I should add that six U.S. LNG ships that normally supply southeast Asia were diverted to Europe due to higher prices for LNG.
Consumer sentiment in Britain slipped to -22 in January, down from -17 in December, which was well below economists’ consensus estimate of -18. This is the lowest reading for British consumer sentiment since August of 2023. There is no doubt that Britain is following the rest of Europe into a recession.
The other problem is that Britain’s “special relationship” with the U.S. has been damaged, since Prime Minister Keir Starmer’s Labour Party actively tried to defeat President Trump by sending “election consultants” into Pennsylvania – a key swing state – last year. The new British Ambassador to the U.S., Lord Peter Mandelson (known as the Prince of Darkness), has been a vocal critic of Donald Trump, so the relationship between Britain and the U.S. is expected to become even more frosty, unless Mandelson and Starmer “mend fences” with President Trump. For now, it is safe to say that Trump will not be going to Britain anytime soon, unless he wants to play golf at one of his Scottish golf courses.
The Latest News on AI and Nvidia
The world’s largest auto manufacturer, Toyota, has selected Nvidia’s Orin chip to power its next generation of driver assist features. Orin is Nvidia’s solution for putting the computing power and intelligence of AI inside a car. The Orin system debuted in 2019 and has developed into a more all-encompassing solution over time. BYD, Mercedes Benz and many luxury EV makers have also adopted Orin. Although Orin does not yet offer full self-driving, like Tesla’s FSD system, when self-driving does arrive for BYD, Toyota, Mercedes Benz, and other auto makers, I expect Nvidia will naturally benefit.
The Trump Administration is promoting AI expansion by announcing Stargate, an up to $500 billion AI initiative for AI infrastructure with Open AI that will create up to 100,000 jobs. Stargate’s goal is to boost AI capacity to train and run new AI models and would “include the construction of colossal data centers.”
The Department of Energy expects AI-fueled electricity demand for data centers will triple in the next three years. Almost all the new data center electricity will be powered by new natural gas turbines. Texas, Tennessee and South Carolina are leading the expansion of natural gas power plants. Energy consultant Enverus predicts that 80 new natural gas fired power plants will be built in the U.S. in the next five years.
While the fires in Southern California persist and a new fire, namely the Hughes fire, has broken out and temporarily shut down the I-5 freeway, rain has finally started to fall, which should help extinguish the fires. Up north, the big fire in Northern California is at the Moss Landing electric plant in Monterey, where a battery storage fire is now being referred to as the “Three Mile Island” for green energy, since a “thermal runaway” fire ensued that is hard to extinguish. Moss Landing is one of the largest battery storage facilities in the world and was expanded recently to a capacity of 400-megawatts.
The batteries at Moss Landing are built to run for up to four hours before needing to be recharged. There is a natural gas turbine electric plant next to the Moss Landing battery storage facility, so a redesign of the battery storage may be necessary when the batteries are eventually replaced. Flammable lithium-ion batteries were used in Moss Landing and will likely now be replaced by iron-phosphate batteries that are less likely to catch fire. Tesla utilizes iron-phosphate (LPF) batteries in its power-walls, so the company may get a big commercial battery order when Moss Landing’s battery facility is redesigned.
Finally, some good news: The Wall Street Journal’s survey of economists raised their U.S. GDP forecasts to well over a 3% annual rate in their latest survey. Interestingly, these economists are still forecasting lower inflation in the upcoming year, so the bond vigilantes fear that the Trump tariffs would ignite higher inflation did not spook these economists at all. Also, the Journal survey showed that economists were expecting the unemployment rate to meander lower in the upcoming months – an overall B+ report card.
Navellier & Associates owns NVIDIA Corporation (NVDA), in managed accounts. In addition we own Tesla (TSLA), in a few managed accounts per client request only. We do not own Toyota Motors (TM). Louis Navellier and his family own NVIDIA Corporation (NVDA), personally, via Navellier managed accounts and NVIDIA Corporation (NVDA), in a personal account but does not own Tesla (TSLA), and Toyota Motors (TM) personally.
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