by Louis Navellier
August 12, 2025
To his credit, Fed Governor Christopher Waller went on Bloomberg TV before the July FOMC meeting to explain that the labor landscape looks weaker. As I reported here last week, two Fed Board members (Christopher Waller and Michelle Bowman) voted against holding interest rates steady at the July FOMC meeting. It turned out to be a 9-2 vote, with one abstention, since a Fed spokesperson announced that Fed Governor Adriana Kugler didn’t attend the FOMC meeting due a personal matter and has since resigned, freeing up President Trump to appoint a new Fed Governor – one who believes in his economic agenda.
On Thursday, President Trump selected Council of Economic Advisers Chairman Stephen Miran to replace Governor Adriana Kugler’s vacated seat on the Fed Board. On Bloomberg TV on Thursday, Miran said that there was “zero macro-economically significant evidence of price pressures” from Trump’s tariffs. He added, “Overall, we don’t expect significant inflation from the tariffs.” He then said if inflation were to materialize from tariffs, “it would be a one-time price-level shift, not an enduring trend.”
In addition, Minneapolis Fed President Neel Kashkari said in a Wednesday CNBC interview that recent signs the economy is slowing have bolstered the case for an interest-rate cut “in the near term.” Kashkari also said the new Trump tariffs could result in persistent inflationary pressures, and the data in hand clearly show that the economy is slowing, leading Kashkari to add, “That tells me, as one policymaker, I need to start leaning more on the data that I’ve got confidence in … the economy is slowing … and that means, in the near term, it may become appropriate to start adjusting the federal-funds rate.” This is a big development, since Kashkari is widely respected, making a September Fed rate cut much more certain.
In addition to the Stephen Miran appointment, comments from San Francisco Fed President Mary Daly and Minneapolis Fed President Neel Kashkari reveal that there will now be at least five Fed officials that want to cut key interest rates instead of waiting for a mythical inflation surge to arise from tariffs.
So far this year, for the President’s first six months in office, inflation has come in below economists’ consensus expectations, due to: (1) deflation in China, (2) lower energy prices, (3) a strengthening U.S. dollar, and (4) AI productivity gains that naturally suppress inflation, so the Fed cannot ignore the obvious much longer, without a mutiny on the Fed Board, which President Trump is now openly encouraging!
Another reason why the Fed should cut rates soon is that other major central banks continue to cut rates. Last Thursday, the Bank of England cut its key interest rate by 0.25% to 4% in an unusually tight vote of 5 to 4. In fact, two voting rounds were required to achieve this decision, since some members still wanted to “fight inflation.” This was Britain’s fifth rate cut this year. Complicating matters further, Prime Minister Keir Starmer’s latest tax increases caused some wealthy British citizens to flee Great Britain.
Gold Becomes a Bargaining Chip in Tariff Talks with Switzerland
There were some important last-minute trade maneuvers going on last week. Most notably, Switzerland remains shocked that their tariffs were set to rise to 31%-39% on August 7th, so there is a now full-court-press to try to get the Trump Administration to reconsider those high tariffs. The Wall Street Journal said that Swiss business leaders called the 39% tariffs a “slap in the face” and a big impediment to trade.
Obviously, pharmaceutical exports to the U.S. from Switzerland remain a contentious subject, as the Trump Administration wants some Swiss drug companies to move their drug manufacturing to America.
Switzerland’s President, Karin Keller-Sutter, flew to Washington D.C. to “facilitate meetings with the U.S. authorities at short notice and hold talks.” Interestingly, Switzerland abolished most of its tariffs in 2023, but it still levies a modest 5% tax on all imports. The only area where Switzerland maintains significant tariffs is in agricultural products, motivated by their belief in self-reliance, so it will be fascinating to see how tariffs between Switzerland and the Trump Administration will be resolved.
Now, we come to gold as a bargaining tool: Central banks around the world have been stockpiling massive amounts of gold since 2010, to replace the declining value in paper currencies to gold, and much of the world’s gold supply comes through Switzerland. Due to the threat of 39% tariffs on exports from Switzerland, gold futures briefly hit a record high of $3,534 per ounce – 101 times its pre-1971 fixed $35 price – and gold bullion prices may continue to appreciate on new fears that gold supplies will be tight.
You may remember that gold prices began to surge this year in January and February as U.S. gold imports surged, so it will be interesting to see where the U.S. plans to buy its new gold bullion in the upcoming months. The Trump Administration on Friday confirmed that it intended to impose tariffs on imports of one-kilo (32 ounce) and 100-ounce gold bars. New York’s COMEX is the largest gold futures market, but it could lose its leadership if tariffs are imposed on Swiss gold, so we’ll carefully watch gold’s next move.
India is Also in Trump’s Trade “Crosshairs” Due to Helping Russia Dodge Sanctions
President Trump has also ramped up his tariff threats against India, threatening to impose tariffs, “substantially higher” than 25%, on India’s exports to the U.S., partly to penalize it for buying oil from Russia. Trump’s aides also said energy purchases by countries like India and China are helping to keep Russia’s economy afloat as its war with Ukraine persists. India has been defiant and is continuing to buy Russian crude oil – actually buying more oil than it needs – since India sells refined petroleum products.
Russia is the largest supplier of crude oil and military equipment to India, while Russia is helping India build 20 nuclear reactors, so the ties between India and Russia are extensive, so President Trump’s added 25% tariff on India’s imports are a means by which he continues to conduct foreign policy via tariffs.
President Trump had a tense call with Indian Prime Minister Narendra Modi, who was unhappy that Pakistan’s Army Chief Asim Munir had lunch with Trump at the White House, where Pakistan welcomed Trump’s ceasefire negotiations with open arms, while India repudiated Trump’s truce offer to Pakistan.
The higher tariffs on India – since they buy crude oil from Russia – has put economic pressure on both India and Russia, while also spurring Vladimir Putin to meet with President Trump on August 15th in Alaska. According to European and Ukrainian officials, Putin is expected to make a proposal for a cease-fire with Ukraine, first by demanding major territorial concessions, as well as a push for global recognition of its new territorial claims in Ukraine. The bottom line is that the U.S. continues to conduct its foreign policy through tariffs as punishments, and it looks like this strategy may be about to get some results.
All of these tariff confrontations have helped lower America’s trade deficits. Last Tuesday, the Commerce Department announced that the U.S. trade deficit for June came in at $60.2 billion, which was better than the economists’ consensus estimate of $62.6 billion and substantially lower than the May trade deficit of $71.7 billion. Imports plunged by 3.7% in June to $337.5 billion, while exports declined by 0.5% to $277.3 billion. This better-than-expected trade deficit is expected to cause many economists to upgrade their second-quarter GDP estimates. Also, the U.S. Dollar Index gained over 3.3% in July, but it is still down for the year, so we need to see better GDP growth figures to help the dollar keep its “mojo” rising.
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