Store this number in your memory for the upcoming weeks and months: 48%.

Last year, a group of economists conducted an analysis on the economic impact of the Iron Curtain; specifically how much trade occurred from east to west despite the numerous restrictions during the Cold War. They concluded that, at its peak in 1951, “the Iron Curtain represented a tariff equivalent of 48%”.

As the world prepares for what Donald Trump has termed his “liberation day,” this figure should stay in your thoughts.

Currently, the average tariff rate on China is between 30% and 40%. However, if the President enforces another 20% of tariffs on China, the level of tariffs between these two trade partners may rival or surpass those of the Iron Curtain era.

No one is certain about what comes next. What number will the President choose for his next round of tariffs? 10%? 20%? Or the 25% rate he has favored for steel, aluminum, and cars? Will the next round of tariffs announced this week apply to every country? Will they only apply to the so-called “dirty fifteen” the Treasury Secretary has mentioned? Who, for that matter, are the “dirty fifteen”?

We are unsure of the answers to these questions. Nor are other world leaders like Keir Starmer. Nor, for that matter, do many in the White House seem to be aware.

However, returning to the number at the top. The tariffs being discussed by the president and his colleagues are now reaching formidable levels. Once cumulative tariffs approach 50%, as witnessed during the Cold War, many countries cease trading altogether.

With such charges looming, it’s no surprise that numerous businesses and traders are taking drastic measures to prepare for the upcoming months of turmoil. Consider two examples.

The first example can be observed if you look at the exports (better described as transfers) of gold from the UK to the US. Until a few months ago, these transactions averaged around £22m a month. Then, as traders worried about the imposition of tariffs and controls on everything, including gold, there was an entirely unprecedented exodus of gold bars from the UK to the US – £1.2bn in December and £6.1bn in January. These figures are unprecedented. We have not seen outflows like this before.

The other data point (somewhat related) is found by examining the US balance of payments. The main goal of these tariffs is to aim to eliminate (or minimize) America’s trade deficit with the rest of the world. President Trump wants the country to produce more goods and import less.

For more reading:
What do Trump’s tariffs mean for the UK?
Tariffs: The rewards and risks for the US as the trade war escalates

However, in the past year, the US trade deficit has literally doubled. It went from £67bn in January last year to £131bn this January. Again, this is unprecedented. It signifies that importers were rushing to bring as much merchandise into the country as possible (not only gold, but also machinery, metals, cars, electronics, etc.) before tariffs were imposed.

The great irony is that the initial impact of the Trump tariffs has been to push the trade deficit in the opposite direction from what the President is aiming for. It will, of course, swing back in the other direction in the coming months. But it is impossible to predict where it will ultimately settle. In the meantime, more chaos and instability await. Hold onto your hats.