President Trump has presented the US tariff strategy. The proposed measures are unfair, ill-considered and harmful. The stated duty rates are pure mishmash. They were supposed to be "reciprocal" but are calculated on the basis of the US trade deficit against each individual country, without regard to trade in services and on the basic premise that bilateral trade is a zero-sum game. No wonder the result is bizarre.

The design is a fundamental blow to world trade. All in all, the US tariff level is multiplying, back to where it was at the turn of the last century – higher than during the tariff war of the 1930s. This results in higher prices for US consumers and lower exports for European and Chinese companies.

The counterparties are preparing countermeasures. The result will be higher import prices in many countries. Globally, inflation will rise, while growth will be weaker. One scenario whose probability consequently has increased is stagflation, primarily in the USA and Europe. Stagflation is an economic condition characterized by stagnant economic growth, high unemployment, and rising inflation.

Stagflation is generally caused by a supply shock that increases company cost. Today raising tariffs and other trade barrier is doing just that. Broken value chains due to regionalisation is another factor that increases inflationary pressure and dampens growth.

Stagflation creates a monetary policy dilemma. Efforts to control inflation by raising interest rates can further slow growth and increase unemployment. Fiscal policy faces the same challenges.

When it comes to financial markets and investing, stagflation is one of the worst economic conditions you can face. Low or negative growth and high inflation lead to weaker corporate earnings and rising interest rates. Under these conditions almost all risky assets will perform badly. Equities will fall, bond yields will raise, and credit spreads widen. You have nowhere to hide, not even in cash whose value will be eroded by inflation.

These fears are now hitting financial markets causing steep stock market falls. But this may be only the beginning. The trade war is part of a broader American strategy to redraw the world economy. Trump and Vance are planning to take over mineral resources in other countries and build a war chest for hostile takeovers. The dollar exchange rate will be lowered to strengthen American competitiveness, possibly through a multilateral accord. The U.S. national debt is to be reduced at the same time as taxes are to be reduced.

Logically, it is difficult to put that whole together. Tariffs will not be able to both reduce imports and fully pay for lower taxes. Higher inflation and higher borrowing usually result in higher interest rates and a stronger currency in the long run. Other countries will not help the US to lower the USD in an orderly way.

The remaining tool to solve the conflicting equation is currency and interest rate regulations. The idea has been raised to force lenders to exchange their old US government bonds for new ones that run for a hundred years without paying interest. In practice, this means that part of the debt is written off.

This is dangerous. American treasuries are the basis of the global financial markets – the most liquid and largest asset, the foundation on which all other securities are valued. If this becomes unreliable, the entire global financial system will be rocked. A period of massive uncertainty – and probably great volatility – will result.

In this dangerous world there is an opportunity for Europe. If we can unite around a massive program for investment in infrastructure and defence, long-term competitiveness may be revived. Paradoxically, Trump’s attempts to make America great again, may result in making Europe great again. We conclude that long-term investment opportunities will arise in our old and battered continent.