On April 2, the implementation of Trump's reciprocal tariffs took effect, and many people still do not understand how significant the impact of tariff policies is on the global financial market. I will explain the logic and impact of tariff policies in a simple and understandable way.
US national debt is the world's largest credit card, with a debt amount of $36 trillion, equivalent to $108,000 per American (≈ 770,000 RMB). Each year, the interest alone needs to be repaid at $1.2 trillion, which is more than China's annual military spending! Debt is like a maxed-out credit card that can still be sustained by 'borrowing to pay off old debts', but the bank (global buyers) is starting to demand repayment!
As soon as Trump took office, he implemented 'tricky operations', wanting to turn high-interest loans into low-interest ones. Later, he imposed tariffs to disrupt the economy → pretended the economy was about to collapse → forced the Federal Reserve to lower interest rates. For example: imposing a 25% tariff on imported cars caused car prices to skyrocket, leading the public to stop buying cars → car companies lamented → the Federal Reserve was forced to cut rates to save the market. The effect was quite good, with US Treasury yields dropping from 5% to 4%, saving $400 billion in interest each year, enough to support the entire population of Beijing.
Trump's trick loan also involves swapping short-term government bonds for 100-year super-long bonds (to be repaid by future generations). It's like borrowing $100,000 from a friend and saying, 'I'll pay you back when my great-grandchild grows up, and there will be no interest!' The creditor (Japan, Germany) flips the table: 'I’m done! Give me my money back!' Trump forces the issue: if you don’t buy bonds, I’ll raise taxes. Threatening Japan and Germany: 'Don't buy more US Treasury bonds? Just wait for the car tariffs to rise to 50%!'' As a result: Japan reluctantly increased its holdings of US Treasury bonds, while Germany secretly bought gold as a hedge.
The Trump administration raised import prices through high tariffs (on Chinese steel and aluminum, Canadian energy), increasing inflationary pressures in the US, forcing the Federal Reserve to maintain high interest rates or lower them. This led to major institutional funds withdrawing from high-risk assets like US stocks and Bitcoin, shifting towards safe-haven assets like gold and government bonds, causing a deflation of US stock bubbles and a sharp decline in Bitcoin, essentially a re-pricing of assets under a global liquidity withdrawal.
Trump's tariff policy covers multiple countries including China, Canada, and Mexico, but unlike the US-China face-off in 2018, this time the response from opponents has been quicker, such as China imposing a 10%-15% tariff on US agricultural products and Canada threatening a $30 billion retaliation list. Under multiple negotiations, the window for policy compromises will be faster.
Time Prediction
Intense Period: From now until the end of May, the reciprocal tariffs will be fully implemented on April 2, leading to increased market volatility.
Period of Easing: June policy inflection point, the US, Canada, and Mexico will reach some compromises due to supply chain security and border control; the US-China rivalry shifts to technology sanctions (such as chip tariffs) rather than a full-blown trade war.
End Period: In Q3 (July-September), stimulus policies may be introduced, and global central banks may cooperate to lower interest rates, with the marginal impact of the trade war diminishing.