At 4 a.m. on April 3, Trump announced the tariff plan, imposing a basic tariff of 10% on all imported goods and additional tariffs on specific countries, as shown in the figure below:
Trump's radical tariff policy first led to a massive stock market crash, especially in the U.S. stock market. Last night, the Nasdaq almost triggered a circuit breaker several times, and today multiple countries stated they would take countermeasures. The true era of de-globalization is about to arrive. So why does Trump know this will lead to such results but still do it? Let's first go back to history to find the answer.
Three Tax Increases in American History
We cannot discuss the issue of tax increases without mentioning three very important tax increases in the U.S., involving three U.S. presidents, one of whom was Benjamin Harrison.
Benjamin Harrison
He was the 23rd President of the United States and a very important figure of the Gilded Age. In a sense, he is also a role model for Trump. He served only one term, from 1889 to 1893, during which time the United States surpassed the British Empire to become the world's number one in GDP.
It cannot be ruled out that Harris inspired Trump, as Harris was also an important figure in U.S. history who expanded the territory. Today's America wants Canada, Mexico, and Greenland, which is highly similar to Harris's ideas. When we talk about Harris today, we focus on his McKinley Tariff Act.
Why did he implement the McKinley Tariff Act? Why did he start a tariff war? In 1890, although the U.S. had caught up with the UK in terms of size, it was still considered a backward country in the eyes of the British, French, and Germans. People did not treat the U.S. particularly well; in Europe, the U.S. was practically on par with Japan. Therefore, the U.S. urgently needed the primitive accumulation of capital.
So the source of capital accumulation in the United States, aside from internal capital accumulation, is also very important. The U.S. does not have large-scale colonies, which makes tariffs the largest source of income. Increasing tariffs by 10% significantly boosts government revenue.
Herbert Clark Hoover
The second person to introduce is Herbert Clark Hoover, the 31st President of the United States, who served from 1929 to 1933, a period known as the Roaring Twenties. Harrison was from the Gilded Age; Hoover was a disaster. By the time he took office, the United States was already on the brink, having fallen into the early stages of an economic crisis.
In 1930, he introduced an important piece of legislation, the Smoot-Hawley Act, which was essentially a tariff act. This tariff act directly led to the outbreak of the global trade war. The act, starting with agricultural products, included tariffs on over 20,000 items ranging from 40% to 48%. This tariff does not seem excessive, but its backlash was severe. Because by the 1930s, the U.S. was already quite large, it would face retaliation from Europe and the entire world. This retaliation led to a spiraling increase in tariffs: if you raise ten, I will raise twenty; if you raise twenty, I will raise thirty; if you raise thirty, I will raise forty, until it doubles.
So what was the result? The trade war of that year lasted from 1929 to 1933. By 1933, global trade plummeted from $68.6 billion to $24.2 billion, and U.S. exports fell by 61%. Thus, historically, Hoover's Tariff Act is referred to as a destructive economic policy, which directly led to the Great Depression worldwide.
But everything has two sides; why does he know this is a disastrous consequence yet still proceed? Hoover's Tariff Act was disastrous in the short term but meaningful in the long term. After Hoover stepped down in 1933, the renowned Roosevelt took office. Hoover's actions directly led to the implementation of Roosevelt's New Deal. In 1933, Roosevelt introduced the Emergency Banking Act, the Gold Reserve Act, and a series of administrative orders to suspend tariffs, which saved the United States.
If Benjamin Harrison was the one who saw the U.S. surpass the UK to become the world's first power, that was just the beginning, while the establishment was completed by Roosevelt's New Deal.
Richard Milhous Nixon
The third president, Nixon, is well known. He was the 37th President of the United States and a very important figure, also an idol of Trump. Nixon's remarkable achievement was that he saved the U.S. after its first setback at its peak. In 1971, he exited the gold standard, dismantled the Bretton Woods system, established diplomatic relations with China, ended the Vietnam War, and skillfully leveraged the Middle East conflict to complete the historic transition from gold dollars to oil dollars.
Why are they mentioned together with Herbert Hoover? Because all three did the same thing: tariffs. They all raised tariffs and implemented price controls.
Today's Tariff War
The Grand Strategy of U.S. Treasury Secretary Bessent
We just sorted through the policies of these three presidents, and all the historical data available can also be seen by U.S. Treasury Secretary Bessent. Since Bessent observed that Hoover's trade war led the world into a Great Depression, and from Harrison to Hoover to Nixon, they all witnessed such earth-shattering historical economic fluctuations, even disasters, even the Great Depression. Why would he still want to do this?
Because this has become an unchangeable national policy for the U.S.; they will definitely engage in a trade war, which may potentially spiral completely out of control. The trade war will simultaneously lead to a series of political consequences. What Bessent analyzes might be this result. And all our judgments and understandings of Bessent, Powell, the U.S. Treasury, and the Federal Reserve in the current public discourse are believed to be completely wrong.
No one desires a global economic recession and depression caused by a tariff war more than Bessent. What he needs is recession and depression, and he does not mind severe inflation. Powell is also just putting on a show; the Federal Reserve pretends to want to curb inflation and increase employment, but this is not Powell's true intention.
Because if you are the Treasury Secretary or the Federal Reserve, do you really want to impose tariffs that lead to a global trade war? A tariff war leading to a 50% decline in global trade and a global economic depression? Don’t you know the consequences? Clearly, each of them is well aware, but why do they take this path?
I personally believe that as a hedge fund manager, Bessent understands the issues related to the dollar and U.S. Treasury bonds, especially the crisis of U.S. Treasury bonds, only during the severe economic fluctuations.
The Problems Facing the United States
The United States currently faces a national debt of $36 trillion. The normal way to deal with debt should be to reduce spending and create income—meaning income needs to increase while spending decreases. The extra money can be used to repay the debt, thereby reducing it. However, under normal thinking, when faced with an impossible task, such as assuming your national debt is $40 trillion, total liabilities exceed $120 trillion, you can create income and compress expenditures. For example, Musk's DOGE is remarkable but might only reduce U.S. government expenditures by $1 trillion. But that is just a drop in the bucket, neither solving the current issues nor the future ones.
Assuming I am Bessent, I must consider how to quickly balance the balance sheet and generate surplus. The correct approach would be that instead of dealing with assets and liabilities, I could manage the measuring stick. If the stick gets shorter, the pants get longer. If the stick gets shorter, assets will rise, while liabilities remain unchanged. A shorter measuring stick means more assets while liabilities stay the same. This creates a significant opportunity to manage the balance sheet, where space and time are extremely important.
Therefore, the dollar needs to accomplish three things: the first action is to devalue, the second action is to recharge, and the third action is to reset; devalue first, then recharge.
The Path to Take in the Future
To summarize Bessent's logic, it can be described in three steps:
The first step is to complete the devaluation of the dollar, recharge the dollar, and reset the dollar.
The second step is to control global capital flows, completing the overall arrangement of Web3 tokenization and stablecoins, which is the digitization process of the dollar and the digitization of global asset and commodity transactions.
The third step is to leverage the advantages of dollar settlements in the radical digitization of assets and commodities to reset a digital energy system that is used more widely than now.
Thus, the third step is to complete the pricing of global assets and goods.
So what should we do? Simply put, it is about the relationship between tariffs and exchange rates, or the relationship between trade wars and currency wars. In fact, if you allow your currency to appreciate, it is equivalent to imposing tariffs. For example, if the RMB appreciates, it is equivalent to imposing tariffs on the other side. So why impose tariffs? It confirms the devaluation of your currency, even if it remains unchanged; the degree of the tariff confirms the extent of the currency devaluation.
When Hoover launched the tariff war, the British Empire could not withstand it and abandoned the peg of the pound to gold. Of course, the U.S. was the first to give it up and then prohibited private ownership and trading of gold, collecting all the gold in the market at $40. At that time, the British Empire was in a difficult position and was also forced to abandon the peg of the pound to gold. Afterward, the international status of the pound plummeted.
When Hoover's Tariff Act was introduced in 1930, pay attention to the relationships between the dollar, ruble, pound, and franc. The ruble under Stalin's rule maintained stability and appreciation. This led to a massive influx of global capital, technology, and labor, especially skilled workers. The stupidest choice was made by Britain and France. Every time they fell into the trap of reciprocal trade wars, the unequal sizes and stages of development meant that such trade wars only led to their own collapse.
At this time, one must dare to go against the grain. Why could Stalin's Soviet Union walk against the current? Because it was socialist, a planned economy, or state capitalism. It could complete internal trading and pricing of assets and goods in the shortest time possible. The Soviet Union, fascist Germany, and militaristic Japan all used this method to survive when global trade volume fell by 50%; after 1929, the U.S. fell by 61%. At this time, measures to ensure people's livelihoods must be taken while increasing capital accumulation. The Soviet Union did very well, continuously developing at high speed, and although damaged in war, it emerged victorious.
Now in 2025, the tariff war has begun. After it started, it began to test each country's own system and response strategies. If the response strategy is correct and reasonable, it should enter a golden development cycle for ten years, just like the Soviet Union did back then. At this moment, during this specific historical period of the trade war initiated by Trump, there is another crucial turning point in the development of productivity: AI and the entry of human information technology into a historical turning point. If we seize this new productivity development opportunity and avoid the hot wars caused by tariff wars and trade wars as much as possible, we can strive to complete the development of new intelligent productivity in another 5 to 10 years of peace. Then we can take off just like Roosevelt's America, winning the most precious time from the socialist Soviet Union.
Of course, this is also true for individual choices. First and foremost, in this century of unprecedented changes, preserving oneself and holding onto cash is paramount. When everyone is losing money, maintaining your own financial stability is a victory. Historically, those who were able to rise again or quickly accumulate capital during the Great Depression were those with very stable cash flow management. Only in this way can one seize quality assets at the bottom during a downturn and ride the fast train of the times. However, if asset allocation is necessary, one must choose assets with strong risk resistance and sustainability. The essence of investment is in choosing the future!
