Currently, the trade relationship between the US and China is in a state of alarming tension. Both countries are facing sky-high tariffs, with US tariffs on Chinese goods exceeding 100%. As a result, the main message that both sides want to convey is clear: 'You are not allowed to sell here.'
🖌️ China's Response
To cope with those tariffs, China is likely to have to take measures such as printing more money, devaluing the yuan, and lowering interest rates to stimulate an economy that is already struggling. This action aims to bolster against attacks from President Trump, who is focused on improving the trade deficit not only with China but with many other countries.
Countries like Italy may propose a '0% for 0%', but this clearly does not satisfy President Trump's goals. Therefore, this trade war is likely to drag on with many other countries.
🪡 US Strategy
China is not only responding with tariffs but also selling US bonds, which could disrupt President Trump's plans. Although this president claims not to intentionally lower stock prices, the question arises as to why he would shock the market with huge tariffs after having reassured it.
One reasonable explanation could be that President Trump wants to lower bond yields. However, the bond sell-off by China has caused yields to rise again, which contradicts the strategy of the US government.
🖌️ Pressure on the Federal Reserve (FED)
Although the FED currently may seem to be 'sitting on the sidelines' waiting for economic data, sooner or later they will have to make a choice: lower interest rates or witness the stock market and economy burn. Regardless of the decision, the FED will ultimately have to print more money, whether through monetary easing policies or bond purchases.
🖍️ Opportunities and Challenges
Although the current situation seems chaotic and painful for the market, it also opens up opportunities for savvy investors. As the US and China continue to print money, assets like crypto may become a safe haven. Demand for stablecoins may increase, leading to the possibility of this market capitalization continuing to rise.
✅ Conclusion
The trade situation between the US and China is not just a story between two countries but also affects the global economy. Monitoring moves from both sides is crucial to gain deeper insights into the future, as well as to seize reasonable investment opportunities in this uncertain context. The current chaos may become a springboard for those who know how to leverage the situation wisely.