Why is China no longer afraid of Trump's tariff threats?
Former U.S. Treasury Secretary Yellen stated, 'Trump's economic policies are the most severe damage inflicted on a well-functioning economy in history.'
Deutsche Bank: We are witnessing a simultaneous crash in the prices of all American assets (including stocks, the dollar against other reserve currencies, and the bond market).
We are entering unknown territory in the global financial system.
Many prominent figures in the U.S. hold this view: 'People around the world are working hard to produce goods for American consumers. In exchange, they receive pieces of dollar paper, which we can basically print in any quantity. But some people (referring to Trump) claim that we are the ones being deceived.'
1. If they leave China, then Trump cannot achieve his policy goals.
In this round of the tariff war, there is a very pessimistic argument that China only has three options:
1. Completely surrender, then give Trump whatever he wants.
2. Devalue the yuan by 20-40%.
3. Introduce the largest fiscal stimulus in history (2-3 trillion dollars).
But unexpectedly, China directly retaliated by imposing an equal 34% tariff, with no exemptions, no exceptions.
It is comprehensive in nature.
It has already reached 125%, and subsequent matters will be ignored!
Therefore, the theory behind the three options above is clearly an enhanced version of American exceptionalism, completely detached from reality.
In the face of U.S. hostile actions, China will take a consistent approach: China will not speak much, but will implement policies to prove at the right time that these actions are completely counterproductive and self-defeating for the U.S., offering no benefits.
This is true for both the stock market and the economy.
Moreover, a wave of protests against tariffs has already erupted domestically in the U.S.
If extreme pressure is applied, a march of 500,000 people will definitely not be enough; it may explode to a scale of millions later on.
Americans have already started rushing into supermarkets to hoard supplies, even the wealthy in the U.S. are calling for this.
When the lower class cannot even obtain the most basic supplies, considering the original chaos and the extent of gun proliferation.
The wave of 0-yuan purchases may emerge.
At that time, the stock market will crash, the middle class's wealth will shrink, the interests of large capitalists will be harmed, and the lower class will struggle to survive.
These forces may tear America apart.
The dollar has started to collapse.
U.S. Treasuries have been heavily sold off! Yields have skyrocketed, with the 30-year Treasury yield breaking 4.95%, marking the largest weekly increase since 1982.
This means the interest that the U.S. has to pay is soaring! It's simply unsustainable.
There is no free lunch in this world.
There's always someone who has to foot the bill.
The first to pay for Trump's tariffs are the middle class and capitalist class holding U.S. stocks.
Thus, it seems that the collapse of the U.S. stock market is just the beginning, far from the end.
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