Trump has just concluded his trip to the Middle East, the U.S. credit rating has been downgraded, China has sold U.S. bonds, and the U.S. side is anxious. Trump has expressed his willingness to visit China; will China agree?
Under President Trump's misguided tariff policies, various sectors in the U.S. have been impacted, especially China's retaliatory tariffs, which have caused the U.S. to reassess China's economic strength. Amid mounting pressure, Trump visited Saudi Arabia, Qatar, and the UAE from May 13 to 16, during which Saudi Arabia promised to invest $600 billion in the U.S. over the next four years and agreed to sign a military sales agreement worth nearly $142 billion with the U.S. The UAE stated it would invest $1.4 trillion in the U.S. over the next decade. It is evident that this trip to the Middle East was more about raising funds, as the White House excitedly stated that Trump secured over $200 million in investments, but the reality is quite different.
Taking the $142 billion military sales order as an example, this amount can be said to have broken global records. For reference, Russia's military sales for 2024 are only $13.75 billion, France's are $7.698 billion, and China's are just $3.216 billion. The combined total of these three countries is still less than a fraction of this U.S. military sale, highlighting the inflated nature of this deal. During Trump's first term in 2017, Saudi Arabia announced plans to purchase $350 billion worth of U.S. weapons over the next decade; now, eight years later, the actual procurement has been less than $50 billion. Looking at the so-called investments in the U.S., the UAE's GDP in 2024 is around $440 billion, with fiscal revenues below $20 billion. The idea of investing $1.4 trillion in the U.S. over the next decade can be considered unrealistic. It is clear that the three Middle Eastern countries are cooperating with Trump to stage a play, finding an off-ramp amidst his failed tariff policies to provide Trump with an explanation to the American public.
International credit rating agencies did not spare the U.S. any dignity. On May 16 local time, the international credit rating agency Moody's downgraded the U.S. sovereign credit rating from AAA to Aa1, meaning the U.S. has lost its AAA rating from all three major international rating agencies. Notably, before Moody's downgraded the U.S. credit rating, the U.S. Treasury found that China had sold $18.9 billion in U.S. bonds in March. With these two factors combined, the yields on short-term and medium-term U.S. bonds have surged recently, breaking through the 'red line' of 4%. U.S. bonds are the foundation of the U.S. economy, and the rising yields reflect insufficient demand, which will affect the U.S.'s future borrowing capacity. In response, Trump has expressed a strong willingness to visit China to discuss matters.
In response to Trump's comments, China has not made any statements. Since the U.S. and China reached a tax reduction agreement in Geneva, the Trump administration has taken actions against Huawei chips and Chinese companies, using long-arm jurisdiction to suppress the overseas development of Chinese enterprises, injecting negative energy into the subsequent U.S.-China tariff negotiations. Given China's economic size, it is one of the main countries capable of bearing the output of U.S. bonds. Trump's outreach to China is, on one hand, to persuade China to purchase U.S. bonds, and on the other hand, to urge China to lift its countermeasures regarding tariffs and rare earths. However, as per China's consistent stance, if the U.S. wants to negotiate, it should not say one thing and do another, and it should show sincerity in dialogue with China.