The big chunk of US enemy is China
Guys, let’s talk about macroeconomic a little bit here as we’ve been hit a lot by tariff warfare lately as well.
The last time I mentioned was that Trump is in bargain with another countries as US is the biggest consumer country in the world.
China must have taken hit the most because of this tariff because almost 30% of China export is to US. That’s why I mentioned earlier, the big chunk of US enemy is China.
Yesterday, we saw several important moves regards to this tariff war.
- China likely knows about the Trump’s objective to refinance US maturity debt to lower interest rate. As a result, China is having strategy of prevent this to happen (as a move to retaliate) with selling the US T bills. As we know, China is the 2nd biggest country to hold US T-bills. With this T-bills sale of China, we also see that US10yr is now starting to hike up again (above 4%).
- China intentionally devalue their Yuan currency. Why? I think it’s most likely to subsidize the tariff increase so that the cost of production in China (which is calculated in domestic currency) will be lower when the product’s end price is entering US.
- As a result, Trump just add 50% tariff to China products effective tonight as well. Now, the reciprocal tariff to China is 104%!
Both countries are now playing in dangerous situation. I don’t know about the outcome for this for the equity market. Although I still see that US still has the upper hand, it’s just like a feeling to begins the world war.
In my opinion, China will accept the US order for current tariff or both of them will settle at this point. But, it’s not good for the long term. Many other countries will do this US style of reciprocal tariff. Some big countries like China, Russia, Germany, Japan, and India. They’re having the power to do the same as Trump is doing right now.
In short term, it’ll settle soon. But in long term, they are now playing a very very dangerous game.
