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China continues to expand its economic influence and recently announced an additional $55 billion capital support for banks. However, Trump is escalating the trade conflict with China, which could adversely affect the U.S. economy while seemingly disregarding potential consequences. Alongside China’s pricing advantage, efforts to export high-level technology are hindered by Trump’s interventions.
Current State of China and the U.S.
The latest proposal from the Trump administration promises additional tariffs of up to $1.5 million on Chinese ships arriving at U.S. ports. This initiative represents the next phase in the global trade war, meaning American consumers will likely face higher prices for goods. The move threatens to increase costs for everything, from raw materials to imported shipments, conflicting with Trump’s pledges to combat inflation.
According to Gavekal Research, 80% of U.S. foreign trade is transported by ships, with very few using American-flagged vessels. Since American merchants rely on Chinese-origin vessels for goods, Trump’s proposal appears to inflict damage on the U.S. economy as much as it does on China.
Trump’s Strategy
Trump’s advisors indicate that he might continue increasing pressure on Beijing to secure concessions from China. This strategy resembles the Turkish expression “showing death and accepting malaria,” as Trump seems to threaten harsh tariffs while leaving room for negotiation. By signing sudden tariff orders, he illustrates the seriousness of his position while signaling potential softening through concessions.
This approach focuses on targets to be reached within the first 100 days, with 64 days still remaining. Trump aims to maintain this tough stance for several months, ultimately seeking a profitable compromise. Meanwhile, he believes he can shift focus to domestic efforts once he perceives himself as strong enough to lower interest rates. However, this period could further pressure risk markets, including cryptocurrencies.
