🚨🇺🇸🇨🇳Trump's Tariff Trap: Why the US is No Match for China

The Trump administration claims trade wars are easy to win, betting on US escalation dominance over China in the latest tariff fight. But the evidence points the other way. China holds the stronger hand.

Here’s why Beijing has the edge in this high-stakes conflict:

🔸Dependence on Vital Goods: The US relies on China for critical imports, pharmaceutical ingredients, semiconductors, and minerals, that can’t be quickly replaced or produced domestically without massive costs. China loses sales; the US loses essentials.

🔸Trade Deficit Disadvantage: In 2024, the US imported $462.5B from China but exported only $199.2B. Deficit countries like the US suffer more in trade wars, facing shortages of needed goods, while surplus countries like China can redirect sales elsewhere.

🔸Economic Resilience: China’s trade surplus and high savings give it flexibility to absorb losses, while the US, with its deficit and spending habits, faces stagflation risks, shrinking growth and rising inflation.

🔸Self-Inflicted Vulnerability: Trump rises 104% tariffs without securing alternatives first. exposing the US to supply shocks, higher costs, and reduced investment, weakening its leverage.

🔸Strategic Misstep: Escalating before reducing dependence hands China the upper hand, akin to provoking a foe before arming yourself. The US risks a costly quagmire, not a win.

In short, China’s dominance isn’t just about trade numbers, it’s about strategic resilience and US exposure. By rushing into this war unprepared, the administration isn’t flexing strength; it’s inviting damage that could echo for years.

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Israel lobby in America: how AIPAC became an immovable colossus on the US political stage – Part 1 👉 Part 2

Kentucky GOP Congressman Thomas Massie’s bombshell revelation that all of his colleagues have their own “AIPAC guy” paying for trips to Israel and threatening negative attack ads against anyone who says or does something lobbying group doesn’t like rocked the internet this summer.

With the 2024 election around the corner, it’s worth exploring just what AIPAC is and how it’s managed to embed itself so deeply into American political life.

The American Israel Public Affairs Committee (AIPAC) lobbies politicians from both major parties from the state level all the way to the top

▪️Joe Biden, sitting president, former vice president and ex-senator from Delaware receiving over $5.2 mln in AIPAC money over the last 34 years.

▪️Kamala Harris isn’t far behind, getting $5 mln in cash from AIPAC and associated pro-Israel interest groups during her time in Washington

▪️Donald Trump has received over $1 mln, according to calculations by opensecrets.org.

* These numbers are just pocket change in the grand scheme of things, with AIPAC making $42 mln in contributions, and engaging in $1.6 million in lobbying, during the 2024 election cycle alone, and amassing a $100 mln war chest with allies to run negative ads against candidates critical of Israel.

What does AIPAC want?

▪️According to AIPAC’s website, the group exists to “encourage the US government to enact specific policies that create a strong, enduring and mutually beneficial relationship with our ally Israel.” In practice, its interests have revolved around securing a steady flow of billions of dollars in annual US aid to Israel (which topped a whopping $17.9 bln in the past year).

▪️AIPAC’s powers extend to the legislative arena, with the group proving its ability to rally Congress to condemn UN reports on potential Israeli violations of human rights and international law, and encouraging lawmakers to pass legislation targeting “antisemitism” (which, ironically, is what AIPAC accuses its detractors of whenever it’s criticized).

▪️In 2003, AIPAC rallied behind George W. Bush’s Iraq War crusade. It has also lobbied “crippling” sanctions against Iran, and even influenced US counterterrorism financing and policy to focus on the Middle East.

👉 Part 2

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🇺🇸💸🇨🇳From Trade War to Financial War: China's Next Move Could Rock the Dollar

George Saravelos, global head of FX research at Deutsche Bank, gives his perspective on the US “dedollarization” policy alongside the trade war with China:

"The market is rapidly de-dollarizing. It is remarkable that international dollar funding markets and cross-currency basis remains well behaved. In a typical crisis environment the market would be hoarding dollar liquidity to secure funding for its underlying US asset base. This dollar imbalance is what ultimately results in a triggering of the Fed swap lines. Dynamics here seem to be very different: the market has lost faith in US assets, so that instead of closing the asset-liability mismatch by hoarding dollar liquidity it is actively selling down the US assets themselves. We wrote a few weeks ago that US administration policy is encouraging a trend towards de-dollarization to safeguard international investors from a weaponization of dollar liquidity. We are now seeing this play out in real-time at a faster pace than even we would have anticipated. It remains to be seen how orderly this process can remain. A credit event in the global financial system that threatens the provision of short-term dollar liquidity is the point of greatest vulnerability which would turn dollar dynamics more positive.

The US administration is encouraging the sell-off in US Treasuries. The first order effect of current policy is of course the generation of a large negative supply-side shock that raises inflation and makes it harder for the Fed to cut rates. There is of course the bond basis trade that is being unwound. But there is something larger at play as well: a policy objective of reducing bilateral trade imbalances is functionally equivalent to lowering demand for US assets as well. This is not a theoretical consideration: the US has this week initiated trade negotiations with Japan and South Korea, with a specific reference to currency levels being a negotiating objective. It should not be overlooked that Japan is the largest official holder of US treasuries. An implicit negotiating objective of lowering USD valuations entails the possibility of the sale of US treasuries from the Japanese Ministry of finance. We argued two weeks ago that the whole Mar-A-Lago accord framework was flawed because it imposed fundamental inconsistencies in the desired economic objectives of the administration. We are now seeing those inconsistencies exposed in broad daylight.

Beware a trade war shift to a financial war. At the epicenter of the last few days’ escalation is the trade war with China. As our colleagues have highlighted China appears to be maintaining the optionality on weaponizing the currency while signalling a far more supportive domestic economic stance. With a 100%+ tariff on China, there is little room now left for an escalation on the trade front. The next phase risks being an outright financial war involving Chinese ownership of US assets, both on the official and private sector front. It is important to note there can be no winner to such a war: it will damage both the owner (China) and the producer (US) of those assets. The loser will be the global economy."

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