I’m So Bored With the USA: Appetite for Destruction 

 

“ Look at the hate we’re breeding
Look at the fear we’re feeding” 

 

My world view today is a mixture of fear and fascination, tinged with the thought that opportunities are there if we are brave, and have our eyes wide open. 

 

The current crisis is unlike anything in my memory, solely the work of one man, surrounding himself with incompetent acolytes. That one man has the power to stop the crisis and restore order, instead he seems determined to hunker down with the total conviction that victory is near. It is the ultimate bunker moment. 

Trade and overseas alliances are built on friendship and trust, with both sides reciprocating for mutual benefit. 

President Trump’s concept of reciprocity is encapsulated in his belief that foreigners are guilty of “pillage” if they sell more to the US than they buy in return. As a result, they are hit with a tariff proportionate to their excess exports. Trump sees this as a “reciprocal” tariff.    

Because this whole mess is based on the vagaries of Trump, governments, our own included face a situation fraught with consequence and, to a significant degree, beyond their control. 

Trump is unpredictable, we can no longer say, “even he wouldn’t do that”. All we can know is that this current US government is determined to bully, intimidate and coerce to get its own way, bringing the likelihood of a global recession ever closer. 

 

Trade and overseas alliances are built on friendship and trust

 

An interesting perspective came from a NYSE trader, who said “everything” they saw was about Trump’s relationship with China. The administration, he said, “was trying to get everyone onboard so they can box China out. I think they’re saying, look, we will drop the tariffs on you, but you have to tariff China. 

“Everything is about China. Everything. It’s not about lumber or fentanyl, it’s about China. Greenland is 100% about China – and Russia, to a degree. Panama is about China. This is all about slowing China down.” 

But, he said, no one was anticipating that the US was looking to become an insulated, self-sustaining nation. “Nobody wants that. They just want it more fair,” he said. 

“Now we’re $37tn in debt and it needs to be rejigged, but he [Trump] is trying to do it in a shock-and-awe fashion. It could be months or years before we know whether he’s successful or not … but obviously it’s going to take some pain. 

“The question is, how much pain can our economy and stock market take for the good things to happen? If it’s one or two weeks of sell-offs, we can stomach that, but if it’s months, the congressmen facing election next year are going to squeal …” 

The trader might just have nailed it. Last evening Trump suspended last week’s additional tariffs for all countries, excluding than China, meaning they remain at 10%. 

The situation with China is first-to-blink. US tariffs on China are now up to 125%, with China reciprocating on 84%, with a further 18 US companies on trade restriction lists and looking at other countermeasures.  

“When challenged, we will never back down,” said China’s foreign ministry spokesperson. Lin Jian continued saying: “If the US really wants to solve the problem through dialogue and negotiation, it should adopt an attitude of equality, respect and mutual benefit.” 

Ahhh there’s that word; respect. That appears to be basis of Trump’s issues; he only respects himself. A true “narcissist.” 

 

‘When challenged, we will never back down’

 

The commerce ministry said: “China will fight to the end if the US side is bent on going down the wrong path.”  

The tit-for-tat measures could spark fears of a race to the bottom, with ordinary people suffering as prices rise and a fears of a global recession grow, and Beijing is unlikely to blink first. 

One of the key factors in Beijing’s favour is the fact that the US is far more dependent on Chinese imports than China is on the US. 

The main items that the US imports from China are consumer goods, such as smartphones, computers and toys. Last week, analysts at Rosenblatt Securities predicted that the cost of the cheapest iPhone available in the US could rise from $799 to $1,142 – and that was when Trump’s China tariffs were just 54%.  

In contrast, the goods that China imports from the US are industrial and manufacturing supplies, such as soya beans, fossil fuels and jet engines. It is much easier for price increases in these commodities to be absorbed before reaching the consumer. 

China has the benefit of having been here before with Trump in 2018. In the intervening years they have diversified their export base, making them less dependent on the US. For example: 

Between 2018 and 2020, Brazil’s soya bean exports to China increased by more than 45% compared to the 2015-2017 average, while US exports declined 38% over the same period.  

China is still the largest market for US agricultural goods, but the market is shrinking, hurting American farmers. In 2024, the US exported $29.25bn of agricultural products to China, down from $42.8bn in 2022. 

There are also other cards China can play, including suspending cooperation on fentanyl control, investigating US companies’ intellectual property gains in China, and banning Hollywood films from China.  

Regarding the banning of films, China has a history of allowing online nationalists to whip up grassroots boycott campaigns. In 2017, Chinese consumers participated in a mass shunning of the South Korean supermarket chain Lotte, in response to the conglomerate’s involvement in a deal that allowed a US missile defence system to be installed in South Korea, which China saw as a security threat. Nearly half of the company’s more than 100 stores in mainland China were forced to close. 

None of this means that China is immune to the tariffs, and analysts suggest that Beijing is still working out how to meaningfully boost domestic demand, which will be important if they are to fully tariff-proof the economy. 

Not surprisingly, relations between the two countries are reaching an all-time low. “I do not remember ever being this pessimistic about the trajectory of US-China relations,” wrote China analyst Bill Bishop in a newsletter.  But with the unhelpful intervention of VP Vance and his reference to  “Chinese peasants” the situation won’t improve, but then does the US administration want it to? 

“I do not remember ever being this pessimistic about the trajectory of US-China relations”

 

There are signs that Trumps inner-circle are starting the see what is really happening. 

Billionaire Trump adviser Elon Musk is reported to have asked the president to reverse course, and the New Civil Liberties Alliance, a libertarian group funded by organisations affiliated with conservative businessmen Leonard Leo and Charles Koch, filed a lawsuit against the “illegal” tariffs. 

Bill Ackman, the hedge-fund supremo, who last July publicly endorsed Trump, declaring: “I assure you that I have made this decision carefully, rationally, and by relying on as much empirical data as possible.” On Sunday, Bill Ackman was explaining how Trump was launching “economic nuclear war on every country in the world”, and that we were “heading for a self-induced, economic nuclear winter”. 

You can add to these voices reports that the US was facing a Truss-style meltdown in the Treasury market. 

Reports reveal that Treasury Secretary Scott Bessent and the Secretary of Commerce Howard Lutnick successfully talked Trump into postponing Tariffs as margin calls on highly levered basis trades in US Treasuries threatened a collapse in the US bond market. 

It is rumoured that bond trades up to 100x leveraged were facing margin calls, and with liquidity drying-up, the only way to exit or meet margin calls is to sell what you can – not what you want to. The rapid rise in bond yields (see below; 50 bp in the 10-yr over the past 4 days) illustrates all too clearly where the trade was headed. 

One of the questions that comes out of this is what is the rationale behind Trumps tariffs? 

With China, it’s fairly obvious. A battle to see who dominates at a global level. 

Elsewhere, it’s less obvious. 

Trump doesn’t believe in taxes, and his election manifesto was clear in stating that the proceeds of tariffs would fund tax cuts. 

What many Americans miss, is that tariffs effect the end-user, them, the consumer. They are, in effect, a consumption tax, buy nothing, or buy home produced goods which are obviously excluded, and you don’t pay them. Or, do you?  

 

‘One of the questions that comes out of this is what is the rationale behind Trumps tariffs?’

 

Goods are the product of a supply chain. If any of the components are from countries facing tariffs the cost of that product is impacted, irrespective of what the “made in..” label says. 

Trumps MAGA voters have been greatly impacted by deindustrialisation and the resulting globalisation, something covered in more detail in “Armageddon Time”. If tariffs make imports so uncompetitive, the expectation is that either local producers step-up, or overseas producers will relocate and open plants in the US. With either scenario jobs are created which should help the inequalities his MAGA supporters suffer from. 

Of course, things are never that simple; delays setting-up production, uncertainty stops change, new president in 4-yrs. All equal, why bother?   

The fear is that should neither scenario happen and people still buy China’s imports inflation will take off, closely followed by rising interest rates. In this scenario, his MAGA followers are the big losers. Some analysts estimates say US inflation – currently at 2.8% – could peak at 4.5% next year if tariffs remain in place and that the chances of a US recession have increased. 

Clearly, this is now a real trade war, and as Ngozi Okonjo-Iweala, the head of the WTO, said given that they account for 3% of world trade, the conflict could “severely damage the global economic outlook”, said. 

The bond market, a more accurate barometer that with wildly optimistic or pessimistic stock market, has seen investors dumping Treasuries, usually the safest of assets during market turmoil. Over the past 5-days yields on the benchmark 10-year US Treasury bond have risen from 3.97% to 4.44%, the highest since late February. 

 

‘US inflation – currently at 2.8% – could peak at 4.5% next year if tariffs remain in place and that the chances of a US recession have increased’

 

We should always remember that there is more to the Trump message than just tariffs, something that often goes unnoticed. One of his bigger targets has been diversity, equity and inclusion (“DEI”). 

Trump issued an executive order in January reversing DEI policies in the federal government. While the orders did not directly apply to the private sector, he called on companies to follow suit, and asked the US attorney general’s office to consider how the rules could be more widely enforced. 

As a result, several large US corporations, including Walmart, McDonald’s, Ford and Amazon, announcing plans to scrap or scale back their DEI schemes. 

Whilst I am disappointed by British bank Barclays ditching DEI targets for US staff. I won’t pretend to be surprised, there has always been something of the night about them. 

The back-peddling means managers will no long have to consider how new hires and promotions advance the careers of women and people from minority ethnic backgrounds, who have traditionally been overlooked in the banking sector. 

The bank’s chief executive, CS Venkatakrishnan, made the decision after a review, which started late last year, into its approach to diversity, equity and inclusion (DEI), although a spokesman confirmed that “representation ambitions for the rest of the group will continue, and are being considered as part of the review.” 

 

“We are in a pretty dark time right now, but the good news that I can share is that people are responding, people are rising up”  

 

Although Trump hogs the headlines, the fightback is under way with millions of demonstrators taking to the streets in over 1300 rallies last weekend to oppose this administration’s weaponisation of White House power 

It is hoped that the “Hands Off” movement can build upon this, going beyond that “Hands Off” slogan, by providing a positive vision beyond resistance. Within that a key vision is confronting the growing economic  inequality. 

Leah Greenberg, co-executive director of Indivisible, one of the main groups organizing these rallies April 5, has built a grassroots network that’s played a key role in mobilizing opposition to Team Trump in so many different places across the country. 

This week, after helping to organize Saturday’s protests, the largest demonstration of resistance to Trump so far this year, Greenberg appeared at a rousing Patriotic Millionaires conference in Washington on how to fight back most effectively against America’s oligarchs, saying: “We are in a pretty dark time right now, but the good news that I can share is that people are responding, people are rising up.”  

Hopefully, by the time the US mid-terms are due in November 2026, “Hands Off” will have built sufficient momentum that the Trump administration becomes a lame duck. Of course, this assumes he abides by the result and the constitution. 

 

 

“Strange fascination, fascinating me
Ah changes are taking the pace I’m going through” 

 

‘I find myself so energised by events that I found time to make the reader suffer a second piece!

The whole tariff saga fascinates me, mainly because it’s such a black swan event with no real precedent.

The overriding question after last evening’s 90-day postponement, is, what next?

Do they reappear in 90-days? Has he seen sense and chosen not to pick fights with everyone? Or, will in that 90-day window compromise agreements be reached?

What is clear is that China is the target. The article highlights some of the advantages China has in this war, but the key one might be the fact that it is effectively a dictatorship. As a result, when it comes down to suffering they have to get on with it, or rebel. Last time that was tried it didn’t end too well!

The US is, or at least was, a democracy. If the pain gets too bad voters, even MAGA ones, will start to question whether it is worthwhile.

I try in thess articles to bring-up the other assaults on the US that the Trump administration is subjecting them to.

As part of this, we have the “Hands Off” movement which appears to be leading the anti-Trump campaign. The weekend saw rallies in every state, with an estimated 3m plus attending. Although this represents less than 2% of the electorate, it’s a big number to start off with.

Lyrically, we start with “civil War” by Guns ‘n Roses, and end with Bowie’s prophetic “Changes”.

Enjoy!

Philip.’

 

@coldwarsteve

 

 

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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