Source: Miaotou APP

The Trump 2.0 cabinet is not only the layout of power, but also a trailer for the future.

After the U.S. election, the market focused on Trump’s upcoming policy, especially his moves toward China. During his second term, the composition and stance of the cabinet members will undoubtedly be the vane for judging the future direction.

Theoretically, the appointment of U.S. cabinet members requires not only Trump’s nomination, but also Senate confirmation—this step is “the key to success or failure.” Fortunately, in the new term, the Republicans continue to control the Senate, so Trump can advance cabinet nominations and agenda more smoothly.

After the election results were settled, Trump quickly entered the "full speed ahead" mode, completing the nominations for 15 cabinet minister positions in just 15 days, and nominating more than 20 key figures. .

Next, we will interpret the future direction by analyzing the characteristics of Trump’s new cabinet selection.

The selection of the Trump 2.0 cabinet emphasizes loyalty and trust rather than professionalism. This strategy will reduce internal friction and ensure more efficient decision-making.

In his first term, Trump’s many controversial decisions exposed differences among cabinet members, especially on immigration, tax reform, foreign affairs and social issues. For example, on the separation of immigrant families, Health and Human Services Secretary Tom Price and Homeland Security Secretary Kyle Nielsen, among others, publicly expressed their opposition, ultimately forcing Trump to sign an executive order in June 2018 to stop this separation.

In addition, the relationship between Trump and his first Secretary of State Rex Tillerson is also tense. According to reports, Tillerson once bluntly said that Trump was "stupid" in a private meeting, which eventually led to his dismissal in March 2018; Trump's chief strategist, Cohen, was also involved in a conflict with Trump. Trump left the White House amid disagreements over his direction.

In order to avoid a recurrence of the cabinet disputes in his first term, Trump is more inclined to select cabinet members who are loyal to him in his second term, rather than relying solely on their professional abilities.

His nominations usually come from three categories:

Category 1: People who have staunchly supported and defended Trump. For example, Secretary Marco Rubio, Attorney General Pam Bondi, Transportation Secretary nominee Sean Duffy, etc., who defended and voted for Trump during the impeachment case and Capitol Hill incidents.

Category 2: Core members of the Trump campaign team. For example, White House Chief of Staff Suzy Wells, Commerce Secretary nominee Howard Lutnick, and Education Secretary nominee Linda McMahon played a role in Trump’s campaign fundraising and team operations. important role.

The third category: well-known figures who publicly defended Trump and criticized the Democratic Party, such as Fox News hosts Duffy and Hegseth.

These nominations highlight the characteristics of Trump’s current term: loyaltyHonesty comes first, ability comes second, which also reflects Trump’s determination to break the “Washington establishment.” Trump regards the Washington establishment as a "swamp" filled with bureaucracy and collusion of interests. He believes that business management experience can improve efficiency and execution, so he chooses business executives and military figures with non-traditional backgrounds in order to break the game.

For example, Howard Lutnick, the nominee for Secretary of Commerce, is a leader in the financial industry and lacks experience; Linda McMahon, the nominee for Secretary of Education, was a former CEO of a wrestling company and lacks education. Background in the field; Ben Carson, nominee for Secretary of Housing and Urban Development, is a renowned neurosurgeon with no experience.

All of these people are believed to be able to help Trump make quick and decisive decisions as he reforms the economy and promotes industry interests.

Although most of the new cabinet members do not have traditional backgrounds and experience, their ideas are highly consistent with Trump’s, their thinking is more unified, and they can promote Trump’s implementation more smoothly.

In addition, most of them maintain a tough stance on China, which also provides Trump with more firm support for China.

In Trump’s 2.0 cabinet, the obvious lineup of “China hawks” once again occupies important positions.

For example, Rubio was nominated as secretary of state, while Walz was nominated as security adviser. The two regarded it as an "existential threat" and advocated containment as a core goal of U.S. strategy. In his book "Decades of Decadence," Rubio points out that the United States' dependence on critical supplies (such as medical supplies, drugs, and technical equipment) poses major security risks to the United States.

In addition, Trump also nominated Jamison Greer as the U.S. Trade Representative on November 26, 2024. This is a key position that directly affects Sino-U.S. trade. Greer served as chief of staff to Robert Lighthizer, who was known for his tough stance on China, leading the U.S.-China trade war and pushing for high tariffs on goods and Section 301 investigations.

The reason why Greer became the successor is mainly because he is familiar with Lighthizer's working style and framework, and played an important role in Trump's trade.

Greer’s nomination will also heighten market concerns because his business background and global economic perspective make him likely to adopt more aggressive measures, such as trade barriers and economic sanctions, to promote Trump’s U.S. Manufacturing reshoring strategy.

One additional point here, why does Trump advocate the reshoring of U.S. manufacturing?

The United States was once the world's largest manufacturing industry, but since the end of the 20th century, especially with the intensification of globalization and industrial outsourcing, many manufacturing companies have transferred production to places with lower labor costs, especially in the Other Asian regions. This change caused the United States to lose sufficient manufacturing capacity in some areas (such as the production of basic consumer goods) and had to rely on imports, especially goods from, to meet market demand.

Trump believes that globalization has brought unfair competition to the United States, and the low-cost labor advantage has allowed foreign-funded enterprises to dominate the U.S. market, thus exacerbating the loss of U.S. manufacturing. Therefore, he proposed the idea of ​​reshoring the manufacturing industry, striving to restore productivity, stimulate employment and revitalize the local economy.

This is also an important reason why Trump implemented tariffs. He tried to bring back American manufacturing by raising import tariffs. Although he has not yet officially taken office, Trump announced on social media on November 25, 2024 that he would impose a 10% tariff on all imported goods, further strengthening this strategy.

Unlike the United States, China is the world's largest manufacturing country (according to 2023 World Bank data, China's manufacturing output ranks first in the world, surpassing the United States, the European Union and other countries), but the problem it faces is The consumer market is relatively insufficient.

Therefore, it has set its sights on overseas markets, especially markets with strong consumption power such as Europe and the United States. According to the 2023 global goods trade data of the World Trade Organization (WTO), the international export market share in 2023 will be 14.2%, of which the European and American markets account for about 40%.

The economic complementarity between China and the United States (the United States lacks production capacity and consumption) has largely promoted trade and cooperation between the two countries. However, as trade barriers increase, this complementarity has gradually declined. be damaged. External pressure has also prompted greater adjustments, promoted consumption and industrial upgrading, and sought more international cooperation opportunities. An important way is the “One Belt, One Road” initiative.

Through the "One Belt, One Road" initiative, it can export its industrial production capacity, infrastructure construction experience and technology to areas along the route, promote their economic development and improve infrastructure, while at the same time integrating with local natural resources (such as minerals and energy) form a complementary relationship.

And unlike the Western model that relies on "credit-based" and financial leverage, China's "One Belt, One Road" initiative adopts a "physical-based" approach, through direct investment in infrastructure construction and exchange with local natural resources. Obviously this is a more sustainable economic development model. Especially when the global financial system (especially the system based on the credit standard) shows signs of weakness, the "physical standard" may indeed show a different effect than expected and greatly enhance the economic stability of some countries or regions.

All in all, Trump’s “America First” and the tough stance of his cabinet members will undoubtedly deepen the tariff barriers between China and the United States. In the short term, we may face some economic pain, but that is to be expected. However, as the Belt and Road Initiative advances, there may still be more opportunities in the global economy, especially in industrialization and regional cooperation.

Of course, the key factor affecting the direction of the A-share market is not only Sino-US trade, but more importantly, the monetary path of the Federal Reserve.

By reviewing the performance of A-shares during the Trump and Biden eras, we find that the Fed’s currency isOne of the key factors affecting the trend of the A-share market.

During the Trump administration (2017-2020), due to the Federal Reserve's implementation of loose money, A-shares performed well overall, especially in 2017, 2019 and 2020. During the Biden administration (2021 to the present), the Federal Reserve has continuously raised interest rates, leading to an increase in capital costs and tightening liquidity. A-share performance has been weak and has been in decline most of the time.

So the question now is: Will the Fed continue to adopt easy money?

When making monetary decisions, the Federal Reserve usually weighs multiple factors such as economic growth, inflation, and employment to ensure the healthy and stable operation of the economy. We have also analyzed before that if Trump significantly increases tariffs, it will directly raise the cost of imported goods, disrupt the global supply chain, and reduce market competition. These may intensify inflationary pressure in the United States and force the Federal Reserve to adjust currency to deal with inflation. rise.

However, in Trump’s second term, the situation may usher in some changes.

Compared with other positions, Trump has gone through repeated weighings when choosing the Secretary of the Treasury. Scott Bessant was initially nominated, then Howard Lutnick (later nominated for Commerce Secretary) and Kevin Warsh were considered, before ultimately returning to Bessant.

On November 22, 2024, Trump nominated Scott Bessant, founder of the global macro investment company Key Square Group, as Secretary of the Treasury.

This decision may reflect Trump’s high emphasis on loyalty and consistency.

Bessent served as chief investment officer at Soros Fund Management and provided Trump with extensive economic advice during the 2016 campaign, especially on promoting economic growth, tax reform and fiscal reform. aspect.

Bessant and Trump are highly consistent in their economic philosophies. Both tend to stimulate the economy through loose money, especially in low-growth or uncertain economic environments.

More importantly, Bessant once proposed the establishment of a "shadow Federal Reserve Chairman", advocating that the new Federal Reserve should select the next Federal Reserve Chairman as soon as possible and promote reform of the Federal Reserve's formulation process.

If this proposal is adopted, it means that Trump may exert greater control over the Federal Reserve in the economic field and make its decision-making process more consistent with the Federal Reserve. Such intervention could undermine the Fed's independence, making it no longer able to make decisions solely based on economic data and long-term goals, but instead need to take into account the Fed's agenda.

In this case, Trump obviously hopes to ensure the effective execution of his economy through more direct control and further consolidate the "America First" economic concept. Trump has always advocated promoting U.S. economic growth through low interest rates, fiscal stimulus and large-scale infrastructure investment, and promoting employment and consumption through these measures. In a low interest rate environment, consumers and businesses are more inclined to borrow and invest, which is important for promoting the economy.Growth is crucial.

If Trump can really "empty out" the Federal Reserve, he may be able to make easy money the norm, which is highly consistent with his consistent "America First" policy. By then, we may usher in a more colorful currency environment, which will do more good than harm to the A-share market.