Source: Barron's Chinese

Since 2017, some major dynamics have changed. One is that it is no longer as dependent on the US market as it was in the past, which means there are multiple countermeasures options.

Currently, the theme of "Trump Deal" has been replaced by the theme of "Grand Bargain" between US President-elect Trump and Trump.

U.S. stock markets rose sharply last week despite Trump's dragging Canada and Mexico into a large-scale "trade war" against the United States and the selection of more anti-free trade people to serve in the new office.

So, are investors right to believe that the Trump circle’s strategy of “escalating the situation to de-escalate it” can work? The author believes that the probability of this strategy working is low.

This involves two different issues. The first question is, what is Trump’s plan? It is well known that he hopes to make the threat of high tariffs yield to the demands of the United States. Trump appoints Scott Bayer, a new member of the MAGA (acronym for "Make America Great Again", Trump's campaign slogan) camp. Scott Bessent's appointment as Treasury Secretary has given hope that the tariffs are just a negotiating tactic.

The second question deserves more attention: How will we deal with the chaos brought about by the coming "Trump 2.0"? Maybe not as "submissive" as many people think.

After all, in the last "trade war" launched by Trump, he was superior to Trump at almost every critical moment. Trump's various achievements since his victory on November 5 The misstep showed that he didn't learn much from the experience.

Trump seems dissatisfied that the "trade war" from 2017 to 2021 did not prevent his rise on the global stage. The "trade war" did not reduce the trade surplus and did not put millions of people to work. Jobs returned to the United States and went to Vietnam instead.

You can ask American farmers, manufacturers, and small business owners whether they have paid a price for those tariffs, or ask Japan, South Korea, and U.S. allies in Southeast Asia what they think about January 20, 2025. How do you feel about Trump's 1,460-day term after he took office? You will find that Trump's "revenge tour" will not continue in Asia first.

At the same time, we know that Japan still has a grudge against Trump’s withdrawal from the Trans-Pacific Partnership Agreement (TPP) initiated by the United States in 2017. This is because the TPP was once Japan’s attempt to contain The core of the series attempt.

The "Trump 2.0" threat to impose 25% tariffs on Canada and Mexico has the same effect as in the past. The United States' other major trading partners are paying close attention to the development. They are worried that negotiations with U.S. officials will end up again. All in vain.

Perhaps the most worried person is Japanese Prime Minister Shigeru Ishiba.u Ishiba), who has not yet been given a chance to meet with Trump at Mar-a-Lago, Trump's team has made it clear that the leader of America's staunchest ally in Asia, if not the world, is standing by, etc. No problem.

"Trump 1.0" is not very friendly to Japan either. The flattery and obedience of former Japanese Prime Minister Shinzo Abe did not prevent Trump from withdrawing from the TPP, and Abe had spent a lot of capital Convince his Liberal Democratic Party to join the TPP.

Those who have observed all this have gained some experience. One is that Trump will never be satisfied. He will keep making demands, and the demands will be more and more.

Assuming that they decide to sit down with Trump and engage in "grand negotiations" between China and the United States, two countries with a combined annual economic output of more than 47 trillion U.S. dollars, the Trump team will most likely not accept it. Disappointed by his demands, the counterattack will begin again. At the same time, if major concessions are made to Trump, know that Trump will ask for more a year later.

Some major dynamics have changed since 2017. One is that there is no longer as much reliance on the U.S. market as in the past, which means there are multiple counterattack options.

One option is to devalue the yuan before Trump devalues ​​the dollar to offset the impact of the 60% tariff.

In addition, there may be restrictions on exports to the United States of key goods needed for "Trumpomics", and of course Musk and his colleagues in Silicon Valley can explain to Trump that the United States cannot obtain rare earths and other Materials risks: Reduced imports of gallium, germanium, graphite and other materials will shake up U.S. industries such as semiconductors, telecommunications and electric vehicles.

It may also sell a large amount of its US$730 billion in US Treasury bonds, or target US companies that are most negatively affected by "decoupling", such as Apple, Microsoft, Tesla, Amazon and Walmart.

In the end, 2025 will be the protector of free trade and globalization, while the United States is pulling the market back to 1985, which will only lead to the "BRICS" (Brazil, Russia, India , , South Africa) and the “global South” have stepped up efforts to replace the dollar in trade and finance.

It is worth mentioning that the "Trump 1.0" trade "victory" was actually in vain. The agreement reached by Trump and Japan in 2019, which he used to replace North American Free Trade, ended in a draw. The U.S.-Mexico-Canada Agreement (USMCA) of NAFTA also brought little change.

The best-case scenario is that Trump’s “grand negotiation” with Trump may just be a formal public relations maneuver that won’t change too much. It depends on whether Bessant can get Trump to control his most serious problems. Bad impulse.

The worst-case scenario is that Trump, who is eager for "revenge", and Trump negotiate with full force, and such an approach will make everyone poorer.

What the global economy can do is to hope that Trump can curb his ownHis worst impulses are to hope that so-called “normal people” can tame the Trump circle. However, with “Trump 2.0” once again beginning to attack the world—and especially the United States—the year ahead is sure to be one of the most different we have ever seen.