Understand Trump tariff war, Assess if market rebound is likelyIf you want to better understand Trump’s strategy for the tariff war and the underlying intentions—especially to assess whether a rapid market rebound is likely—you may refer to a paper by Trump’s economic advisor Stephen Miran, titled “A User’s Guide to Restructuring the Global Trading System.”
Here’s a brief summary of the key points from the paper regarding the trade war:
1. Market Volatility Is Anticipated
The paper acknowledges that sharply raising tariffs may trigger financial market turbulence, increase uncertainty, lead to rising inflation, potential interest rate hikes, and a stronger U.S. dollar—all of which could cause broader ripple effects. (In other words, the Trump administration is aware that such moves will shake the markets.)
2. Second Term: Focus Shifts to Legacy
While Trump and his team prioritized stock market performance during the first term, in a second term—when re-election is no longer a concern—he may focus more on leaving a political legacy. This includes reshoring manufacturing, tax reform, reducing national debt, and shrinking the trade deficit.
3. Tariffs as a Strategic and Fiscal Tool
This new round of tariffs serves not only as a pressure tactic , but also as a potential revenue source to fund Trump’s desired tax cuts. As such, the Trump administration may not rush to finalize new trade deals. Instead, tariff reductions would likely occur gradually, and only after securing substantial economic benefits.
4. Trade and Security Will Be Linked
Future trade negotiations will likely tie economic cooperation to national security. The U.S. could use a dual standard—“tariffs + security”—to compel other nations to follow U.S.-defined trade and geopolitical rules.
For example: Countries might be forced to join a tariff alliance against China. In exchange for market access, they would either have to tax Chinese goods or accept high U.S. tariffs and reduced security cooperation. For the EU, if it does not meet U.S. demands, tariffs would become a key revenue stream for the U.S., while freeing up American resources to focus on China’s rise rather than spending time and money on European security.
5. Big Picture Strategy: Build a Global “Tariff Wall”
This paper lays out a grand strategy to use tariff warfare to pressure countries into forming a global “tariff wall” encircling China, aimed at constraining China’s economic influence.
Strategic Implications
Based on this approach, the U.S. goal in trade negotiations is not merely tariff reductions or market access, but achieving:
1. Market access for U.S. goods via lowered barriers abroad.
2. Adoption of U.S.-led trade and geopolitical rules, including encircling China and sidelining nations like Iran and Russia.
3. Increased U.S. government revenue— meaning tariffs might persist throughout Trump’s term and not be eliminated outright!
Market Outlook
If the U.S. follows this roadmap, it’s unlikely that a consensus with China or other China-dependent economies (like the EU) will be reached quickly. This suggests that market volatility could persist for some time if these strategies are enacted.
Given the current asset declines showing signs of a liquidity crunch, without a clear positive catalyst (e.g., successful trade deals, tax cuts, or rate cuts), it may be difficult for equities, crypto, or even gold to see a meaningful rebound in the short term.
As markets remain highly sensitive to news, it’s crucial to focus on risk control in trading and consider reducing position sizes when needed.
Let’s keep the discussion going—what do you think about the future direction of U.S. trade policy under Trump?
