Saturday, April 26, 2025

China (once again) Owns the US

(from a tweet)
Arnaud Bertrand

@RnaudBertrand

Responding to this previous tweet: WHITE HOUSE CONSIDERS SLASHING CHINA TARIFFS TO DE-ESCALATE TRADE WAR, SOURCES SAY -- WSJ

If this gets confirmed and Trump indeed folds, this will be seen as one of those seminal events that confirm, beyond all the propaganda, a fundamental rebalancing of power between China and the US, and an end to the era of US economic dominance. Factually speaking, the US launched an extraordinary attack on China's economy, as according to Trump and others around him the tariffs were largely about a "grand encirclement" plan of China (Bessent's characterization: https://bloomberg.com/news/newsletters/2025-04-12/bessent-has-a-grand-encirclement-plan-for-china-bloomberg-new-economy…). 

But China didn't get intimidated and responded in kind, and 21 days after not a single country - not one - made a "deal" with the US against China, or even signaled their intention to do so. Quite the contrary, many countries publicly stated their intention to get closer to China as a result and to derisk from the US. 

Furthermore, as we all know, the US lost trillions of dollars in its stock market, saw the cost of its debt soar like rarely before and the value of its currency crash. And I'm not even speaking about the thousands and thousands of companies and individuals in the US complaining about how the tariffs are already affecting them negatively. 

The impact on China's side was much less pronounced: the CSI 300 Index is virtually unchanged, and so is the cost of China's debt, standing at 1.67% for their 10Y bonds vs 4.4% for US 10Y bonds. Due to the tariffs, the IMF just predicted a reduction of only 0.5% in China's GDP growth (down to 4%) vs a loss of 0.9% for the US's GDP (down to 1.8%), meaning that China would keep growing at more than twice the rate of the U.S. despite the tariffs, and would be much less affected by them than the U.S. 

In short, when Trump undoubtedly attempted to showcase America's might, he's only achieved a brilliant demonstration of its impotence and, by contrast, highlighted China's diplomatic and economic adeptness. Basically, we're in a new world where America simply cannot bully its way around anymore: when they do so, they end up hurting themselves first and foremost.

...

Meanwhile, from Molson Hart's tweet:

The White House has put itself and the country in a bad situation but doesn’t realize it yet. 

Around April 10th China to USA trade shut down. 

It takes ~30 days for containers to go from China to LA. 

45 to Houston by sea, 45 to Chicago by train. 55 to New York by sea. 

That means that there are no economic effects of what was done on April 10th until about May 10th. 

Around that time (it’s already started to happen) trucking work is going to dry up. Warehouses will start doing layoffs because no labor is needed to unload containers and some products will be out of stock, reducing the need for shipping labor. 

All this will start in the Los Angeles area. 

After about 2 weeks, it’ll start hitting Chicago and Houston. 

Let’s say the White House, after 3 weeks, changes its mind, on May 31st. “This isn’t working out like we thought it would. Tariffs back to 0.” 

Let’s say China says “bygones be bygones, we’ll go back to how things were”. Let’s say every factory in China that got screwed by their orders being cancelled says the same thing “no problem, we’ll make and ship”. 

The problem is, even under the most favorable conditions of China and the factories restarting economic ties as though nothing happened, it will be at least another 30 days before economic activity is revived. 

And that’s just in LA. 

In Chicago/Houston, you’ll need to wait another 45 days. 

New York, at that point, will still be getting containers from before April 10th, they will then have 50 days (May 31 minus April 10) of zero economic activity at the ports, in trucking of Chinese goods, in warehousing. 

The whole situation is a bit like lockdowns. Once you shut down, it takes a long time to get economic activity back to where it was, if you ever can. 

And again, this assumes, that China and its factories, which make things you can’t buy elsewhere, will start right back up again as though nothing happened, which is unlikely. 

It’s almost like we’re speeding towards a brick wall but the driver of the car doesn’t see it yet. 

By the time he does, it’ll be too late to hit the brakes.

Sino shipping route map

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