[By GuanchaNet Columnist Shen Yi]

Hello everyone, welcome to this episode of Yi Yudaop, where we continue our discussion on the Sino-US trade博弈. Trump and Beasant have been continuously releasing information; how should we understand these messages? Let's analyze them.

I remember when I was studying Western economics in university, it was mentioned that the core concept of Western economics is supply and demand. Someone joked that if you taught a parrot Western economics, it would only need to learn to repeat the words "supply" and "demand" to master all of Western economics. Of course, this is a joke, but it reflects that the core focus of Western economics is the relationship between supply and demand.

In the Sino-US trade war, some people argue whether the US as the demand side is more powerful or China as the supply side is stronger? The key lies in substitutability. If the US can find alternatives to China's supply from other parts of the world besides China, then the US will be more proactive. Similarly, if China can find alternatives for US demand, China will be relatively more proactive.

The current situation is very clear. McKinsey once released a report titled "Where Will the Next China Be in the Next 25 Years?" The conclusion is that the next China will still be China, meaning that from the perspective of supply capacity, China is irreplaceable at least in the foreseeable future.

If this situation does not change, then the final prospect of this Sino-US trade博弈 has already been determined by economic laws - Trump cannot decide this, we must listen to Hayek.

Now, the US is disrupting the optimal supply path from China directly to the US with tariffs. China simply changes the path from supply to demand. For example, if the US cancels an order, new intermediaries will appear. These intermediaries purchase the same items from China and bypass tariff barriers to deliver the supplies to the US because US demand will not disappear due to tariffs. If the US itself cannot replace this supply in the short term, this supply will still originate from China and reach the US, ultimately causing losses borne by US consumers, which is the basic principle of tariffs.

Although everyone says that trade wars are best avoided as they have no winners and may result in double or even multiple losses. However, this trade war was not initiated by China, and to resolve it, the US needs to recognize its own mistakes and change its erroneous tariff policies for substantive easing of the trade war to be possible. China cannot yield to unreasonable US demands.

In this process, all countries bear the same responsibility. When faced with unreasonable tariff bullying demands from the US, only firm resistance and counterattacks against the US will make the US realize its mistake and change such policies. Yielding continuously, compromising, or changing actions merely based on some verbal statements from the US are all wrong options.

Certainly, both sides will face pressure in the short term, but it is obvious that the pressure on the US side is greater, and there are fewer effective solutions to handle it. Besides making substantial changes to the erroneous tariff bullying policy, the US has few other options.

In the short term, the pressures facing the US at least include rising domestic prices, confidence pressure in financial markets. As we have seen, the US stock market, bond market, and currency market are experiencing a triple-hit situation. Capital is voting with its feet, systematically leaving the US market and the dollar, turning to European and Japanese markets, seeking gold to avoid risks, which is a specific manifestation of this financial pressure. At the same time internationally, countries are working together to counteract US tariff pressure and refuse to make concessions, which is another pressure the US faces internationally.

Trump's "confession" does not solve the substantive issues of Sino-US economic and trade relations.

Trump's former senior strategist Bannon explained it very clearly: The real challenge facing the Trump administration is the ticking time bomb of US national debt pressure. To defuse this pressure, effective coordination from foreign sovereign investors like China is required. If this coordination is lacking, the exploding national debt pressure will cause fatal damage to the US dollar system, which Trump cannot endure. What we need to do is maintain composure and patience before that, letting economic laws and national debt pressure force Trump to make substantial policy adjustments.

At the same time, Trump faces time pressure set by the US domestic political process - the midterm election of the US Congress in 2026. According to the current situation, if Trump does not make substantial changes to the tariff policy, the impact of rising domestic prices on American lives will create enormous political pressure in the 2026 midterm congressional elections, putting Republican congressmen in a very awkward and unfavorable position during the congressional elections.

And if he loses the 2026 midterm congressional election and loses control of both chambers of Congress, Trump will enter a de facto lame-duck period prematurely. This is also an unbearable political pressure for Trump personally.

Based on this analysis of these pressures, we know that time is not on Trump's side but on China's side. China needs to work effectively within this favorable time frame to alleviate its own pressures while waiting for this pressure to have a substantial impact on Trump's administration policies.

From the current situation, this round of so-called "confession" messages released by Trump is essentially a short-term calming measure for the US financial market, mainly aimed at alleviating panic in financial markets, achieving a short-term recovery or a brief buffer space to prevent the financial market from falling too rapidly, causing Trump to lose bargaining power.

But ultimately, confidence in financial market capital cannot be substantially alleviated through words alone. After a short-term rebound, if it is found that Trump's policies have not undergone substantial changes and the attitude and policies of other countries resisting Trump's tariff bullying have not undergone substantial changes, the trend of continuous capital outflow from the US market will not undergo substantial changes either, and related pressures will continue to rise. And with key time nodes such as the maturity of US Treasury bonds, the panic in the capital market is expected to grow significantly. By then, it may be a truly effective node to observe whether Trump will make substantial policy changes.

For China, as Foreign Minister Wang Yi said, in this round of Sino-US strategic博弈, regarding economic and trade issues and US tariff bullying, what we need to do is remain calm and composed, maintaining our determination, while strictly countering US tariff bullying, using more comparative advantages, including export controls on rare earth resources, to continuously apply reverse pressure on the US, making the US feel or realize this error through pressure, loss, and changes in the domestic real economy and financial markets.

Currently in the US, dissatisfaction with Trump's policies among media, research institutions, former government officials, and various states is brewing and fermenting. This brewing and fermentation require a process, and during this process, China sticking to its own affairs, responding discourse with discourse, and action with action is the best strategy choice.

Some are discussing the possibility of reaching a so-called "grand deal" between China and the US. If, as Beasant said, his goal is to pursue trade equilibrium and reach a systemic, new trade arrangement, this is not impossible, but it must return to the source of the market according to rules, correctly understanding and interpreting how this trade imbalance came about.

People will find that everything stems from America's erroneous policies, including the excessive expansion of the financial sector and the imposition of non-economic factors on China's high-tech products, leading to systematic and structural trade imbalances. Therefore, what really needs to change is the US itself, which is the continuous emphasis by China: the US is sick, it cannot let China take the medicine, nor can the world take the medicine to solve America's problems. It is wrong and bullying to try to get two layers of skin, or even several layers of skin, from one bull to fill the domestic shortfall in the US. This is an incorrect and bullying solution.

America today does not have the true strength to implement such hegemony. The previous analysis has repeatedly emphasized that the three pillars supporting the US hegemony system - the US dollar, the US military, and ideology - are showing obvious signs of decline today. For the US, unless it returns to the side of economic laws and seriously follows the rules, making substantial changes, it will face the situation where all countries continue to stand on the right side of history, effectively countering US tariff bullying policies until the US changes its policies.

This is a tough博弈and a typical protracted war. We need sufficient patience, confidence, perseverance, and determination because we stand on the right side of history. Ultimately, the law will play its proper role, and the victory will belong to those who stand on the side of the law, on the side of "Hayek," and on the side of the right side of history, rather than to Trump and his administration, who make decisions impulsively, whimsically, and recklessly in the White House. This is beyond doubt.

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Original article: https://www.toutiao.com/article/7497425300855439909/

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