Trump's tariff war is a complete failure, which can be considered the biggest strategic blunder for the United States since World War II. The consequences may destroy the dollar system and lead to the collapse of the U.S. economy and finance.

Let us analyze Trump's tariff war. Why did Trump initiate the tariff war? Ignore what Trump has said; his core purpose is singular: to force the Federal Reserve to cut interest rates.

The Core Purpose of Trump's Tariff War: Interest Rate Cuts

Let’s break it down thoroughly. All of Trump's controversial actions since taking office in less than 100 days, including Musk's layoffs, withdrawing from international agreements, demanding protection fees for military bases, initiating global tariff wars, etc., stem from one thing:

That America is running out of money, and U.S. Treasury bonds are about to explode. This point was clearly stated by Musk during a cabinet meeting when he directly mentioned that America is on the verge of bankruptcy.

Therefore, Trump made a big move: forcing the Federal Reserve to cut interest rates.

By triggering high inflation globally through tariffs, Trump forced the Federal Reserve to intervene, and after the interest rate cut, all of Trump's ideas could be realized, including devaluing the dollar through interest rate cuts, stimulating consumption, helping American enterprises recover from the damage caused by tariffs, and enhancing the competitiveness of American manufacturing.

Of course, manufacturing is not what Trump cares most about. What Trump truly wants to address is the $6.5 trillion worth of U.S. Treasury bonds maturing in June, which is a major issue. If there is any fluctuation in U.S. Treasuries, the entire dollar financial hegemony and order would collapse, which no U.S. government could accept.

In the short term, the pressure of debt rollover is unprecedented. Offending creditors won't work either way. So, Trump's advisory team had an epiphany: starting a tariff war to force the Federal Reserve to cut interest rates, which would result in a devaluation of the dollar. A devalued dollar means the actual value of debts decreases, thus alleviating the U.S. debt crisis.

In addition, we can look at the previous uproar over the "Mar-a-Lago Agreement." After the dollar devaluation, Trump might restructure America's $36 trillion in massive debt. According to rumors, Trump plans to convert U.S. Treasury bonds into 100-year bonds, non-transferable, and interest-free. In this way, Trump could default on over $30 trillion in U.S. Treasury bonds and the annual interest of over $1 trillion.

This can also solve America's fiscal deficit. Moreover, due to increased global tariffs, U.S. fiscal revenue can increase. Tariffs are effectively an "interest-free" loan borrowed by Trump from the American public. Don’t you think this strategy is very smooth?

Consequences if the Federal Reserve Does Not Cooperate

However, the current result is clear: the Federal Reserve stubbornly refuses to cut interest rates. First, Trump talks too much, making it impossible for the Federal Reserve to determine the direction of U.S. policies. Then, the Federal Reserve has its own considerations. Once interest rates are cut, U.S. Treasury bonds will rapidly increase, quickly surpassing $40 trillion. The devaluation of the dollar will be confirmed, and the dollar will become uncontrollable. Once federal debt exceeds $40 trillion, money cannot be recovered. At that time, the Federal Reserve will be in trouble.

Therefore, without the prerequisite of the Federal Reserve cutting interest rates, all of Trump's ideas have become mere bubbles, and he must also bear the consequences of global tariffs.

First, this prematurely triggered the U.S. Treasury bond crisis. Trump didn’t expect that China hadn’t sold off U.S. Treasuries, but Japan already started. Despite Japan’s official promise not to sell, Japanese civilians don’t care about that. This selling became the direct reason for Trump to delay tariffs.

Now, the biggest concern for the U.S. is that the Treasury bond selling wave will continue, as China hasn’t yet intervened.

Secondly, China’s strong countermeasures directly pinched the lifeline of America's defense industry and high-end industries. Moreover, because of China’s strong countermeasures, the tariff war blocked American goods from entering China. Most of the goods sold to China by the U.S. have substitutes, and American goods blocked by the tariff war cannot enter the Chinese market through third countries. Instead, their markets are being replaced by other countries, such as beef and soybeans, which are Trump's key voter base.

Furthermore, China’s strong countermeasures also gave other countries courage. You see, Brazil, South Africa, and others directly challenged Trump, and even Britain said it wouldn’t decouple from China.

Then, the U.S. stock market lost $6 trillion directly, severely damaging Wall Street financial capital. Now, high inflation in the U.S. continues to rise, with the inflation rate surging to a 40-year high. Ordinary households spend an additional $300 per month due to tariffs. Look, isn’t the U.S. now facing an egg shortage crisis?

Reasons for Trump's Complete Failure

It can be said that the tariff war is a bomb that heavily damaged the U.S. economy, finance, politics, and technology. Now, Trump has only two solutions: to make the Federal Reserve cut interest rates. Trump even threatened to fire the Federal Reserve Chairman, but the Federal Reserve is not under Trump's jurisdiction.

The second solution is for China to yield, so Trump has been saying he is waiting for China's call. Once China negotiates with the U.S. and signs an agreement, it can alleviate the current economic and financial pressures in the U.S. Haven’t you seen Trump’s recent claim that he will resolve the China issue within a month?

So, which of these two do you think will succeed? Now, the biggest problem with Trump’s situation is that he is not a president who is emotionally stable or focused on long-term strategies. Look at Biden; although many people call him a sleeping president, his policies have been implemented throughout his four-year term, and they have caused China significant difficulties.

Secondly, there is the issue with Trump's advisory team. Peter Navarro, Trump's "trade advisor," is an extreme anti-China advocate. If the goal is to force the Federal Reserve to cut interest rates, the best approach would be to temporarily avoid offending China first. Navarro wants both to pressure the Federal Reserve to cut interest rates and use the tariff war to isolate China globally. Handling one issue is already difficult enough, but now he has offended two sides. Moreover, the tariff war completely disregarded Trump's financial backers in Silicon Valley. You see, Nvidia just gave billions and hoped Trump wouldn’t ban H20 chip exports to China. Trump promised, but then he went back on his word. Apple, Tesla, and other giants warned that if iPhone costs double and electric vehicle batteries are cut off, they might relocate production lines. Haven’t you seen Musk publicly criticize Navarro?

So, what is the current situation like? The tariff war has failed miserably, and Trump's grand plan has shaken the U.S. Treasury bond system. The $6.5 trillion worth of Treasury bonds maturing in June remain unresolved, and there are still $3 trillion by the end of the year, followed by another $8 trillion next year. If the Treasury bond issue remains unresolved, the U.S. could indeed go bankrupt.

The U.S. economy is now in chaos, and Wall Street financial institutions face a potential meltdown. Moreover, the tariff war has isolated the U.S. internationally. With the U.S. acting this way, which traditional ally like Europe, Japan, or Korea would trust them anymore?

We will now see a state of maximum tug-of-war among the Federal Reserve, China, and Trump. To divert domestic conflicts, Trump might turn his attention to Iran in the Middle East. We are about to witness history.

Original Source: https://www.toutiao.com/article/7495709080829329983/

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