#关税政策后市场分析 #下行市场风险对策

The United States has imposed tariffs
Why did China choose to confront the United States this time? - A comprehensive interpretation of the internal logic behind China's countermeasures for the first time.
In the past couple of days, there have been many voices online saying that China is standing up to the United States. Although it can garner nationalist sentiments, winning face but losing substance isn’t beneficial. For the livelihoods of hundreds of millions, it’s actually okay to earn money while bowing down, because after all, nothing is more important than the people’s ability to eat.
Is it really like that?
The above remarks are somewhat reasonable, but they have not grasped the essence of this tariff war at all. Next, let's talk about why China chose to fight hard instead of compromising this time.
In the 2018-2019 period, it was also Trump who initiated the trade war and imposed tariffs on China. At that time, China actually chose to compromise for the livelihood of hundreds of millions of people. The compromise was to sign the first phase trade agreement with the United States, but ultimately Trump still imposed tariffs of 7.5%-25% on China. Subsequently, China promised to increase annual purchases of 200 billion USD worth of energy and agricultural products from the United States.
So what is the cost of China's compromise? It is a significant depreciation of the Renminbi against the US dollar, with the dollar rising from 6.5 to 7.3 against the Renminbi. According to Miran, a Harvard PhD in economics who served as a senior policy advisor at the Treasury during the Trump 1.0 era, China's currency depreciation and the declining international purchasing power of the Renminbi have made their people poorer (they need to spend more money to import goods from the international market), and the tariffs paid by China are precisely used by Trump to cut taxes for the American people.
This is the logic behind Trump's tariffs.
You see, China compromised in 2018-2019, but Trump is a person who takes advantage and has no integrity. You compromise once, and he comes back for a second time. This time the tariffs are raised to 54%, which means that the 500 billion dollars of goods exported from China to the U.S. will have to pay over 250 billion dollars in taxes to the Americans! 250 billion dollars, 1.85 trillion yuan, just wasted to support the Americans? Out of this 500 billion in export value, the Chinese only make about 50 billion dollars, yet they have to give the Americans five times that amount in taxes.
Tariffs have now risen to 104%. If China still does not compromise, what will be the result? It means that China's exports to the U.S. will shrink by 50%-60%, which is a reduction of $300 billion in exports. Some may ask, why not reduce exports by 100%? Because a portion of Chinese goods remains a necessity in the U.S. even with several times the tax.
For example:
The coffee mugs produced by the factory in Zhejiang have a factory price of 0.8 dollars, while they are priced at 48 dollars in supermarkets in New York.
The wholesale factory price of Bluetooth headsets produced by factories in China is 3 USD, while the factory price from the Texas factory in the United States is 22 USD;
The price of LED bulbs produced in Yiwu is $0.5, while the price of similar products produced in Michigan is $22.
The air fryer produced in Shenzhen is priced at 59 RMB with a 3-year warranty, while the similar product produced in Chicago is priced at 499 USD with a 6-month warranty.
The biggest impact of the tariff war is on high-value products, such as mobile phones, laptops, and new energy vehicles. Can anyone guess what brands of computers, mobile phones, and new energy vehicles China exports to the United States? Could it be Huawei, Xiaomi, or BYD? Of course not, it’s Apple and Tesla.
The export decline of Apple and Tesla will undoubtedly result in some job and tax losses for us, but the biggest loss will be for American brands like Apple and Tesla.
Therefore, the reason China chooses not to compromise is that instead of using 250 billion in actual expenditure to exchange for 300 billion in exports, it is better to use this 250 billion to stimulate domestic consumption and boost internal circulation. Next, China will definitely implement large-scale economic stimulus policies.
Moreover, China this time is different from 2018; the confidence to take a hard stance is based on three aspects that have undergone tremendous changes over the past seven years.
The first step is to address energy dependence.
China is a major energy-dependent country, with 70% of oil consumed by automobiles. In recent years, with the vigorous development of electric vehicles, the market share of electric cars has exceeded 50%, significantly reducing the dependence on oil. Therefore, if energy is used to blockade us, it won't work anymore.
Secondly, it is about solving the bottleneck in technology.
Since the trade and technology war in 2018, China has made significant breakthroughs in fields such as semiconductors, quantum technology, and aerospace, including the Harmony operating system, Beidou navigation system, International Space Station, industrial robots, and so on. The year 2025 is already different from 2018; the current technology blockade will only promote China's independent research and development and cannot effectively choke it.
Finally, it's consumption.
The most powerful aspect of the United States is that it is a consumer superpower, with a total global import volume of 24 trillion dollars a year, of which the United States itself accounts for 3.3 trillion dollars. Coupled with the dominance of the US dollar, no country can do without the US market, which is the basis for Trump’s boldness in raising tariffs. If China seizes this opportunity to vigorously stimulate domestic consumption and elevate the level of domestic consumption, turning China into a manufacturing and consumption powerhouse, then other countries will become even more reliant on China and will stand alongside China.