09.04.25 - China 1:0 US
The trade battle between the world’s two largest economies, China and the United States, has entered a new and more aggressive phase. In a bold show of force, China announced today that it will impose 84% tariffs on US imports. This follows US President Donald Trump’s decision yesterday to increase tariffs by 50%, bringing total duties on Chinese goods to 104%.
Trump’s so-called "reciprocal tariffs" took effect today, targeting around 60 trading partners with whom the US runs trade surpluses. This follows the implementation of a baseline 10% tariff on most US trading partners, which came into force on Saturday.
In response, China has pledged to continue taking “resolute and forceful” countermeasures. As of now, there has been no official response from U.S. political leaders regarding China’s latest move.
Adding to market jitters, there was a fire sale of long-term US Treasuries overnight, a development that could signal further financial instability if tensions escalate.
Meanwhile, in a somewhat under-the-radar move, the European Commission announced countermeasures targeting EUR 21 billion worth of US imports. These duties are expected to be collected starting April 15. The EU emphasized its strong preference for a "balanced and mutually beneficial negotiated outcome" in its official statement.
In Germany, coalition talks have concluded with an agreement to form a new government.
Markets: Chinese equity markets saw an increase last night, European markets with another bad day deep in the red, US indices with a try of stabilization, US long-term interest rates with a strong up move from 4.2% to 4.5% within few hours, gold up +3%, US dollar and oil weak, metals in plus. Cryptos also with signs of stabilization after the dip earlier today.
My view: I am not surprised by China’s latest move. The country has the strength and strategic positioning to play this game. With ample foreign exchange reserves, China has the ability to stabilize its own markets. Today’s positive market performance suggests that government-backed equity purchases may have taken place to restore investor confidence.
China remains the second-largest holder of US Treasuries, with approximately USD 760 billion. What caught my attention is that the origin of last night’s fire sale in long-term Treasuries hasn’t been clearly identified. To me, this looks like a calculated signal from Beijing, designed to rattle global markets and remind the US of its financial interdependence with China. If China would aggressively liquidate its Treasury holdings, it could send US interest rates soaring, causing significant economic disruption.
Interestingly, we’ve also seen a pause in the recent downtrend of some key commodities today. This could be an early sign that the fight for strategic resources is heating up, a theme I have been watching closely.
In light of these developments, I have taken some tactical positions in the ETFMandate portfolio today. As always, all Premium Members received immediate updates on these investment decisions earlier today.
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