When the tide goes out, we know who is swimming naked

King Trump is the emperor with no clothes

When I wrote my last essay China’s Strategy to Defeat US by Bankrupting It (https://huabinoliver.substack.com/p/china-s-strategy-to-defeat-the-us) just before Trump’s “liberation day”, I thought I would do a follow up in a month’s time after the dust settles down a little. Things have moved along the trajectory as predicted but at a much faster pace than I anticipated.

With the late Friday announcement that Trump is exempting China-made smartphones, chips, computers and electronics from the 125% “reciprocal (a complete farce)” tariff, representing roughly a quarter of China’s export to the US, King Trump essentially bent his knees and capitulated. However Karoline Leavitt spins it, Trump didn’t just blink, he dodged.

Anthony Blinken was right. In international relations, either you are at the table or you are on the menu. We have found out that Chicken Trump is on the menu alongside Chicken Kiev.

I commented in the last essay Trump’s trade policy was like putting a gun to his own head to threaten the world. Little did I know he would put a razor on his throat with his other hand, and also ate some rat poison to go with it.

Typically I would draw conclusions after “let the bullet fly a little longer”. However, a few things are already clear since April 2^nd FOOLS Day. We can anticipate what is likely to come in the coming months and years.

In this essay, I will share my predictions. I’ll focus on the bigger picture and advise against being captive to the day to day (even hour to hour) headlines that will surely come from the saturation media.

On a follow up essay to be published later, I’ll share the lessons learned from events of the past week – so many myths are broken and so many naked truths have come out when the tides go out.

Here are my topline predictions –

- Trump has lost and will get little concession from China.

Peel away all the theatrics of the last 2 weeks, it is clear the primary target of Trump’s all-out tariff war is China. Unfortunately for him, like he said to Zelensky, Trump himself has no cards this time.

The trade war happens at two levels – economic and political.

On the economic level, US is the third largest market for Chinese exports after ASEAN and EU, accounting for 12.5% ($440 billion out of $3.5 trillion), down from 20% in 2018. The $440 billion US export represents 2.3% of China’s GDP ($19 trillion). China’s trade with the US has shrunk since 2018. Its trade with the rest of the world (Russia and global south in general) has been growing rapidly.

The US is not that important a market for Chinese goods already. For example, China doesn’t export any EV to the US (100% tariff thanks to Biden) and is still the world’s No. 1 EV exporter.

Even if trade with the US goes to zero, China can make up the lost US export by consuming more domestically and selling more to the rest of the world.

The Chinese government has plenty of fiscal and monetary tools to stimulate consumption domestically. There are $3 trillion foreign reserve (including $760 billion US treasury) and $13 trillion domestic savings. China’s trade surplus alone was $1 trillion in 2024. A lot of these funds can be used to offset the negative impact of a trade war with the US.

Digging a bit deeper – 90% of China’s export to the US is tech products, machinery, pharmaceuticals, batteries, green energy products and critical minerals. Only 10% is low value-added products such as shoes, clothing, toys and furniture. 30-40% of Chinese export to the US goes into the manufacturing process in the US as parts and components.

Given China’s position on global supply chain, US businesses and consumers will find it very difficult to replace Chinese goods economically – either directly or indirectly in trading with other countries. Otherwise, China’s export to the US would have become much lower by now after the 2018 Trump’s first trade war.

On the other hand, 70% of China’s import from the US is agricultural and energy products that can be replaced with other suppliers in Brazil, Russia and elsewhere.

By 2022, the US relied on China for 532 key product categories – nearly four times the level in 2000 – while China’s reliance on US products was cut by half in the same period. The US relies almost exclusively on China for rare earth for high tech manufacturing and for API (active pharmaceutical ingredients) for drug production. 95% antibiotics used in the US is produced in China. If cut off, the US tech and pharma industries will suffer. The biggest reliance China had on the US was semiconductors but that trade has already been cut off by Biden’s chip embargo.

In short, China simply has a much lower trade dependency on the US than the other way around. At the big picture level, China sits on top of the global supply chain (as producer) and the US is at the bottom (as consumer). China can cause as much, if not more, pains on US businesses and households.

In addition, on the financial front, China can inflict enormous disruption on the US economy if it decides to dump US treasury holdings, driving up borrowing costs for everyone in the US. This could deal a massive blow to the US as the country is highly leveraged at every level from government, business, to household. China so far has refrained from exercising this nuclear option but it certainly is on the table if the economic war escalates.

On the political level, the trade war between the US and China has become a contest of national resolve. It is part of the full spectrum US-China confrontation. Xi has nearly universal domestic support to stand firm against Trump, whose trade war on China has turned into a mobilization call. Trump’s total disrespect for US trading partners (“kissing my ass”) who are ready to negotiate (like Vietnam and Japan) only serves to repulse the Chinese and make any concessions extremely distasteful.

On the other side, the chaos in the US financial markets (equity, bond, currency) and prospect of runaway inflation are leading to broad-based resentment of Trump’s self-inflicted pains from billionaires to the working class. Even MAGA diehards are worrying about the impact on their wallets. King Trump has neither the political capital nor personal grit to stand firm.


As Trump boasts of other nations “kissing my ass”, Xi is spanking his ass with pants down in front of the world. While Trump pathetically proclaimed “Xi is my good friend”, the affection is never reciprocated and treated with complete disdain by Beijing. Xi has not even mentioned Trump’s name in public since April 2.

As the most important goal of the trade war is to hurt China, China’s tough stand has made Trump’s whole tariff policy irrelevant and the butt of a bad joke.

- Trump will get some limited concessions from weak countries and vassal states and will declare a huge victory.

As Trump crudely put it, many countries have reached out to “kiss my ass…please sir please”. No doubt he is bullshitting with the numbers – it was “more than 50 countries”, “70 countries” and then “more than 75 countries” from one spokesperson to another. Still, countries like Vietnam, Japan, South Korea, India, Canada, Mexico, etc. will kowtow to his coercion to various degrees.

They will offer to lower tariffs, promise to buy more US goods, and maybe invest in US manufacturing or purchase more US debt. Trump’s blackmail will extract its pound of flesh from weak victims.

However, he could have easily got those deals through bilateral negotiations (since many are vassal states with little agency) and without humiliating these trade partners. Instead he chose to piss off everyone – even those who indeed kick his ass don’t like to be called out as such…

- The economic trajectory of the US will not change

With or without the “reciprocal” tariffs, the US will not reindustrialize and bring manufacturing jobs back in any meaningful manner, anytime soon.

This is because the tariff policy will not address the real root cause of US’s economic problems today. Deindustrialization is a result of decades of financialization, profit-driven outsourcing, poor domestic infrastructure and education, overregulation, and shareholder-first short-term focused neoliberal economic practices.

Technological transformations like AI and automation further erode any prospect of bringing manufacturing jobs back.

Today’s US is a high cost economy. Its infrastructure from roads, bridges, ports, to railways are crumbling and not capable to support large scale industrial production.

Its labor force is poorly skilled and not trained to carry out high end high tech manufacturing. Starbucks coffee baristas and McDonald’s burger flippers don’t automatically make battery mechanics. And there won’t be “millions and millions” of American workers putting tiny screws on iPhones like Lutnick very helpfully pontificated.

Its managerial class is driven by quarterly earnings and repelled by long term investment and risk taking.

Its ruling elite are financiers and lawyers, not engineers – they don’t know how to build factories, develop supply chain, design and produce stuff, and manage a workforce.

After all, it’s so much easier to make money from the stock market or as talking heads on TV or as online influencer. It is easier to study marketing or law than physics and engineering. The hard work of making things is no longer in the US DNA.

The costs of reindustrialization is simply too high in the many trillions – beyond a country already with $36 trillion national debt (not counting the many more trillions in business and household debt).

- Traditional safe havens such as US treasury and currency will crumble – de-dollarization will accelerate

Despite loudly threatening any country from de-dollarizing on his campaign trail (“I’ll put 100% tariff on anyone who don’t want to use the US dollar”), Trump has delivered the biggest gift to the proponents of de-dollarization.

As a fiat currency, the entire value of the US dollar resides in the credibility of the issuer – the US government. Trump, the chaos agent with his mood swings, incoherent ramblings, irrational decision making, and total lack of basic economic common sense, has managed to do the impossible – driving US equity, bond, and currency down at the same time!

The result of his crazy moves is higher borrowing costs, reduced investments, higher inflation, lower standard of living, and accelerated exodus from US dollars by not just US foes but even its “friends”.

Xi and Putin cannot do any of the above. Only King Trump can manage this – turning the US into an economic terrorist rogue state!

- US rivalry with China will be further militarized and a hot war is more likely than ever

After falling flat on its face with the trade war and tech war with China, the US will further gear up for a military showdown. It is already increasing military spending to a historic $1 trillion (per Hegseth’s profuse thank-you-Mr. President X post).

People say Trump is a peace president and doesn’t like wars. I have never bought the crap for a second. If you have learned anything about him, from his public behavior to shelves of books published by people who have interacted with him, you should know Donald Trump has zero moral compass, is a fraud and a belligerent bully through and through. He is not a peace maker. His actions in Yemen and threats against Iran are clear proof of that.

It's a bygone conclusion the No. 1 US regime priority is to weaken and destroy China by any means available. The only reason a hot war has not broken out is because the odds are against the US military and the US regime still harbors the delusion to defeat China economically and technologically. However, as China’s rise becomes unstoppable, and all its cards are dealt and failed, the US will resort to force.

As with the trade war and tech war, China has long prepared for an eventual showdown in western pacific. Whether a hot war breaks out in Taiwan or South China Sea, whether it’s a proxy war or a direct one, China will fight to the end and win. https://huabinoliver.substack.com/p/comparing-war-readiness-between-china

- The race is on – will the US implode and go bankrupt first or will a hot war break out between US and China first?

As laid out in my earlier essay, China’s strategy to defeat the US is to force it into bankruptcy before a hot war breaks out, much like the US strategy that defeated the USSR.

Trump’s tariff war and Pentagon budget have accelerated the pace – the US is facing higher borrowing cost (therefore interest payments) and higher military spending at the same time – the two single biggest expenditures for the US government. You can also count on Trump following through the Project 2025 neocon plan to cut taxes for his rich donors.

Reducing revenue and increasing cost is a surefire way to go bankrupt – something Donald Trump has plenty of experience with. After all, this is a guy who went broke 6 times and somehow managed to bankrupt casinos!

While China pursues the Sun Tzu Art of War strategy to win without fighting, Trump pursues his Fart of the Deal to bluff and swindle. As I said last time, Trump is the best unpaid agent for (proudly) Communist China.