State of the Union and the World

In the past weeks, the global financial markets have been turned upside down with Trump’s beautiful Tariffs by raising ALL the existing import taxes from around 4% to 35%. The world is fighting back with its own higher import tax and the selling of the US Treasury bonds. In the meantime,

1) The US stock markets dropped 10% highest since the COVID pandemic,

2) The bond market crashed, with yields rising from 3.9% to 4.5%

Immediately, Trump backed down the tariffs to 10% and delayed the implementation for 90 days pending negotiations with each country.

State of the USA

The main motive behind Trump’s tariffs is to reduce the billions of dollars in trade deficits and use the new tax windfall to relieve the 30 trillion dollars in national debts that must be borrowed through the treasury bonds. With a bond yield of 4.5%, the yearly interest will be 1.3 trillion dollars.

How does the US amass such massive debt? The US is the most powerful economic country in the world; its innovations in computers, the Internet, the iPhone, EVs, ICs, AI, and medicines change how people live around the world for the better. But it has also been involved in the destructive conflicts around the globe after WW2, including the present Israel/Hamas war and the Russia/Ukraine war that costs trillions of dollars.

The US also has the highest standards of living. Its people work in high-paying jobs in service, finance, research, professional, and entertainment industries. Low-paying manufacturing jobs that are labor-intensive, polluting, and contaminating the environment have found their homes in the underdeveloped countries. As a result, the US has been importing all the daily necessities as well as many materials and comfort commodities from the rest of the world.

State of China

China seized the opportunity since the 1980s to become the factory of the world, building a supply chain that can turn out affordable and reliable products (big or small) in quality and quantity, while its hardworking people endure suffocating air pollution and health-hazardous land contamination, and live and work under poor and challenging conditions.

In a relatively short 40 years, China has used the hard-learned technological know-how and the hard-earned export money to transform a once backward farming society into a powerful country militarily and economically. It has eliminated poverty, built freeways, railways, and airways, schools, and universities to educate its people to face the challenges of a modern world.

Trump also hopes to use the high tariffs to entice the factories to start manufacturing products back to the US. But times have changed, with the EPA, the Union, and the high labor costs, will the products still be affordable? China is the US’s biggest importer, and the US is China’s biggest customer; 80% of the products in Walmart and Costco are from China. China buys billions of dollars from the US in commercial aircraft, agricultural products, and treasury bonds.

State of the World

Both countries have benefited each other tremendously from their endeavors for the past 40 years, and the rest of the world has also been enjoying unprecedented material comforts where TV, HVAC, refrigerator, car, and cell phone are common items. The looming trade war initiated by Trump’s sudden, unexpected, and high tariffs threatens to disrupt the global economy that has been based on a delicate and balanced ecosystem and to cause more instability and tension in an already fragile global political environment.

Trump’s intentions are to reduce trade deficits and national debts, bring manufacturing jobs back, and MAGA. The US has been the world’s most democratic and free country. However, the US cannot be GREAT without the continuing influx of hardworking and talented immigrants who have and can help it innovate and uphold the ideal that true justice and fundamental human rights protection are possible. As other countries try to emulate the US's success, they need to have a healthy and sustainable economy to avoid civil unrest. Together, the US and China can play a crucial role in making things better.