Author: BitMEX Research
Translation: ShenChao TechFlow
Abstract
This article explores Trump's newly introduced radical tariff policy and the starkly different views of analysts on the current economic situation. Is China promoting exports by devaluing the yuan? Or is the U.S. manipulating the dollar by increasing its value and using the CIA to target any dictator attempting to sell off dollars? Will Trump's tariff policy reduce the U.S. trade deficit, leading to capital outflows from the U.S. and threatening the dollar's status as the global reserve currency? Or are foreign investors still willing to invest in the U.S. regardless? We ultimately conclude that global trade is far more complex than people imagine, and the U.S. trade deficit is the result of various seemingly opposing forces at play.
Overview
The U.S. President has just disrupted the global trade landscape with a radical and tough tariff policy. The geopolitical and economic impacts these policies may bring are filled with uncertainty, and there is intense debate with sharply opposing views. Before delving into the discussion, we need to clarify one point: we support free markets and global trade. Trade is inherently voluntary and only occurs when both parties believe they can benefit from it. Therefore, trade is not a zero-sum game. There are many legitimate reasons for long-standing trade imbalances between countries. Based on this, our view is that all tariffs are harmful, and all reciprocal tariffs are equally harmful. The implementation of tariffs will negatively impact global economic growth and productivity.
Nevertheless, there remains significant disagreement about how international trade imbalances operate, their causes, and the impact of these tariffs on capital flows. The focus of this article is precisely on these issues.
Trump's View
In Trump's view, the U.S. has been "taken advantage of" by its trading partners for decades, and the massive trade deficit is proof of this. These trade deficits are the result of protectionist policies implemented by some major trading partners (such as China, the EU, and Japan).
The formula Trump uses to calculate "reciprocal tariffs" indicates that he believes persistent trade deficits have no legitimate justification and are entirely caused by protectionism.
In Trump's view, these protectionist policies include:
Tariffs
Regulatory policies favoring domestic producers
Exporting countries (such as China, Germany, and Japan) manipulating their currencies by devaluing their currencies against the dollar
Due to these policies, the U.S. manufacturing base has been severely weakened, leading to a difficult economic environment for American workers, who are a crucial part of Trump's "Make America Great Again" (MAGA) political base. By fulfilling campaign promises to ultimately achieve a fair competitive environment, Trump believes that American consumers will buy more domestic products, thereby reviving U.S. manufacturing and revitalizing the American economy.
Petrodollar Perspective
Many believe that Trump's view on trade indicates a lack of understanding of economics. In fact, the U.S. benefits significantly from trade deficits. Americans can consume goods from Asian countries like China, Japan, India, Thailand, Vietnam, and South Korea at low prices while also consuming oil produced in the Middle East (or benefiting from low oil prices due to Middle Eastern oil production).
This makes the U.S. a winner, acquiring all goods, while Asian workers become the losers, spending long hours under harsh conditions to produce products for meager pay. This is essentially the "economic magic" that the U.S. has successfully performed on its trading partners for decades.
The U.S. has somehow persuaded trade surplus countries to invest their funds in the U.S., thereby maintaining the strong position of the dollar and allowing this favorable situation for the U.S. to continue. Remember, there is no longer a gold standard, and trade deficits do not lead to the U.S. losing precious gold reserves. The U.S. can sustain these deficits with almost no cost.
This view is almost completely opposite to Trump's perspective. Trump believes that the U.S. is losing out in trade, while the petrodollar perspective argues that the U.S. is the biggest winner.
However, this situation is unsustainable, as trade deficits will continue to accumulate over time. The only reason this state has persisted for so long is that the dollar is the global reserve currency.
When other countries export goods to the U.S., they invest the cash income they receive in dollars to keep this "Ponzi scheme" running. However, one day, these accumulated imbalances will become too large, and the entire system will collapse, making Americans poorer in real economic terms.
To avoid this fate, Americans should invest in gold, and of course, in Bitcoin.
To keep the dollar as the global reserve currency for as long as possible, the U.S. has implemented several policies, some of which are conducted secretly. Some of the most controversial and secretive examples of these policies include:
- Overthrowing Gaddafi's regime
Libyan leader Gaddafi was overthrown and killed due to holding large amounts of gold and planning to settle oil transactions in gold. If this policy had been implemented, it would have weakened the dollar's status as the global reserve currency. In fact, according to a leaked email from Sidney Blumenthal to Hillary Clinton in 2011, Libya's gold policy was one of the factors that "influenced" the decision to attack Libya. (France and the UK also played significant roles in this action, not just the U.S.)
- The Iraq War and Saddam's oil policy
In October 2000, Iraqi President Saddam Hussein decided to stop settling oil transactions in dollars and instead settle in euros. This is considered one of the key motivations for the U.S. invasion of Iraq and the eventual execution of Saddam. The so-called threat of weapons of mass destruction and Saddam's poor human rights record were merely pretexts. The core reason for all this is related to oil and the dollar's status.
- Due to the above and other aggressive foreign policies, oil-exporting countries like the UAE and Saudi Arabia are well aware that they must continue to settle oil transactions in dollars and invest the vast wealth accumulated from oil in dollars and U.S. assets, or they may incur the "wrath" of the CIA and other military agencies.
It is clear that the above views are completely opposite to Trump's superficial view of global trade. Trump accuses China of manipulating its currency by devaluing the yuan, but in reality, the U.S. is the one pushing up the dollar's value through various means, some of which are highly controversial and even malicious.
To highlight this contradiction, Trump recently attempted to prevent the BRICS nations from creating a currency to compete with the dollar. If the BRICS plan succeeds, it will weaken the dollar's position while enhancing the value of their own currencies. So the question arises—shouldn't Trump want the dollar to weaken? After all, a weaker dollar would benefit the manufacturing base of "Make America Great Again" (MAGA). However, Trump's latest tariff measures seem to accuse BRICS nations of promoting exports to the U.S. by devaluing their currencies, which is clearly a set of contradictory accusations.
So what does the U.S. actually want China to do? Does it want China to buy U.S. Treasury bonds or sell them? It seems that no matter which option China chooses, the U.S. cannot tolerate it. It is worth noting that we are not singling out Trump for criticism; in fact, many politicians—regardless of party—seem to be confused about China's monetary policy, as seen in similar statements from Obama and Geithner.
Our view is that, from the perspective of the petrodollar, the core of U.S. policy is to support the dollar's status as the global reserve currency, while China is preparing for the end of the dollar's reserve currency status.
This petrodollar-based global trade perspective may be one of the most popular views among our readers and Bitcoin supporters. Notable analyst Luke Gromen is one of the main advocates of this perspective.
According to this worldview, the future of the dollar is facing increasing uncertainty. In particular, the rise of BRICS nations is gradually becoming a significant threat to dollar hegemony. These countries may gradually move away from the dollar as their primary trade and global settlement currency. Therefore, it is foreseeable that at some point, the dollar's status as the global reserve currency will be weakened, and the prices of oil, gold, and even Bitcoin may rise significantly as a result.
From this perspective, Trump's new tariff policy could have particularly severe and dangerous effects on the U.S. The trade surpluses of exporting countries will decrease, and they will no longer accumulate large amounts of capital each year to invest in U.S. Treasury bonds and other U.S. assets.
Instead, these countries may begin to sell off existing U.S. assets to increase domestic consumption, compensating for the losses from reduced exports to the U.S. This chain reaction could become a catalyst for triggering a U.S. debt crisis and further undermine the dollar's position as the global leader.
Capital Flow Perspective
In addition to the petrodollar theory, there is another perspective on trade imbalances that is less frequently mentioned but, in our view, holds considerable value.
Reflecting on introductory economics courses, the Balance of Payments (BoP) must always remain balanced. This is because every person buying dollars must correspond to someone selling dollars.
Therefore, if a country has a trade deficit, it must have a corresponding surplus in the capital account (financial asset flows), and vice versa. But the question is, what exactly drives these changes?
It could be that hardworking Chinese workers are producing high-quality goods that Americans truly want, which drives the U.S. trade deficit and subsequently leads to a surplus in the U.S. capital account. On the other hand, it could also be that Chinese investors wish to invest capital in the U.S., leading to a surplus in the U.S. capital account, which then results in a trade deficit with China.
This perspective is more optimistic about the U.S. compared to the petrodollar theory. The U.S. has the world's best companies, which focus more on profits and return on equity than those in other parts of the world. The corporate culture in the U.S. is also more capability-oriented, and compared to regions like Europe and Asia, American companies are less constrained by "networks," backgrounds, or even race and gender. This culture helps the U.S. attract the best talent globally.
The U.S. is home to the most innovative companies in the world, such as Google, Microsoft, Apple, Amazon, Nvidia, Meta, OpenAI, Tesla, Broadcom, Visa, and Netflix.
These high-quality, high-growth companies attract the attention of global investors.
Moreover, many Asian investors wish to transfer capital out of their countries to prevent their assets from being seized by the government. In contrast, the U.S. theoretically offers stronger rule of law and legal protections for investors.
Trump's view that Asian exporting countries manipulate trade by devaluing their currencies is actually completely wrong; these countries have been trying to raise their currency values to prevent capital outflows.
According to this worldview, the U.S. capital account surplus is driven by these characteristics, which in turn leads to the U.S. trade deficit. Therefore, a persistent trade deficit may not be a problem; rather, it could be a sign of success—the key lies in what is driving this outcome.
In our view, these economic factors are far more important than the impact of U.S. foreign policy in the Middle East on the dollar's status as the global reserve currency. For example, eliminating any dictator attempting to settle oil transactions in gold may not have much practical effect. This is not to say we defend the hypocrisy and disgraceful foreign policy of the U.S. in the Middle East.
Indeed, there may still be some people in U.S. security agencies who adhere to the petrodollar theory, although this theory now seems somewhat outdated and irrelevant. If that were not the case, there would be many other dishonest theories to criticize.
Furthermore, even if competitive fiat currencies cannot rival the dollar, because U.S. investment opportunities are more attractive than those in other countries, gold remains a potential competitor. The CIA may still need to employ some "dirty tricks" to curb gold.
The reason U.S. authorities may want global trade to be settled in dollars is not to protect the dollar's value, but to enhance U.S. control over global affairs, thereby increasing its ability to freeze assets and block payments, further expanding its global power.
If you agree with this perspective, even if you believe that "tariffs are always a bad idea," Trump's new tariff policy may not immediately have a devastating impact on the dollar's status as the reserve currency. Of course, this is still a tax policy that will harm U.S. businesses, weaken the economy, and cause damage to various parties, but the dollar's hegemony may still be maintained for a while.
Summary
The reality of the global economy is complex and ever-changing. The petrodollar theory does have its validity, and trade deficits do drive capital account surpluses to some extent. However, the same situation can be interpreted from multiple angles, all of which are reasonable. The view that capital account surpluses drive trade deficits is equally valid. In fact, this driving force is bidirectional, and understanding this is crucial for grasping global trade.
For the U.S., both factors are very important, and analysts should not overlook either side. Additionally, Trump's views on trade do have some merit in certain cases, and indeed some politicians have believed this perspective at times. This may explain why some politicians appear somewhat contradictory when discussing China's currency manipulation.
Nevertheless, we still believe that Trump's trade views are largely unfounded. Tariffs are essentially a tax on Americans, which will weaken the U.S. economy. While the American middle class may have become relatively "losers" in the process of globalization, with benefits flowing more to the elite, this does not mean that reversing globalization will make the middle class relative "winners."
Trump may abolish the IRS, replacing income tax with tariffs, and revert to pre-1930s economic policies. If that were the case, it would be another topic for discussion, but we do not believe this will happen.
Of course, there is a conspiracy theory worth mentioning: Trump announced these tariffs to deliberately cause an economic collapse, attracting investors to flood into the U.S. Treasury market, driving down yields so that the U.S. could refinance at lower rates, delaying the inevitable crisis caused by an inability to pay interest on debt.
From our perspective, while this possibility exists, it is unlikely. The principle of Occam's Razor may apply—the simplest explanation is often the best explanation: Trump simply likes tariffs; he even thinks tariffs are the "most beautiful word."
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
