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Next Round of the Trade War
Alright Tiger, it’s a new week—and with it, another round of economic madness. If you thought the trade war was over, think again. We’re not even out of the first inning.
The White House Backs Down—Twice Let’s keep it real: it’s not looking great for Trump, Besson, and the so-called economic masterminds in the White House. They’ve already backpedaled twice in just seven days—first with a 90-day tariff pause, then with a full exemption on electronics and smartphones. That tells you one thing: reality is setting in.
Apple’s Supply Chain Nightmare The White House had a sobering moment. They realized that if they went full throttle on tariffs, iconic U.S. companies would take a nosedive. Take Apple, for example. The majority of its revenue comes from iPhones, and over 90% of those are assembled in Chinese factories. Cut that supply chain and you risk a complete collapse in sales—wiping out a massive portion of Apple's revenues. And even if Apple were to move production, they’d open themselves up to retaliation. Remember, 17% of Apple’s revenue comes directly from the Chinese market. And judging by what we’ve seen in the last 30 days, China isn’t bluffing. If pushed into a corner, they’re ready to go all out.
Doubling Down Instead of Pivoting Now, you’d think the White House would reassess, pivot strategies, and maybe find a smarter way to stimulate the economy. But nope—Howard Lutnick is back, doing another policy backflip. Now they’re hinting that the electronics exemption is just temporary. The trade secretary wants to escalate the tariff regime again—this time targeting semiconductors and pharmaceuticals.
The Chip War Begins So what’s the new angle? Simple: the U.S. plans to wage a global chip war. The name of the game is domestic manufacturing. They want semiconductors, medicines, and essential electronics to be built in America, not overseas. No more dependence on China for core infrastructure. According to Trump’s camp, new tariffs on semiconductors and pharmaceuticals are coming within the next couple of months.
Not Up for Negotiation Now to be clear—this isn’t some permanent tariff exemption. The message is that these policies aren't up for negotiation between nations. But we've already seen how this movie plays out. Biden’s “cheap war” was focused on global semiconductor restrictions, but Lutnick's strategy of throwing tariffs around like confetti is likely to end just as badly, if not worse.
A Look Back at Raimondo’s Strategy For contrast, look back at the previous administration. Gina Raimondo’s approach was all about offering big carrots to get chip companies to reshore to the U.S. And it worked. TSMC, for example, received $53 billion in incentives via the CHIPS Act—spanning commercial grants, low-interest loans, and a 25% tax credit. Samsung got about $14 billion under the same program.
Subsidies vs. Tariffs: Two Playbooks While Biden waged the semiconductor war through direct subsidies—essentially writing big checks from America’s war chest—this new crew seems more focused on blunt force tariffs. And if history’s any guide, this is a dangerous game to play.
US Semiconductor Desperate Reshoring
Subsidies Over Sanctions Now, I don’t fully agree with Biden’s semiconductor export controls—but let’s be real: if you want to compete with China, a subsidy war is necessary. Beijing is running a $1 trillion trade surplus. If you're not willing to spend, you're not going to keep up. There’s no getting around that.
Trump’s Tariff Gambit Trump, on the other hand, wants to dismantle the CHIPS Act altogether. He’s betting big on tariffs instead. At one point, he even threatened TSMC with a 100% import tax. And by all appearances, he got what he wanted—TSMC is now building a $50 billion plant in the U.S. But is this really a long-term strategic win?
A Hollow Victory? Sure, TSMC will profit by selling chips to American tech giants. But is this the silver bullet to contain China? The situation on the ground says otherwise. Trump’s tariff war is starting to backfire—U.S. chipmakers are hurting. Intel, for instance, saw its stock drop nearly 4% in just a few hours. The market’s signaling an earnings collapse, and for good reason: 27% of Intel’s revenue last year came from China.
The Chinese Market Shuts Its Doors And Intel’s not alone. Many U.S. semiconductor companies rely heavily on China—the world’s largest chip consumer. But now, China has slapped a 125% tariff on all U.S. goods, making American chips instantly uncompetitive. They’ve also closed any loopholes, targeting where the chips are made rather than where the company is headquartered. So if it’s manufactured in the U.S., it’s getting hit—no matter how it’s routed. This makes reshoring to America a much tougher sell.
Beijing's Retaliation Strategy China isn’t just reacting—they’re planning long-term. U.S. exports are being punished, and Beijing has every incentive to double down on domestic chip development. With time and enough pressure, they’ll likely succeed. They’re already ordering their top tech firms to accelerate innovation.
China’s Bigger War Chest Globally, the biggest semiconductor funding isn’t coming from Washington—it’s coming from Beijing. China has committed at least $142 billion to building its chip ecosystem. In comparison, the U.S. has pledged around $75 billion. And if Trump dismantles the CHIPS Act, even that funding could disappear, making reshoring far less appealing for U.S. chip companies. Meanwhile, China is poised to increase funding, ensuring full control over its supply chain.
Demand Doubts Are Creeping In There’s also growing uncertainty about future U.S. demand. China’s recent “Deep Seek” AI release shook investor confidence. Tech companies suddenly realized they're burning billions chasing cutting-edge chips with unclear returns. While demand isn’t disappearing, some earnings projections may have been overly optimistic. Look at Microsoft—they just pulled the plug on massive data center projects in both the U.S. and EU, totaling 2 gigawatts of power. That’s not a random move—it’s a response to shifting expectations.
A Potential Tech Bubble Bursting If the U.S. tech bubble starts to deflate, chip companies reshoring to the U.S. might be throwing billions into a black hole. Without stable demand, that massive investment becomes a liability, not a strength.
Beijing’s Resource War Even before Trump re-entered the picture, China was quietly waging a resource war. They restricted exports of key minerals like gallium, germanium, and antimony—critical components in semiconductor production. And just this month, they cut off seven more rare earth elements. The message is clear: the U.S. will have to scramble to find alternative suppliers.
The Price of Scarcity Yes, the U.S. can buy from other countries—but not without a hefty price tag. With China tightening supply, other suppliers will charge a premium simply because they can. The cost of semiconductor inputs is going up, and that adds even more pressure to American chipmakers trying to operate onshore.
US Chip Production
Rare Earths: The Hidden Leverage China accounts for 70% of all U.S. rare earth metal imports and produces 70% of the global supply. The entire world depends on China for these critical materials, and that presents a massive risk if the trade war continues to escalate. If Trump doesn’t ease off, China could tighten its grip further—seriously jeopardizing the chances of successfully reshoring the chip industry to the U.S.
Two Very Different Strategies The U.S. and China are playing entirely different games. Trump is leveraging America’s consumer market at a time when confidence is already slipping. Meanwhile, China is weaponizing its supply chains—where it holds near-total dominance. According to the EU, there’s simply no global competition when it comes to refining rare earths: China controls 85% of light rare earth processing and 100% of heavy rare earth refining.
The Refining Trap Here’s the kicker: China could go one step further and block other rare earth exporters from using its refining facilities if their end destination is the U.S. “If your cargo’s headed to America, we won’t process it”—that’s the kind of hardball Beijing can play. That’s why Latnik’s strategy is disconnected from reality. You can slap tariffs on chips from Korea and Taiwan, but the end result isn’t some ideal outcome. The U.S. ends up making more expensive chips, while China keeps its option to retaliate wide open.
The Trade War Hits Farmers Hard Now let’s talk about American farmers—who are once again caught in the crossfire. We all know farmers are the backbone of any country. Without them, nothing else works. Since the trade war reignited, they’ve been hit hard. After watching the President’s announcement on broad new tariffs, one thing is clear: everything a farmer needs—from fertilizer to equipment—is about to cost more. And retaliation is coming, just like last time, with other countries targeting American agriculture in response.
Déjà Vu for Family Farms We’ve seen this before. When U.S. farmers lose global markets they’ve spent decades building, it’s not easy to win them back—if at all. Countries quickly turn to alternative suppliers, and once those new relationships are in place, they tend to stick. That’s a blow most small and mid-size American farms can’t afford to take.
The Farm Trade Deficit is Growing This time, things are even worse. During the first trade war, the U.S. was still a net food exporter. Today, that’s no longer the case. In 2025, the U.S. agricultural trade deficit is expected to hit nearly $50 billion. The country is now importing more food than it exports—partly due to skyrocketing farming costs, especially post-COVID. Meanwhile, countries like Brazil have stepped in, ramping up exports and taking America’s market share.
China Plans Ahead, the U.S. Reacts Unlike the U.S., China tends to prepare before the storm hits. Since the first trade war and especially after observing the Ukraine conflict, they’ve moved to make their economy more sanction-proof. Just this past week, China booked over 2.4 million tons of Brazilian soybeans—an amount that’s close to their weekly average. They’re aggressively stockpiling, redirecting demand to BRICS partners, and increasingly shutting out U.S. suppliers.
125% Tariffs Are an Effective Ban Let’s not forget: Beijing has now raised tariffs on all U.S. goods—including food exports—to 125%. That’s not just a price hike. A 100%+ tariff is a de facto ban. No importer wants to pay double the cost just to buy from the U.S., so they’re shifting to Brazil or other countries. U.S. food is now essentially off-limits in the Chinese market.
Rising Demand, but Not for U.S. Goods China’s middle class is growing fast, and so is its appetite. Food demand will keep climbing—but it won’t be U.S. producers who benefit. Since the 2018 trade war, China has slashed U.S. soybean imports by over 70%. In the meantime, Brazilian soybeans have become their preferred source. At this rate, China could easily import more than 80 million tons a year from Brazil, while U.S. exports dwindle to zero—and possibly stay there.
U.S. Farmers Face Export Collapse
Is this a win for American farmers? Not even close. More family farms are on track to shut down, and as domestic supply dwindles, U.S. consumers will be left paying higher prices for food—or relying on imports. And yes, those imports will be hit with Trump’s 10% universal tariff too. If this keeps snowballing, the impact will hit every American household through rising grocery bills.
And for anyone thinking, “China doesn’t matter,” think again. According to the U.S. Census Bureau, China is a massive buyer of American agriculture. Nearly 49% of all U.S. soybean exports—worth $13 billion—go straight to China. In meat and poultry, China makes up 13% of total exports, or around $3 billion, and 30% of all U.S. cotton exports are at risk of disappearing for good.
The kicker? Farmers made production plans and financial projections a year ago, assuming those markets would still be there. Now, a huge portion of the harvest might end up unsold or wasted. This could force Trump into another emergency bailout of the farm economy—he spent nearly $30 billion during the last trade war, but this round could demand even more.
Unless there’s a sharp reversal in trade policy, the biggest losers down the road may not be China—they might be American farmers. What do you think? Will Lutnik’s tariff-first plan actually work? Can U.S. agriculture survive another round of economic warfare? Drop your thoughts in the comments below.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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