To The Moon

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All right, folks—buckle up. Global trade is undergoing a seismic shift, and today’s deep dive will show you just how fast the old order is unraveling. The economic relationship between the United States and China, once a pillar of global trade, is being dismantled in real time. And the implications are both structural and long-lasting.

The Collapse of U.S.-China Trade Is Reshaping Global Inflation

As trade between the U.S. and China deteriorates, the first major consequence is inflation—but not everywhere. This new regime creates structurally higher inflation in the United States, while the rest of the world—particularly Europe and emerging Asia—stands to benefit from deflationary tailwinds. Why?

Because China, now pivoting away from the U.S. market, needs to reroute its massive industrial output elsewhere. That means cheaper goods and inputs for other countries, as Chinese exporters drop prices to maintain global market share. Ironically, President Trump’s tariffs—which were meant to hurt China—are resulting in lower prices for the rest of the world.

In fact, data from January to April shows that China’s trade surplus with Europe hit a record high, exceeding $90 billion in just four months. At this pace, it’s on track to surpass a quarter trillion dollars by year-end.

This realignment isn’t just about money. It’s about power. By embedding themselves more deeply into the European and Asian supply chains, China becomes more indispensable—and, therefore, harder to sanction. Europe, in particular, is growing more reliant on affordable Chinese goods to circumvent America’s tariff walls. That’s the global irony: to sidestep the U.S., Europe is doubling down on China.

Can Chinese Exporters Really “Eat” U.S. Tariffs?

There’s been a lot of noise from U.S. policymakers—like Scott Bessent—arguing that Chinese producers are absorbing most of the tariffs imposed by Washington. In one report from the South China Morning Post, it was claimed that up to 65% of tariffs are being shouldered by Chinese exporters. But is that really the case?

Let’s apply basic logic.

Margins in retail are razor-thin, and the baseline cost of goods from China was already extremely low before tariffs. Expecting Chinese suppliers to eat two-thirds of the tariff costs is simply not sustainable. If Chinese companies truly absorbed these costs, they’d be operating at a loss or going out of business—neither of which is happening at scale.

Instead, Chinese exporters are adapting in smarter ways. Rather than focusing on the U.S., they're offering 5–10% discounts to customers in Southeast Asia, the Middle East, and Latin America. They are reshaping their trade routes—and the data backs this up.

Shipping Volumes Tell the Real Story

Here’s where it gets even more interesting.

Despite a steep drop in tariff rates on certain goods—from 15% down to 30%—container traffic between China and the U.S. is plummeting. Over just two weeks, the number of container ships has dropped from 60 to around 45. That’s not a small adjustment. That’s a trade exodus.

It shows us that Chinese exporters are simply not prioritizing the U.S. market anymore. They’re reallocating capacity to other regions that are more profitable or at least more predictable. And despite Washington’s messaging, China is surviving—perhaps even thriving—while cutting away U.S. trade.

Two Scenarios: Neither Favorable for the U.S.

Let’s consider what this means. There are only two plausible conclusions here:

1. U.S. tariffs remain prohibitively high, making it uneconomical for suppliers to sell into the American market.

2. U.S. importers are depleting old inventory, gambling that Trump will eventually reverse course.

Either way, the idea that the U.S. can sustain this level of trade decoupling without consequences is misguided. Even though Trump recently held a call with President Xi, no meaningful agreement was reached. Until reality forces a policy shift, the U.S. will likely continue this game of economic brinksmanship.

The Myth of China’s Dependence on the U.S.

Many analysts still cling to the belief that China "needs" the U.S. market. While that was once true, the data tells a different story today.

• In 2018, the U.S. accounted for 20% of China's exports.

• In 2025, that figure is down to just 14%—and dropping.

For an economy of China’s scale, that’s a massive pivot in customer diversification. More importantly, only 15% of the revenue of publicly listed Chinese companies comes from overseas—and U.S. revenue is likely a sliver of that. Some estimates put it at 2–3%.

This is why Chinese equities are holding strong. Their fate is no longer tied to the whims of American trade policy. Instead, it’s increasingly powered by domestic demand and trade ties with regions that aren't building walls.

U.S. Exports Face a Full-Blown Crisis

While China’s exports to the U.S. fell around 21% in April, the real collapse is in reverse.

U.S. exports to China via ocean carriers fell by 77% between March and April. This isn’t a dip—it’s a crash. China has slapped its own triple-digit tariffs on select U.S. goods, and buyers are walking away.

Worse, China has already sourced alternative suppliers. Even if tariffs were lifted tomorrow, there’s no guarantee demand would return. That’s the nature of trade realignment—it creates permanent shifts in global logistics and sourcing.

Why U.S. Tariffs Are Backfiring on U.S. Industry

There’s a crucial point that policymakers continue to overlook: tariffs cut both ways.

By slapping import taxes on everything from chips to aluminum, the U.S. is not just targeting foreign producers—it’s undermining its own industrial competitiveness. Consider this:

• 26% of U.S. steel consumption is imported.

• 44% of aluminum is imported.

So, when tariffs hit 50%, everything made with these materials—cars, planes, electronics—gets more expensive. U.S. companies are now struggling to stay price-competitive globally.

The Stimulus Response: China Doubles Down on Domestic Growth

While U.S. industries are being squeezed, China is rolling out massive stimulus to power its economy.

• The central government’s deficit in the first four months of 2025 reached 2.7 trillion RMB (~$370 billion), up 50% year-over-year.

• Beijing is also planning a $70 billion infrastructure program, further driving domestic demand.

With interest rates low and fiscal firepower high, China is building an economy that relies less on exports—and more on its own people. But if the U.S. keeps escalating trade restrictions, American brands operating in China will likely become collateral damage.

Already, there’s a cultural shift brewing: Starbucks could be replaced by Luckin Coffee, Apple by Xiaomi, and Nike by Anta. Consumer patriotism—backed by government policy—could deal a massive blow to American multinationals.

U.S. Policy: Reshoring at All Costs—But At What Price?

Washington's current trade doctrine centers on reshoring critical industries, like semiconductors and pharmaceuticals, no matter what. That includes rejecting deals even if countries like Vietnam or Japan offer zero tariffs.

But here's the catch: You can't force industrial ecosystems into existence overnight. The U.S. is already experiencing supply chain bottlenecks, especially in high-tech industries.

A prime example: rare earth elements.

Rare Earths: The Achilles Heel of American Manufacturing

From 2020 to 2023, 70% of U.S. rare earths came from China. For elements used in magnets and advanced electronics, dependency is even higher—up to 90–100%.

So when China enforces export restrictions, U.S. manufacturing is in serious trouble.

Already, automakers are scrambling. Some are considering shifting motor and magnet production to China just to keep assembly lines running. Ironically, this means U.S. factories may shut down while Chinese plants expand—all thanks to the very tariffs that were meant to do the opposite.

China’s Smart Play: Export Controls as Economic Leverage

In a strategic judo flip, Beijing has found a way to use export controls to their advantage.

• Raw rare earths? Banned.

• Magnets embedded in Chinese-made motors? Still allowed.

This loophole forces global companies to build in China if they want access to critical inputs. The U.S. may be weaponizing consumer demand, but China is weaponizing the supply chain—and doing it with far more precision.

Beijing has even developed new tracking systems to monitor rare earth shipments, ensuring that smuggling or re-exports are shut down. The age of "Captain Jack Sparrow" trade routes is over.

Conclusion: A Battle of Attrition That the U.S. May Not Win

This is not just a trade dispute—it’s a prolonged economic war of attrition. And China is playing a far longer game.

If the U.S. couldn't isolate Russia, it will be even harder to contain China, whose industrial base, technological reach, and financial tools are vastly superior.

So the key questions remain:

• Will China continue cutting U.S. trade out of its economy?

• Will American automakers really move production to China just to access raw materials?

• And can the U.S. afford to keep fighting this war while its own industries pay the price?

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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