A million-dollar question: Is a billionaire with negative equity richer than a middle-class individual with over ten million net assets? I would say that a bankrupt tycoon is poorer than both, even compared to a grassroots citizen with just $100 in savings and no debt. This "tycoon" on the brink of bankruptcy is the United States.
On April 15, amid the escalating tariff war, White House Spokesperson Leavitt read a statement from U.S. President Donald Trump: “China wants what we have. Every country wants what we have—American consumers, or in other words, they need our money.”
But the real question is: Does America have money? No—it has only debt. According to the U.S. National Debt Clock, the federal debt has ballooned to $36.8 trillion, nearing $37 trillion. In 2008, U.S. debt stood at $10 trillion. Over 17 years, it surged by nearly $27 trillion—a terrifying trajectory.
Trump recently backtracked, claiming he would soon slash tariffs on China. The U.S.-China tariff standoff resembles the game of chicken: two cars speeding toward each other, with the first to swerve labeled the coward. Trump, now the one blinking, fears something deeper. Critics speculate his fears include soaring prices that angers U.S. consumers; China’s halt on purchase of U.S. liquefied natural gas in April, leaving surplus gas no place to store; and farmers finding him responsible when no one buys their soybeans. Others cite the stock market plunge also unsettles him.
Yet Trump’s true fear lies in an impending bond market crash. If U.S. Treasury prices collapse, stocks and the dollar will follow, triggering a meltdown rivalling the 2008 financial crisis. Recent single-day bond price crashes—akin to a canary dying in a coal mine—signal looming disaster.
The debt crisis has a deadline. This year, $8.5 trillion in U.S. Treasuries will mature, with $5.8 trillion due in June alone, equivalent to 22% of 2024 U.S. GDP. Most June maturities are 5-year bonds issued at 1.8% interest during COVID-19 as relief efforts. The interest rate has much soared since then.
The bigger problem is weak market demand. Poor Treasury auction performances compound the problem. Usually the Federal Reserve will buy up when the market is weak. But, instead of buying, the Feb plans to shrink its balance sheet by $1.2 trillion this year. Even if all $8.5 trillion in new debt is sold, higher rates in the range of 4.5% will drastically increase fiscal burdens.
The immediate threat is June’s debt rollover. With the tariff war ongoing and Trump threatening to fire Fed Chair Jerome Powell, the Treasury market resembles a powder keg. If Trump fails to resolve the tariff dispute by May, June’s debt tsunami could detonate the market.
In this fragile environment, a 15-minute bond sell-off could trigger mass liquidations. Hedge funds leveraged in Treasury arbitrage (holding ~$1 trillion in positions) would face cascading losses. A single actor could ignite this bomb, or Japan’s central bank might sell U.S. Treasuries to support its own bonds, sparking chaos indirectly.
Trump’s tariff war lacks preparation, strategy, and economic logic. A debt-ridden nation antagonizing its creditors is absurd. We can sit back, grab some popcorn and watch Trump struggle to defuse his self-made debt crisis.
Wing-hung Lo
Bastille Commentary
** 博客文章文責自負,不代表本公司立場 **
America's trade policy can be described as chaotic beyond measure, leaving the entire world at a loss.
First, there are the visible changes. The US not only changes its so-called "reciprocal tariffs" abruptly but also rapidly shifts tariffs on China. Within two weeks, tariffs on Chinese goods went from an initial 20% to 54%, then to 104%, 125%, and finally to 145% - rates changing on a whim. Meanwhile, the various "reciprocal tariffs" on different countries around the world was suddenly suspended for 90 days, but a 10% "baseline tariff" is imposed.
The latest chapter in these rapid changes came on April 13, when US Customs announced new guidelines exempting a large batch of products from "reciprocal tariffs," including smartphones, desktop computers, laptops, semiconductors, and solar cells. Since a significant portion of these products are manufactured in China, not exempting them would have meant paying extremely high US tariffs of 145%. These exemptions, estimated to cover more than 30% of China's exports to the US, have enormous impact.
While these are officially announced tariff changes by US Customs, interpretations of these changes have been wildly varied, creating extreme confusion. Taking the electronic product exemptions as an example, it's unclear whether Chinese products are completely exempt from the 145% tariff, or if they still retain the initial 20% tariff supposedly imposed due to China exporting fentanyl precursors to the US.
Naturally, the most authoritative person to interpret US policy is President Trump himself. However, when reporters asked him on Air Force One about the impact of exempting electronic products from tariffs on China, he was evasive, saying details would be announced Monday night.
Later, Trump refuted claims on his own social media platform, stating there were no tariff "exception," only "moving to a different Tariff ‘bucket’”, but Chinese products would still be subject to the 20% "Fentanyl Tariff." Trump criticized this as fake news, specifically naming China as unable to escape.
Trump is playing word games, not acknowledging "exceptions" but only "a different bucket". The so-called transfer means new industry-specific taxes will handle tariffs on specific products. However, for these "exceptions", the only industry-specific tax heard of so far is a chip tax, estimated at 25%. No industry-specific taxes have been mentioned for other products like phones and computers. The talk of "moving to a different Tariff ‘bucket’" appears to be merely an excuse to avoid admitting concessions.
The Trump administration not only changes announced policies at will but also leaves policy interpretations ambiguous and inconsistent. When a major power implements such important policies with such significant interpretational discrepancies, it reflects both incomplete thinking when launching the policies and the hasty implementation of policies with far-reaching effects. When unforeseen side effects emerge, the response is a mixture of distortion, withdrawal, reversal, and stubborn insistence, resulting in massive chaos.
Some say the above analysis is too conventional. Looking at the market chaos created by Trump's policy fluctuations, stocks and various assets including cryptocurrencies have been tossed up and down due to Trump's policies and their variable interpretations – suddenly plummeting, then rebounding, then plunging again after clarifications. These fluctuations create enormous profit opportunities for those with inside information.
Shockingly, Trump makes no effort to hide that his associates are making huge profits from these transactions. He even pointed to a friend at the White House, saying he made $2.5 billion from trading during these fluctuations. Media reports also claim Trump made $1 billion through his cryptocurrency.
Some suggest Trump and his advisors might profit from stock trading. Its noted that while stock markets are regulated, the cryptocurrency market is completely unregulated. As a risky speculative product, recent cryptocurrency fluctuations have basically synchronized with US tech stocks. Those who understand the rhythm of Trump's tariff policy implementations or withdrawals could make enormous profits in the cryptocurrency market, which are difficult to trace.
Certain things that seem extremely implausible to us could be palpably explained when massive interests are hidden behind them.
Wing-hung Lo
