The United States has a habit of telling others to take medicine for its own sickness. This has become their usual tactic.
The core problem in the U.S. is its enormous debt, which is unsustainable. Currently, within the Trump administration, there are two factions. The "radical faction," led by White House trade advisor Peter Navarro, proposed the so-called "Mar-a-Lago Accord," which demands other countries to revalue their currencies and force a sharp depreciation of the U.S. dollar. They also want other countries to accept 100-year interest-free U.S. Treasury bonds in exchange for the U.S. debt they currently hold. This is a crazier version of the 1985 Plaza Accord and essentially amounts to debt shirking.
The other faction is the "rational faction," composed of people with extensive business experience in the U.S., who find the radical ideas too extreme to voice openly. This faction is led by Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick. Bessent points out that President Trump's goal is not to entangle the U.S. and Chinese economies but rather to have China’s economy shift toward consumption while the U.S. economy shifts toward manufacturing. This idea was recently disclosed by The Wall Street Journal, and also featured by Shenzhen Satellite TV’s news channel.
On April 23, The Wall Street Journal reported that the Trump administration is considering reducing tariffs on Chinese goods from 145% down to between 50% and 60% to ease current tensions. This means removing retaliatory tariffs between the two countries, while the U.S. would retain about a 54% tariff on Chinese goods. This includes 20% initially imposed over the fentanyl issue and an additional 34% levied under the guise of "reciprocity."
According to insiders cited by The Wall Street Journal, Trump is also considering a tiered tariff approach similar to the one proposed by the House Select Committee on China in 2024. This would categorize Chinese exports to the U.S. into strategic and non-strategic goods. Strategic goods such as machine tools and the Apple supply chain components are key areas for decoupling, amounting to $145 billion in exports, about one-third of China’s total exports to the U.S. Tariffs on these would gradually rise to 100% over five years. Non-strategic goods, worth about $293.9 billion, would be subject to a minimum 35% tariff. This tariff structure is effectively a form of structural decoupling, which China naturally finds unacceptable.
The U.S. always shifts its own problems onto others, blaming its massive debt on countries like China running large trade surpluses with the U.S. So on one hand, the U.S. wants to shirk debt by converting it into 100-year interest-free Treasury bonds, effectively wiping it clean. On the other hand, it raises tariffs to bring manufacturing back to America, so Americans buy American-made goods -- this is the so-called shift of the U.S. economy toward manufacturing. And they say, the large Chinese trade surplus with the U.S. is mainly due to China’s overcapacity, so the U.S. calls on China to increase consumption to absorb these excess products -- this is the so-called shift of the Chinese economy toward consumption.
Even the so-called rational faction within the Trump administration is proposing policies that fundamentally violate basic principles of international trade. Regardless of whether the U.S. can withstand the shock of high tariffs, the core problem is that American products lack competitiveness. The U.S. cannot simply shift back to manufacturing because it lacks a labor force -- Americans are unwilling to work in factories, and it lacks the technology. After decades of manufacturing decline, it is not something that can be reversed overnight. The U.S. is sick but refuses to take medicine itself, instead telling others to take medicine, which cannot truly solve the problem.
The real cure for America’s sickness is that Americans must shift to working more, and the U.S. government should shift to spending less. Only then can the U.S. reduce debt, increase income, and return to fiscal health.
However, for the past 54 years, the U.S. has taken the opposite path. Since Nixon announced the end of the gold standard monetary system in 1971, the U.S. has embarked on a wild spending spree. Before that, the dollar was pegged to gold, and issuing dollars required gold reserves, which controlled the money supply. But Nixon abolished the gold standard overnight, and U.S. money printing and debt exploded uncontrollably. In 1971, the U.S. national debt was only $400 billion; today it is $36.8 trillion, a 91-fold increase. In 1971, U.S. GDP was $1.2 trillion; last year it was $29.2 trillion, a 23-fold increase. Debt issuance has far outpaced economic growth.
The objective effect is a rapid depreciation of the dollar. In the year the gold standard ended, an ounce of gold was $45; today it is $3,351. Relative to gold, the dollar has depreciated by 98.7%. There is a market saying in investment circles that "gold turns to junk copper in ten years." If gold is junk copper, then the dollar is essentially worthless paper, all due to America’s reckless money printing.
Over the past 50 years of reckless money printing and borrowing, Americans have felt no pain. The last major pain was in 1980 when then-Fed Chairman Paul Volcker raised the federal funds rate to 20% to control inflation. But after him, under Greenspan, the Fed cut rates sharply whenever the economy slowed. Americans never had to endure hardship; any crisis was solved by loose monetary policy. During the 2008 financial crisis, Fed Chair Bernanke cut interest rates to near zero and launched multiple rounds of quantitative easing, even printing money to buy back U.S. debt.
Supported by loose money, Americans embraced the "Work-Life Balance" concept, which in practice means working less and earning more, relying on government bailouts whenever trouble arises, and printing money to boost asset markets. Americans who understand this capital game can make good living even by speculating in stocks without working. The U.S. government shares this operational philosophy. Since the Clinton administration in the 1990s, no government has truly controlled spending. The ruling party knows that spending big can buy votes. With mid-term elections every two years and major ones every four years, the U.S. government has entered a vicious cycle of reckless spending. Under such conditions, how can America not be deeply in debt? Even if China refuses to sell a single cent of goods to the U.S., Americans will buy more expensive goods elsewhere rather than become thrifty and wealthy.
The U.S. is sick but refuses to treat the root cause. Instead, it tries to plunder other countries to pay the bill or believes closing trade doors can balance things. This sickness can never be cured and will eventually explode. The tariff war will only accelerate the detonation of the America’s economic bomb.
Bastille Commentary
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