America’s Biggest Hidden Cost in Trump’s Tariffs

Recently, U.S. Treasury bonds, stocks, and currency markets experienced severe turbulence, forcing Trump to temporarily halt tariffs on Chinese semiconductors and consumer electronics. On the surface, the Trump administration finally seems to have recognized that its tariff policies are self-defeating and is attempting to correct its mistakes. However, Chinese strategist Professor Wang Xiangsui points out this is too late, in the eyes of global investors, three fatal errors have caused the U.S. to lose a nation’s most valuable asset: credibility.

Trump’s First Error: Lack of Clear Strategic Goals and Haphazard Decision-Making  

Trump claimed that launching a global tariff war was to “Make America Great Again” and revive U.S. manufacturing. But is America’s decline truly due to the existing international trade order? The logic that destroying the global economy would somehow restore U.S. greatness is flimsy and reckless.  

In fact, numerous U.S. media outlets immediately pointed out that such policies defy market principles and would further harm U.S. companies. For example, Reuters reported that if Apple were to relocate all manufacturing to the U.S., the price of each iPhone would rise by 40%, rendering the company’s products uncompetitive. Trump’s tariffs would inflict billions in direct losses on the most valuable US company while creating opportunities for Asian rivals.  

When Apple began airlifting 600 tons of iPhones from China and India, Trump hastily announced temporary tariff exemptions for Chinese consumer electronics and semiconductors. Such hasty fixes highlight his lack of prior analysis. Showing Trump failed to identify which industries the U.S. could compete with China and which should avoid, exposing his administration’s amateurishness.  

The Chinese were unsurprised by his performance, given Trump’s track record. As a businessman who filed for bankruptcy six times, Trump’s most extensive experience lies in failure. Moreover, his background in real estate and casinos—traditional sunset industries—left him ill-equipped to understand today’s complex global financial systems and supply chains. His only response to international investors dumping U.S. bonds has been to blindly follow the “tariffs fix everything” theory from Peter Navarro’s book Death by China. As early as 2017, The Economist dismissed Navarro’s plan to “force Chinese concessions” as pure fantasy. Yet Trump appears determined to double down on these proven failures.  

Second Error: Inconsistent and Erratic Policies

On the 9th, Trump announced a suspension of tariffs on 75 countries; the next day, he threatened to reimpose, and even further raise tariffs if deals were not reached. The leader of the world’s largest economy breaking promises within 24 hours left allies like the EU and Japan stunned.  

Spanish Prime Minister Pedro Sanchez has criticized the “unprecedented” US tariffs, calling them a return to “19th-century protectionism.”

His tariffs against China were equally erratic. On the 12th, the U.S. suddenly exempted Chinese laptops, smartphones, and chips from tariffs. Before Apple’s Chinese factories could breathe a sigh of relief, Trump declared on the 13th that the exemptions were temporary and subject to a “national security investigation.”  

His flip-flopping sent U.S. stock markets into a rollercoaster ride, triggering massive capital flight. The Financial Times noted that foreign holdings of U.S. Treasuries have dropped from 33% in 2015 to 24% in 2024, signalling eroding trust in U.S. reliability—a trend Trump’s policies accelerate.  

After delaying tariffs, Trump publicly congratulated his billionaire friend Charles Schwab for making over $2 billion in a single day. Nineteen House members urged an investigation into insider trading, but U.S. authorities have taken no action to reassure global investors.

A CBS News poll conducted on April 13 revealed that 63% of Americans disapprove of Trump’s approach to tariffs. Yet this unpopular policy persists, underscoring the U.S. system’s failure to self-correct. Trump bypassed Congress by hyping a national emergency over fentanyl, granting himself unchecked power to wage a tariff war—highlighting the systematic risk for funds in the US.  

Third Error: Reneging on Agreements with its biggest Competitor, China

As the architect of Trump’s tariff war, U.S. Economic Advisory Council Chair Stephen Miran accused China of violating trade deals in A User’s Guide to Restructuring the Global Trading System. But the report should be renamed A User’s Guide to Restructuring Global Deception.  

In May 2018, then-Chinese Vice Premier Liu He announced that China and the U.S. had agreed to avoid a trade war. However, just three months later, Trump unilaterally imposed 25% tariffs on Chinese goods, shredding the deal. Thus, even during his first term, Trump cemented his image as untrustworthy.  

Donald Trump shakes hands with former Chinese Vice Premier Liu He in the Oval Office on May 17, 2018.

This explains why when Trump said “We are waiting for their call. It will happen!”, China added “a tariff-wielding barbarian who attempts to force countries to call and beg for mercy can never expect that call from China.” If even a written agreements from high-level negotiations can be discarded, how can verbal promises in a phone call hold weight? China initially extended extraordinary courtesy, such as sending a special envoy to Trump’s inauguration instead of the usual ambassador. Yet Trump’s governance style aligns with an ancient Chinese worst adage for leaders: “he did not appear like a sovereign”

For instance, he often announces policies via social media, and uses vulgar insults like “kiss my ass” against rivals and allies. Moreover, as economist Rohit Krishnan notes—his tariff strategies may even be AI-plagiarized, mirroring outputs from Chat GPT. In demonstrating incompetence, irresponsibility, and a lack of statesmanship, Trump has cost America its most vital asset: credibility. This will prove fatal to the dollar.  

While Mike Pompeo boasts, “We lie, we cheat, we steal,” credibility remains the bedrock of the US dollar. Under the Bretton Woods system, $35 bought an ounce of gold. Today, gold exceeds $3,200 per ounce—a 98% devaluation of the dollar’s “gold content.” For 54 years post-Bretton Woods, the dollar’s status relied on U.S. military might and its $3 trillion import. Now, both anchors are being jettisoned.  

Militarily, U.S.-supplied weapons have failed in Ukraine, and recent struggles against Yemen’s Houthi rebels expose American decline. Economically, Trump’s tariffs primarily hit U.S. importers, with costs passed to consumers, eroding market strength.  

The Exterior damage of USS Harry S. Truman (CVN 75) following a collision with a merchant vessel on Feb 12, 2025

Instead of rallying G7 allies against China, Trump has alienated Europe and Japan with tariffs, even suggesting Russia rejoin the G7 to counter China—a laughable proposal given U.S.-Russian competition in energy, agriculture, and arms. Such incoherent strategies reveal desperation. Meanwhile, China holds at least two trump cards to escalate the front into U.S.-feared territories.  

First: Imposing Reciprocal Tariffs on Service Trade.

Trump frames the U.S. as a victim of globalization, demanding “reciprocal” tariffs on trade surplus nations. Yet Canada’s National Observer noted that Trump carefully avoids targeting America’s dominant service sector—finance, intellectual property, education, etc.—led by firms like Goldman Sachs, BlackRock, and Microsoft.  

The Economist highlights that while the U.S. had a $1.2 trillion goods trade deficit in 2024, its service exports hit $1.1 trillion, with a $295 billion surplus. China’s Commerce Ministry states that the U.S. accounts for 9.5% of China’s service trade deficit, about $26 billion in 2023. If other countries applied Trump’s “reciprocal” logic to service trade, China, the EU, and Saudi Arabia should respectively levy tariffs on the US service sector for 28%, 15%, and 41%.

In fact, China has already begun countering in this arena. The U.S. entertainment industry, especially Hollywood, exports heavily to China. In 2024, eight of the top ten highest-grossing imported films in China were American, generating over $ 796 million and accounting for 64.1% of all imported box office revenue. However, on April 10, China’s Film Administration announced reduced imports of U.S. films, Warner Bros. shares suddenly dropped 12.5%, and Disney fell 6.8%.

Chinese film Ne Zha 2 has became the highest-grossing animated film globally.

Second: Leveraging US Dollar and Treasury Holdings to Fight US

U.S. Treasury bonds were once considered high-quality assets, but they have now become politicized and weaponized. As U.S. credibility deteriorates, the global trend is to reduce holdings of U.S. debt. For example, Russia once held over $300 billion in U.S. Treasuries, which were immediately frozen after the outbreak of the Russia-Ukraine conflict.

Countries that trade with the U.S. typically hold U.S. debt equivalent to about two months’ worth of trade volume. However, as of February 2025, China still holds $760 billion in U.S. Treasuries—far exceeding what is needed for trade security. As of December 2024, China’s foreign exchange reserves have reached a staggering $3.2 trillion. During the Obama administration, China’s purchase of U.S. Treasuries helped the U.S. through difficult times, but now the U.S. not only shows no gratitude, it is actively pursuing a hard decoupling from China. Since these assets can no longer serve as a shock absorber in China-U.S. relations, finding ways to leverage U.S. debt and U.S. dollars to better serve China’s national interests is a direction with great potential—and China has already begun making creative moves in this regard.

For instance, in November 2024, China’s Ministry of Finance, on behalf of the central government, successfully issued a $2 billion sovereign bond in Saudi Arabia.

This marks the first Chinese sovereign bond issued and listed in the Middle East. A sovereign bond is a type of debt issued by a national government in foreign currency on the international market, backed by the credit of the issuing government. While denominated in U.S. dollars, these bonds are different from U.S. Treasuries. U.S. Treasuries are issued by the U.S. government, whereas dollar-denominated sovereign bonds are issued by other governments in the international capital markets. Despite being denominated in U.S. dollars, China’s strong national credit and the healthy balance sheet of the central bank made the bond extremely popular in the market. The total subscription amount reached $39.73 billion—19.9 times the issued amount—with the 5-year tranche alone oversubscribed by 27.1 times, the highest multiple for sovereign bond issuance globally in recent years. Similar financial products may offer China better ways to utilize its large holdings of U.S. Treasuries, potentially generating greater national benefit than simply dumping them.

Furthermore, this presents an opportunity to expand the international influence of the Chinese Yuan. As the U.S. turns inward and countries begin erecting trade barriers, China’s unified market of 1.4 billion people and GDP growth of over 5% stand out as a stabilizing force in the turbulent waters of global trade. The unpopular tariff policies under Trump have already pushed the EU to seek alternative trade options with China. Reuters reported that the EU is considering removing the 45.3% tariff imposed on Chinese electric vehicles since last year, and is working to establish a minimum price standard. Beijing might also consider offering tariff incentives to countries that agree to settle bilateral trade in the Chinese Yuan, encouraging more nations to break away from the uncertain shadow of the U.S. dollar.

In summary, “A nation without credibility will decline”—a maxim that China’s Ministry of Foreign Affairs reminded the United States of back in 2022. Maintaining a good credit record has never been merely a moral issue; it is the foundation of all consensus and the exchange of interests. Trump often touts his business background and brags about his mastery of the “art of the deal.” However, he forgets that capitalism was born not in boardrooms, but beside Dutch ports, where countless sailing ships braved stormy seas with nothing but life and honour as collateral. Without credibility as the ultimate ballast, maritime trade would never have flourished, nor would the entire financial ecosystem of insurance, stocks, and bonds have come into existence.

The Amsterdam stock exchange is considered the oldest “modern” securities market in the world

The rise of democratic revolutions came about because civic parliaments proved more politically credible than tyrants, thus attracting greater investment from commercial capital and sparking waves of liberation across Europe. The development of the West has always relied on the engine of capital—and capital, in pursuit of profit, aligns itself with the side that offers greater credibility.

For a deal, credibility comes first—everything else follows. Thus, when Trump tries to force “deals” through blackmail, threats, and deception, taking short-term delight in zero-sum games that harm others for America’s temporary gain, all while ignoring the long-term, irreversible damage to U.S. credibility, showing he had long since departed from the art of the deal, and instead, began studying the art of putting the cart before the horse.

What’s worse, America seems to lack any internal mechanism for self-correction or restoring order—an alarming reflection of its systemic unreliability. This guarantees that in the future, the U.S. will be left sitting atop a shrinking $3 trillion import market, isolate itself from the $33 trillion global trade.

In contrast, after China raised reciprocal tariffs to 125% and confirmed that U.S. goods had lost their competitiveness in the Chinese market, Beijing declared it would no longer play Trump’s childish numbers game. Instead, China has turned to more rational efforts in other domains—working to secure real benefits for its people and seeking new growth drivers for the global economy. This kind of institutional stability, policy-driven rationality, and diplomatic pragmatism is prompting the world to reconsider: Who are the barbarians only good at wielding tariff sticks, and who are the civilization striving to uphold global order?

Editor: Charriot Zhai