34% tariffs. China retaliates. Trump goes out with 52%. Then 104%. The US-China trade war is in full swing, sure.
But this isn’t about tariffs or the U.S. and China anymore – this is about President Trump and President Xi Jinping.
How does this end?
Here is one sequence of events: U.S. legislators and the Senate pass a resolution to declare tariffs invalid. The Supreme Court backs them up. Things return to normal. And this takes all of 30 days or less.
While we see this as a likely sequence, the ‘30 days or less’ timing of it is just wishful thinking. A 30-day timeline looks too short. It’s likely going to take way longer than 30 days and things will get worse before normalcy returns. See our analysis – S&P to drop 40%.
Now why will it take longer than 30 days?
What’s really needed as a start is a groundswell of public outcry against tariffs. Support from tens of millions – no hundred million plus Americans. A voice – a vote so clear against tariffs that business and community leaders join and then lead, and grow the voice. So the local government and house representatives and senators have no way to miss that people don’t just dislike tariffs – but the political consequences are severe for whoever doesn’t listen to them. That may not happen in 30 days. It could take 3-6 months. Or with confusing signals along the way, and much back and forth, it may stretch all the way to mid-term elections in 2026!
That’s one possible (and a likely) end game. What’s worse, the voice isn’t clear enough for Congress and the judiciary, and the pain stretches all the way to the 2028 Presidential elections when Trump’s term ends.
The thing is, Trump is a tough leader – a fearless leader – not one to stop fighting, until he has to. Markets will reel and drop in the interim. See: how low can markets go in a crisis.
Your best bet as an investor? Stay invested, hopefully, in something resilient – the Trefis High Quality strategy has outperformed the S&P by a large margin, as seen in HQ performance metrics is useful. Or talk to a financial adviser with some experience with bear markets.
The point is, falling markets will make a difference in Trump’s opinion. However, it’s likely he’ll frame it as a fight China started that we shouldn’t back out of.
And, China won’t back down
Xi Jinping is unlikely to back down. Not in front of a combative Trump. Especially not in front of a combative Trump. Demand for Chinese goods will decrease as tariffs are imposed. Chinese producers will see sales decline. Some lost American demand will be replaced – but much won’t be. Sure, Chinese producers will feel the pain, and the government will need to help. And, of course, they’ll help. The Chinese government always steps in. This can’t be worse than the situation posed by Covid – it isn’t. China is ready for this. They’re prepared.
In summary, the end game always has, and again must, rely on what the People wish for. Citizens. Community and business leaders. The Collective.
We made a choice. And now again, we have choices.
We choose what we want. We choose when we’re ready.