Trump may not have intended it, but the global economic "reset" has arrived

Source: Jinshi Data

In the past few years, there has been a lot of talk about the global economy being reset. While what the United States is seeing now may be very different from what was expected, it is certain that the global economy is already reset. Trillions of dollars have been invested in building today's global supply chain.

The United States cannot reverse decades of investment and build a new supply chain overnight. For example, it takes about $10 billion to build a manufacturing facility to produce computer chips, and the construction period may be as long as 3 to 5 years. Therefore, any idea that the United States can just press the "reset button" and make everything better is too unrealistic.

The United States has just experienced the largest tariff increase in history. Many companies that have invested heavily in building global supply chains in the hope of gaining a competitive advantage are now facing setbacks in their business. Wall Street is clearly not ready for the moment when the "reset button" is pressed. The current mentality of investors is "sell first and talk later." The tariff hikes have sent shockwaves through global financial markets, sparking concerns about a recession and sharp price increases in the world's largest consumer market.

"The Trump administration may be playing a game of 'chicken' with its trading partners, but market participants are not willing to wait for the outcome," said Michael Arone, an investment expert at State Street Global Advisors.

Many people are hoping that President Trump will change his mind after seeing what's happening on Wall Street, but the news to the United States is that this change will not happen. Trump administration officials said on political talk shows last Sunday that these tariffs will be strictly enforced and there will be no room for negotiation. "The tariffs are going to take effect. The president has announced this decision, and he is not kidding. The tariffs are going to take effect, of course they will take effect. " Commerce Secretary Lutnick said on CBS's "Face the Nation." Get ready for some eye-popping price increases. For example, the price of an iPhone could soon increase by hundreds of dollars. If companies pass on the costs of tariffs to consumers, American consumers may find that the prices of their beloved electronics, including iPhones, will rise sharply. Although Apple has been working to expand its supply chain, the vast majority of its iPhones are still produced in China. According to Rosenblatt Securities analysts, the price of the lowest-equipped iPhone 16, which starts at $799 in the U.S. market, may soar to $1,142 in the future, a 43% increase. This will be a devastating blow to the American living standard.

After Trump announced his aggressive tariff stance, JPMorgan's economic team has raised the probability of a recession to 60%. In a report titled "Blood Rain is Coming," JPMorgan Chief Economist Bruce Kasman said. Kasman and his team note that this year’s 22 percentage point tariff increase amounts to the largest tax shock since 1968. There is no way the US will get through this crisis unscathed.

Since the 1990s, apparel and footwear manufacturing has been moving offshore across the board. As Swartz explains, sportswear brands in particular have spent billions of dollars building the roads, ports, factories and rail lines that make up the complex supply chains that underpin Vietnam’s infrastructure. It’s in everyone’s interest to keep those factories running: Vietnam’s economy depends on them, and companies depend on Vietnam to produce their goods.

These tariffs will create winners and losers. Many once-thriving businesses will suddenly be in trouble. The US is being warned of a “new wave of corporate defaults” on the horizon.

< p>The global trade war unleashed by Trump has set the stage for a new round of corporate defaults in financial markets. A global distressed debt index compiled by Bloomberg News posted its biggest increase in at least 15 months this week, with more than $43 billion in bonds and loans at levels that are difficult to refinance.

Although Trump had repeatedly signaled the imposition of tariffs before the official announcement on April 2, few expected Washington to impose such high tariffs on so many major trading partners - especially considering that such a move could upend the global supply chains that entire U.S. industries rely on.

Some Trump supporters have speculated that Trump is deliberately disrupting the global economy and causing a financial market crash. In fact, Trump himself shared a video discussing this theory on TruthSocial last Friday. But White House National Economic Council Director Hassett said on ABC's "This Week" on Sunday: "The stock market crash is not a deliberate strategy by Trump. The video, which originally appeared on TikTok in March and was retweeted by Trump two days after the tariffs were announced, claims that "Trump deliberately caused the stock market to fall 20% this month in a move that could make you rich," explaining that it would "force money into Treasuries, pushing the Fed to cut interest rates sharply in May, while weakening the dollar and driving down mortgage rates. It was a risky move, but it worked."

This is going to be dramatic. By slashing tariffs, the United States is essentially "economically bleeding" its citizens. The government will receive more revenue, the US standard of living will drop significantly, and economic activity will slow sharply. If the United States does not change course, this story is not destined to have a happy ending.