US.-China Trade War: Why the Trump Administration Is Now Eager to Talk

Recent developments suggest a notable shift in the Trump administration’s trade strategy: according to well-placed sources, U.S. economic and trade officials have been actively reaching out to China through multiple channels in an attempt to restart negotiations. This stands in stark contrast to Washington’s public narrative, which paints China as the party seeking talks. Chinese authorities, however, have repeatedly denied initiating such discussions.

Even within the White House, clarity on the ground reality seems lacking. In a CNN interview, Agriculture Secretary Brooke Rollins insisted that the U.S. is in daily contact with China, despite media confirmation that Beijing has denied ongoing talks. Rollins added that “China needs us more than we need them,” revealing more about Washington’s political messaging than any genuine diplomatic breakthrough.

Why Is the U.S. Eager to Re-Engage?

The U.S.’s sudden eagerness to reconnect with China stems from five key pressures—economic, political, diplomatic, personal, and strategic.

1. Economic Backlash from Tariffs

Trump’s 145% tariffs on Chinese goods have inflicted severe economic pain on the U.S. economy. Despite claims that China would absorb the costs, the burden has fallen heavily on American businesses and consumers. Prices on platforms like Shein and Temu have soared, with some import taxes exceeding product prices. Even Amazon drew criticism from the White House after attempting to highlight the impact of tariffs on consumer prices—prompting Trump to personally call Jeff Bezos to express displeasure.

The fallout: disrupted supply chains, soaring inflation, shrinking consumer spending, investment slowdowns, hiring freezes, and growing fears of a recession. Economists now estimate a 60% chance of a U.S. recession within the next year. As the “holiday president,” Trump risks becoming the one who “cancelled Christmas” due to price hikes on gifts and essentials.

2. Political Pressure from All Sides

Economic hardship has translated into political instability. Trump is facing bipartisan criticism—including from former allies like billionaire investor Bill Ackman, who warned the tariffs could trigger an “economic nuclear winter.” Elon Musk publicly clashed with trade hawk Peter Navarro, while Wall Street, once supportive, has turned sour after April’s market crash.

Even Trump’s base—middle- and low-income voters hoping for inflation relief—are feeling betrayed. His approval ratings hover at historic lows (39–45%), setting new post-WWII records for presidential unpopularity within the first 100 days of a term.

3. Diplomatic Isolation

Efforts to rally a global anti-China trade alliance have failed. Countries with deep economic ties to China—Japan, South Korea, Brazil, India, Australia, and others—have resisted U.S. pressure, valuing Chinese trade over American demands. Even key allies like Japan are distancing themselves from Washington’s unilateralism.

This strategic misstep has left the U.S. isolated, weakening both its leverage and its global credibility.

4. Trump’s Personal Regret

Trump has privately admitted that a 145% tariff was excessive—a product of impulse rather than strategy. Even during his 2024 campaign, he floated a 60% tariff, a figure many thought he would never implement. Now, he’s looking for a way to scale back without losing face. Treasury Secretary Besant, sensing the president’s regret, has begun preparing the public for a climbdown, calling the tariff impasse “unsustainable” and akin to a “trade embargo.”

5. China’s Firm and Measured Response

Most importantly, China has held firm. Contrary to Western expectations, Beijing has refused to yield under pressure, demonstrating resilience and confidence. Trump, who tends to respect strength and exploit weakness, now sees China as a formidable opponent unwilling to bow. As China continues to stand its ground, the U.S. is realizing that this trade war cannot be won through bluster or brute force.

Trump’s Exit Strategy: A Face-Saving Retreat

Trump is now attempting a strategic de-escalation while preserving his tough image. His new narrative? The tariffs will be “substantially lowered,” but “not eliminated.” This dual messaging—hardline rhetoric combined with policy softening—is part of a carefully calibrated exit plan.

Key tactics include:

Softening language: Trump now speaks of treating China “in a friendly manner” during talks, signaling openness to negotiation without looking weak.
Flipping the narrative: The White House insists China initiated talks, hoping to position the U.S. as the party in control.
Managing public expectations: Statements about “progress” in potential agreements are aimed at calming markets and preparing the public for eventual concessions.
Playing global chess: By hinting at a deal with China, the U.S. aims to pressure other nations into trade concessions—classic transactional diplomacy.

This is not a sincere outreach, but a tactical repositioning designed to minimize political damage while securing broader strategic wins.

China’s Likely Response: Principle and Pragmatism

Beijing’s stance remains consistent: “The door to dialogue is open, but we are prepared to fight if necessary.” China welcomes sincere negotiation but will not make unilateral concessions. Talks are important to reduce strategic miscalculations and offer global stability, but must be based on mutual respect.

China will assess Washington’s true intent through actions, not words. If the U.S. continues with coercive pressure while claiming to seek dialogue, Beijing will see through the charade. Any resolution must protect China’s core interests and national dignity.

What the U.S. Should Really Focus On

Instead of blaming China, the U.S. would do well to address its own structural challenges:

Modernize infrastructure
Boost domestic manufacturing competitiveness
Improve public education and workforce skills
Tackle domestic drug abuse
Reform its political and economic systems

China, meanwhile, has responded to U.S. pressure by doubling down on self-reliance, industrial upgrading, and long-term reform—an approach that has positioned it better in this second round of trade tensions.

Conclusion: A Trade War Without a Victory

The Trump administration’s pivot to dialogue underscores one truth: this trade war is unsustainable. Whether the outcome is a scaled-down deal, prolonged standoff, or a new status quo, it’s clear that brute force economics no longer work in a multipolar world. For the U.S., real strength lies not in tariffs or threats, but in fixing its own house first.

CN20250331-Can China’s Stock Market Withstand the Global Selloff Triggered by U.S. Tariffs?

A Volatile Market Shaken by Tariff Wars

The ongoing tariff war initiated by the United States has thrown global financial markets into turmoil. As economic uncertainties mount, stock markets worldwide have been hit by a wave of sharp declines. Investors are now left wondering: Can China’s A-shares remain resilient amid this global selloff?

1. U.S. Stocks Lead the Downturn as Tariff Fears Escalate

With a crucial tariff deadline approaching on April 2, fears of sweeping U.S. import taxes have unsettled markets. Investors are on edge, leading to widespread panic selling. Last Friday, all three major U.S. indices plunged—

Dow Jones Industrial Average fell 1.69%, barely holding onto a critical support level.
Nasdaq dropped 2.7%, and
S&P 500 slid 1.97%, both breaking below key moving averages.

2. A New Wave of Tariff Threats Looms This Week

Markets are bracing for another turbulent week as Washington shows no signs of easing its tariff policies. Adding to investor anxiety, the U.S. has threatened secondary sanctions on oil imports from Iran and Russia. If enforced, countries purchasing Russian crude could face 25%-50% additional tariffs on their exports to the U.S., worsening the fragile global trade environment.

3. Global Markets Plunge as Panic Spreads

The tariff-driven selloff has had a ripple effect across the world:

Chinese U.S.-listed stocks plummeted 3.33% last Friday.
European markets saw broad-based declines.
Nikkei 225 fell nearly 4%, while South Korea’s KOSPI dropped 3%.
Hong Kong’s Hang Seng Index showed relative resilience, limiting losses to 1.3%.

4. Government Policy Support Aims to Stabilize Markets

Amid the turbulence, China is deploying financial measures to cushion the impact. Over the weekend, the Ministry of Finance announced the issuance of 500 billion yuan in special treasury bonds to bolster the core capital of China’s four major state-owned banks. This move is expected to inject stability into the economy and provide much-needed support for the financial sector and broader A-share market.

5. A-Shares Struggle to Escape the Global Downtrend

Despite policy support, China’s stock market today morning could not escape the global risk-off sentiment. As of the midday close:

Shanghai Composite Index fell 0.97%
Shenzhen Component Index dropped 1.66%
ChiNext and STAR Market indices lost 1.82% and 1.65%, respectively.

Market breadth remains weak, with only 599 stocks rising versus a staggering 4,749 decliners. Trading volume remains subdued, signaling investor caution as they await the final outcome of U.S. tariff decisions.

6. A Turning Point Ahead?

Despite the bearish sentiment, policy-driven support could trigger a market turnaround. Historically, state-backed funds have stepped in during critical market downturns. With April shaping up as a pivotal month, a potential reversal may be in the cards. As the dust settles on the tariff issue, renewed investor confidence and government interventions could set the stage for a market rebound.

Will A-shares weather the storm or succumb to the global selloff? The coming weeks will provide the answer.

This version maintains the urgency and depth of the original while improving readability, SEO effectiveness, and engagement for a financial audience. Let me know if you need any refinements! 🚀

$2.9 Billion Defense Deals Signal UAE’s Shift: From Arms Importer to Global Competitor

Middle East’s Largest Arms Fair Reveals UAE’s Homegrown Defense Ambitions

Last week, the United Arab Emirates (UAE) hosted IDEX 2025, the Middle East’s biggest defense expo and one of the largest globally. With 1,565 companies from 65 nations and 41 country pavilions, the event spotlighted the UAE’s rapid rise in defense innovation. Local firms accounted for nearly 16% of exhibitors , led by EDGE Group, the UAE’s defense champion, which secured $2.9 billion in new contracts – mostly with UAE government entities.

Key Deals at IDEX 2025:

$1.2B aviation ammunition deal with UAE Ministry of Defense.
$524M naval support contract with EDGE subsidiary Maestral.
46 new defense solutions launched, including drones, missiles, and AI-powered systems.

From Buyer to Builder: UAE’s Defense Transformation

For decades, the UAE relied on foreign arms imports. From 2016–2020, it ranked as the world’s 9th-largest defense importer , buying 64% of its weapons from the U.S. (SIPRI data). But with a $22B+ annual defense budget , the Gulf nation is now:
1️⃣ Investing heavily in R&D and local manufacturing.
2️⃣ Building maintenance/repair capabilities to reduce foreign dependence.
3️⃣ Exporting homegrown tech – EDGE Group’s exports hit $2.3B by 2024 , projected to double in 2025.

Why the Shift?

Geopolitical Risks: U.S. export restrictions under Biden highlighted overreliance on Western partners.
Economic Vision: Moving beyond oil by creating a high-tech industrial base.

EDGE Group: UAE’s Answer to Global Defense Giants

EDGE has become a symbol of the UAE’s ambitions, offering:

Missiles & drones rivaling Turkish and Chinese systems.
NATO-compliant weapons like the Lahab 155mm howitzer (challenging French/German rivals).
Strategic partnerships with firms in Estonia, Poland, and Singapore for cutting-edge tech.

Recent Wins:

Supplied Caracal sniper rifles to NATO member Hungary.
Acquired majority stakes in Estonia’s Milrem Robotics (combat robots) and Poland’s Flaris (drone tech).

Implications for Global Defense Markets

The UAE’s strategy – blending joint ventures, acquisitions, and innovation – poses challenges for traditional players:
⚠️ Western Firms: Face rising competition in Gulf markets.
⚠️ Regional Rivals: Saudi Arabia and Egypt now emulate UAE’s model.

Financial Takeaway: The UAE’s defense pivot reflects a broader Middle East trend toward industrial self-reliance, creating new investment opportunities in dual-use technologies and regional supply chains.

The Shifting Global Order: The U.S., Europe, Ukraine, and the End of Unipolarity

Is Europe in Control of Its Own Future?

With growing speculation that the U.S. may scale back support for Ukraine and engage directly with Russia, a key question arises: Does Europe have the ability to influence this outcome? The reality is that Europe, as a collective entity, has limited options. In the grand geopolitical landscape, Ukraine is on the menu, while the U.S. and Russia are seated at the negotiating table. Europe, however, is neither a guest nor a dish being served—at least, not yet.

Europe’s Defense Dependence on the U.S.

For decades, European nations have relied on the U.S. for military security, maintaining relatively low defense spending. This dependency is a cornerstone of the U.S.-led unipolar order, often referred to as Pax Americana. Countries across the continent, as well as Canada, have long assumed that U.S. military support was an unconditional guarantee.

The Trade-Off: Economic Growth Over Military Strength

By outsourcing defense to the U.S., Europe has been able to focus on economic and social development. Governments have directed resources toward industrial growth, agriculture, and welfare programs funded by high taxes. However, this arrangement has come at a cost: Europe has little independent military leverage and often aligns with U.S. strategic decisions.

But today, this post-war arrangement is under strain. The U.S. faces increasing political resistance at home against maintaining the current global security structure. While powerful interest groups, including defense contractors and multinational corporations, continue to benefit, the average American voter sees little return. This discontent is amplified by economic grievances, such as European nations maintaining strong manufacturing industries while imposing trade barriers that disadvantage U.S. exports.

Diverging Economic Models and a Fractured Alliance

The weakening of the U.S.-led order is also driven by structural economic differences. The American model prioritizes low taxes, corporate growth, and a free-market approach, whereas Europe leans toward high-tax, high-welfare policies. When the distribution of benefits becomes unbalanced, tensions emerge within the alliance. External events, such as the Russia-Ukraine war, further accelerate these fractures.

While global shifts play a role, some of the current instability can be traced back to past U.S. foreign policy choices. The 2003 Iraq War, for instance, disrupted the Middle East, contributed to the rise of extremist groups, and triggered mass displacement. As a result, Europe bore the burden of millions of refugees, fueling political and social tensions. The rise of nationalist movements across Europe today is, in part, a response to these demographic and economic pressures.

Many of these geopolitical trends are linked to long-standing historical factors. The U.S.’s unconditional support for Israel, for example, has shaped its relationships in the Middle East, contributing to conflicts that have had far-reaching consequences. These historical patterns highlight how past decisions continue to shape present challenges.

Russia’s Strategic Calculations

When Russia launched its military operation in Ukraine in 2022, it did so with an awareness of the internal divisions within the U.S. and Europe. Russian leaders have long observed the ideological divides in Western nations—ranging from nationalist movements to left-wing skepticism of American global influence. While Russia may have correctly predicted the long-term decline of unipolar U.S. dominance, it underestimated Ukraine’s military resistance. As a result, the conflict has turned into a prolonged struggle, with Russia waiting for larger geopolitical shifts—such as potential leadership changes in the U.S.—to shift the balance in its favor.

The Russia-Ukraine conflict has accelerated shifts in global geopolitical structures, particularly in the transatlantic alliance. This conflict has highlighted long-standing differences between the U.S. and Europe, especially in defense spending. Trump has repeatedly called for NATO members to increase their military budgets, suggesting a target of 5% of GDP—far above the current 2% guideline. However, many European nations struggle to meet even the 2% target, with some of the strongest economies, such as Spain, allocating as little as 1.28% of GDP to defense. Given Europe’s current economic and fiscal challenges, significantly increasing military spending seems unlikely without increasing debt and deficits.

Europe’s Political Structure and Its Influence on Global Influence

Europe’s modern political system is characterized by decentralization. Most European nations have opted for smaller, more focused governance structures to enhance democratic efficiency and accountability. While this has strengthened domestic governance, it has also led to a fragmented geopolitical presence. As a result, individual European nations often lack the geopolitical weight to act independently, leading to reliance on larger allies such as the U.S.

To counterbalance this fragmentation, European nations have pursued greater integration through institutions like the European Union and the eurozone. However, deeper integration comes with challenges, including bureaucratic costs, regulatory complexities, and sovereignty trade-offs. For instance, issues such as immigration policies and economic regulations have sparked internal disagreements, contributing to events like Brexit.

Economic stability is often a prerequisite for political strength. The EU has strict fiscal policies, such as limiting national debt to 60% of GDP and budget deficits to 3% of GDP. Countries like Germany have embedded fiscal discipline, such as a constitutional “debt brake,” further restricting budget flexibility. Under these financial constraints, significantly increasing military expenditure remains a difficult proposition for most European nations.

Additionally, historical perspectives play a role. Many Europeans remain skeptical about the likelihood of direct Russian military aggression beyond Ukraine, which reduces the urgency for higher defense spending. The economic and political conditions in Europe make large-scale military expansion a challenging endeavor.

Trade tensions between the U.S. and Europe are another key issue. Trump has criticized Europe’s value-added tax (VAT) system, arguing that it creates an unfair trade advantage. VAT accounts for 20-30% of many European nations’ fiscal revenue and is a fundamental pillar of their economic model. Any major changes to VAT policies would require structural shifts in Europe’s taxation and welfare systems, which seems highly unlikely. These debates highlight deeper differences between the U.S. and Europe, where the former follows a lower-tax, lower-welfare model while the latter relies on higher taxation to support social services.

Europe’s post-war economic model has been heavily dependent on U.S. defense support, allowing nations to prioritize social welfare. However, as geopolitical and economic pressures mount—including energy security concerns, the rise of China’s manufacturing sector, and technological shifts such as AI—Europe must reassess its economic strategy. Countries like Germany, traditionally reliant on industrial exports, face significant challenges in maintaining competitiveness.

The political landscape in Europe is also evolving, with increasing support for both far-left and far-right movements that challenge the traditional establishment. These groups often advocate for rethinking European alliances, prioritizing national interests, and reassessing relations with Russia. Political changes in key nations, such as Italy and France, could further shift Europe’s policy direction, especially regarding defense and trade relations.

Europe stands at a crossroads, facing geopolitical, economic, and technological challenges that will shape its future. The continent’s ability to navigate these shifts depends on its economic resilience, political unity, and strategic alliances. As debates over defense spending, trade policies, and economic reforms continue, European nations must find a balanced approach that preserves stability while adapting to global changes. The coming years will be crucial in determining whether Europe can maintain its influence on the world stage or if it will become increasingly dependent on external forces.

Trump’s Latest Interview: Trade Policies, Global Relations, and Economic Strategies

Overview of Trump’s Recent Interview

On February 11, 2025, U.S. President Donald Trump sat down for an interview with Fox News ahead of the Super Bowl. The discussion covered a wide range of topics, including trade policies, international relations, and economic strategies. Fox News anchor Bret Baier, known for his direct questioning, conducted the interview, addressing both Trump’s past decisions and his future plans.

Key Takeaways from the Interview

1. Lessons from His First Term

Acknowledged his initial lack of experience in Washington.
Claimed he had used unqualified personnel but is now better prepared.

2. Views on the U.S. Agency for International Development (USAID)

Stated that many of its projects were unreliable.
Described USAID as “fraudulent” and a “scam.”
Said he tasked Elon Musk with investigating the agency.

3. On Elon Musk’s Role

Reported that Musk provides him with updates.
Expressed admiration and trust in Musk.
Suggested Musk’s team would investigate the Department of Education and the military.
Mentioned Musk’s team consists of highly intelligent individuals.
Assured that Musk wouldn’t personally benefit from these tasks.

4. Trade Relations with Canada and Mexico

Criticized Canada over 30 times during the interview.
Proposed additional tariffs on Canada and Mexico.
Suggested Canada could become the 51st U.S. state.
Argued against “subsidizing” Canada due to trade imbalances.
Stated that if an agreement isn’t reached, the U.S. could impose tariffs of 50-100% on Canadian cars.

5. Tariffs and Economic Policy on China

Indicated current tariffs are just the beginning.
Linked tariffs to addressing fentanyl concerns.
Highlighted China’s dependence on U.S. trade.
Reaffirmed strong relations with Chinese leaders.
Avoided direct criticism of China, instead emphasizing economic discussions.

6. Domestic Political Unity

Questioned the legitimacy of Vice President Kamala Harris’s votes.
Stated that policy differences with Democrats prevent unity.
Suggested economic success is key to national cohesion.

7. Education Policy

Proposed decentralizing education by transferring control to states.
Criticized U.S. education rankings compared to countries like China and Nordic nations.
Claimed Republican-led states manage education better than Democratic-led states.

8. The Gaza Conflict

Stated that Gaza is now uninhabitable.
Proposed relocating Palestinian populations to nearby Middle Eastern nations.
Suggested transforming Gaza into a redevelopment project.
Claimed that funding and support could be secured from Middle Eastern countries.

9. Russia-Ukraine Conflict

Offered vague comments on peace talks.
Deflected questions on how he would negotiate with Russia.
Criticized NATO for inadequate financial contributions.
Suggested the U.S. should reclaim its financial aid to Ukraine through resources like rare earth minerals and oil.

10. U.S. Policy on Iran

Opposed past nuclear agreements with Iran.
Advocated renegotiating a long-term nuclear deal.
Claimed Iran is now in a weaker position and willing to negotiate.

11. Relationship with Congress

Claimed strong ties with Republican lawmakers.
Acknowledged the challenges of governing with a slim House majority.
Called for bipartisan support on tax cuts and government spending.

12. Defense Spending

Supported increasing defense budgets.
Did not elaborate on specific spending plans.
Expressed willingness to negotiate arms reduction with Russia and China.

13. Tariffs and Domestic Economic Impact

Avoided directly addressing inflation concerns.
Suggested tariffs could help reduce the budget deficit.
Proposed imposing new tariffs on steel, automobiles, semiconductors, and chips.

14. Future Leadership within the GOP

Praised Senator J.D. Vance but deemed it too early to discuss his potential as a successor.

Observations on Trump’s Approach

1. Campaign-Oriented Mindset

Continues to emphasize his past successes.
Frequently criticizes President Joe Biden.
Focuses on rhetoric used during his campaign.

2. Self-Promotion and Grand Claims

Frequently highlights his own leadership skills.
Positions himself as a top negotiator and strategist.
Attributes past economic successes solely to his administration.

3. Communication Style

Frequently changes topics and avoids direct answers.
Tends to shift discussions back to his accomplishments and criticisms of Biden.
Often brings up Canada as a target for criticism.

4. Gaps in Policy Details

Lacks clear explanations for tariffs, inflation, and foreign policy decisions.
Provides optimistic projections without specific implementation plans.

5. Approach to Foreign Relations

Takes a strong stance against U.S. allies like Canada and Mexico.
Expresses caution in dealings with Iran and North Korea.
Avoids direct confrontation with China and Russia, suggesting a more strategic approach.

Conclusion

Trump’s interview revealed a mix of aggressive trade policies, strategic foreign relations, and a continued emphasis on his past administration’s achievements. While he remains confident in his approach, his statements often lack clear policy details, particularly on economic and diplomatic challenges. His strategy appears focused on prioritizing short-term victories, especially in dealings with allied nations, while cautiously engaging with global superpowers (you guess who they are)

CN20250210-Global Stock Markets Decline, but Chinese Assets Show Strength

While global stock markets faced a downturn, Chinese stocks, including U.S.-listed Chinese companies, Hong Kong stocks, and A-shares, showed resilience and recorded gains today.

1. U.S. to Announce New Tariffs This Week

During a meeting with Japan last Friday, the U.S. government indicated that it would announce reciprocal tariffs on certain countries this week. Additionally, a 25% tariff on steel and aluminum imports from all countries is set to be announced on Monday. This news has raised concerns that higher tariffs could contribute to inflation in the U.S., potentially leading the Federal Reserve to delay interest rate cuts. In 2025, tariffs and inflation are expected to be key factors influencing global financial markets.

2. Global Stock Markets Experience Declines

Amid concerns over tariffs, U.S. stock markets dropped significantly, with the Dow Jones, Nasdaq, and S&P 500 falling by 0.99%, 1.36%, and 0.95%, respectively. This downward trend extended to global markets, with European stocks broadly declining. In the Asia-Pacific region, most markets followed the same pattern, except for Hong Kong stocks, which remained relatively stable.

3. Strong Performance of Chinese ADRs and Hong Kong Stocks

Despite the weakness in the U.S. market, Chinese ADRs gained 1.75%. Hong Kong stocks also performed well, with the Hang Seng Index reaching its highest closing level since October 8. Meanwhile, the Shanghai Composite Index closed at 3,489 points on October 8, showing that Hong Kong stocks have been leading the recovery.

4. Technology Stocks Drive Market Gains

Since October 14, the Hang Seng Index has risen for 17 consecutive trading days, gaining over 13% during this period. The primary driver behind this rally has been technology stocks. The Hang Seng Tech Index outperformed, surging 24% in the same timeframe, indicating strong momentum in the tech sector.

5. Mixed Performance in A-Share Market

The A-share market showed a mixed trend in the morning session. As of midday, the Shanghai Composite Index and the STAR Market Composite Index rose by 0.31% and 0.82%, respectively. However, the Shenzhen Component Index and the ChiNext Index declined slightly by 0.1% and 0.35%. Market activity remained robust, with total trading volume reaching RMB 1.11 trillion in the morning session, only RMB 367 billion lower than last Friday. The number of advancing stocks (3,399) exceeded declining stocks (1,814).

The overall outlook for A-shares in 2025 is becoming clearer. International investors are increasingly optimistic about the Chinese stock market, accelerating their investment strategies in A-shares and Hong Kong stocks. Domestically, market recovery is evident, with more funds entering the market. Trading volumes have also increased significantly, surpassing RMB 800 billion compared to the last trading day before the holiday.

As the Consumer Price Index (CPI) stabilizes and the post-holiday manufacturing season begins, further policy measures are expected to support economic growth. The market is looking forward to a technology-driven bull run in 2025.

Canada’s Defeat? How Trump’s Tariff Strategy Works

U.S. President Donald Trump has temporarily suspended the 25% tariff on Canadian and Mexican imports but kept the 10% tariff on Chinese goods. Canadian Prime Minister Justin Trudeau reacted on social media, but let’s break down what this really means:

1. Canada Talks Tough but Acts Cautiously

Despite strong words, Canada quickly adjusted once Trump was elected. They tightened border controls and even shared their progress with him. Trudeau personally met Trump at Mar-a-Lago, showing Canada’s willingness to cooperate on trade issues.

2. Tariffs Hurt Canada More Than the U.S.

The U.S. economy is much larger than Canada’s, so tariffs hit Canada harder. The trade relationship is not balanced, making Canada more vulnerable.

3. Trump Used Non-Economic Reasons for Tariffs

Trump justified the tariffs on Canada by citing illegal immigration—an issue that isn’t directly trade-related. This gave him two advantages:

He could use executive power to enforce tariffs under the pretext of a “national emergency.”
He could define “solving” the immigration problem however he wanted. Since the U.S.-Canada border isn’t a major source of illegal immigration, Canada could easily comply by showing effort rather than making real policy changes.

4. Trudeau’s Political Troubles

Trudeau is facing declining support in Canada, especially due to his immigration policies. Many critics blame him for worsening U.S.-Canada relations, arguing that his left-leaning policies caused unnecessary conflicts with Trump.

5. The U.S.-Canada Trade Relationship Is Deeply Connected

Canada supplies the U.S. with essential resources like oil, making them economically intertwined. Many U.S. refineries are specifically designed to process Canadian oil, and Trump supports the fossil fuel industry. So, despite tensions, a complete trade breakdown was unlikely.

6. Canada’s Concession Puts Pressure on Mexico

By resolving its tariff dispute with Trump, Canada left Mexico alone in negotiations. Smaller economies like Mexico can only stand up to the U.S. if they unite, but Trump’s strategy was to divide and conquer. With Canada cooperating, Mexico had fewer options.

7. Trump’s Focus: Fossil Fuels and Automobiles

Trump mainly cares about two industries: fossil fuels and cars. The U.S. auto industry relies heavily on Mexico for manufacturing and supply chains. If tariffs hit Mexico too hard, U.S. car companies and jobs would suffer, making it a politically risky move for Trump.

8. Trump’s Strategy Was Carefully Planned

Trump knew what he was doing by targeting Canada and Mexico first:

He linked tariffs to issues like immigration and fentanyl, which align with his political promises.
He set a precedent for using tariffs in non-trade disputes.
He picked economically weaker countries that depend on U.S. trade.
He wanted to show both U.S. voters and other countries that his tough trade policies work.

9. A Political Win for Trump?

If Canada and Mexico back down, it strengthens Trump’s position. However, this success comes at a cost: damaging alliances and breaking international trade rules.

10. The Bigger Picture: China Is the Real Target

Trump’s trade war isn’t just about Canada and Mexico—they were the warm-up. His real focus is China. While Canada and Mexico could be pressured individually, China will require a different strategy.

Key Takeaways:

Trump’s tariff strategy won’t improve U.S. relations with other countries.
Countries affected by U.S. tariffs will look for alternative trade partners.
The old global trade system, led by the World Trade Organization, has been disrupted.
U.S. isolation from allies could create more opportunities for China.

Now, the big question is: how will China respond?

Why Did Chinese Stocks Surge During the Lunar New Year Holiday?

Last night, four major events caught global attention, with one standing out: the impressive surge of Chinese stocks listed in the U.S. While the broader U.S. stock market remained volatile, Chinese stocks saw a strong rally.

1. Chinese Stocks Surged—Fueled by AI Developments

The rally was largely driven by the growing influence of DeepSeek, a rising AI player, and Alibaba’s latest AI model. Yesterday, Alibaba announced the open-source release of Qwen2.5-Max, an AI model reportedly on par with GPT-3.5. This move reinforced China’s competitive edge in developing high-performance AI at lower costs, prompting global investors to reassess Chinese tech stocks.

The numbers speak for themselves:

The Nasdaq Golden Dragon China Index, which tracks Chinese stocks listed in the U.S., rose 4.33%.
Alibaba jumped 6.22%.
The China Internet ETF saw $105 million in net inflows, the highest since October 2023.

With markets reopening after the Lunar New Year, investors may want to keep an eye on Chinese AI and tech stocks, especially those focused on AI applications.

2. U.S. Tariff Threats—Trump’s Plan to Tax Canada and Mexico

U.S. President Donald Trump announced plans to impose a 25% tariff on imports from Canada and Mexico starting February 1 (tomorrow!). If implemented, this could have several effects on global markets:

Positive for U.S. Stocks: Higher tariffs make American-made products more competitive.
Stronger U.S. Dollar: Past tariff hikes have triggered capital inflows to the U.S.; after the 2018 China tariffs, the U.S. Dollar Index climbed 4.1%.
Market Uncertainty: Trade tensions often push investors toward safe-haven assets like the US dollar.
Potential Fed Response: If tariffs drive inflation higher, the Federal Reserve may consider interest rate hikes, further strengthening the dollar.

3. Trump Criticizes the Federal Reserve Over Interest Rates

Shortly after the Federal Reserve decided to keep interest rates unchanged, U.S. President Donald Trump took to social media to directly blame Fed Chairman Jerome Powell for mismanaging inflation. Trump has a history of criticizing Powell—during his previous term eight years ago, he would call him out almost every ten days for not cutting interest rates.

Trump’s reasoning is simple: lowering interest rates would weaken the U.S. dollar, making American exports more competitive, boosting employment, and driving up the stock market—all of which could increase his political support.

4. Rising Uncertainty Boosts Gold Prices

Market uncertainty is pushing investors toward safe-haven assets like gold. The possibility of new tariffs on major trading partners could lead to trade tensions, while ongoing geopolitical conflicts add to economic unpredictability. In response, central banks worldwide are increasing their gold reserves, making a continued rise in gold prices highly likely.

Currently, gold is trading at around $2,800 per ounce, not far from Goldman Sachs’ target of $2,910. With gold prices up 8% this year and silver surging nearly 12%, the bullish trend is expected to continue.

CN250127-China’s AI Models Might Shake the U.S.

1. Chinese Stocks Surge Amid U.S. Market Slump

Last Friday, the U.S. dollar index took a dive, dropping 0.64% after a sharp 1.22% fall earlier in the week. The U.S. stock market with all three major indexes declining: the Dow Jones fell 0.32%, the Nasdaq 0.5%, and the S&P 500 0.29%.
In contrast, Chinese stocks listed in the U.S. skyrocketed. The China Stock Index surged by 4.25% in one night, reclaiming all its moving averages. Over the past eight trading days, it has gained 11.8%, signaling a strong rebound in Chinese assets.

2. China’s AI Models Spark Market Panic

Over the weekend, the Chinese AI company Deep Seek, a subsidiary of the quant fund giant High-Flyer Quant (幻方量化), caused a stir in Silicon Valley. The release of its open-source AI model, R1, just a month after unveiling its V3 model, sent shockwaves through the U.S. AI and stock markets.
Independent tests in the U.S. suggest that R1 even surpasses OpenAI’s latest model, o1, raising concerns about China’s rapid progress in AI development.

According to global AI model rankings, Deep Seek’s R1 ranks alongside OpenAI’s o1 as the best in the style-control category, with R1 slightly outperforming in specific benchmarks. Meta’s Chief AI Scientist stated that R1’s debut marks a turning point, showcasing how Chinese companies are not only catching up but surpassing their U.S. counterparts. Open-source models, like R1, are now proving more efficient than proprietary models.

What’s even more striking is the cost efficiency of R1. Deep Seek revealed that training R1 cost only one-thirtieth of what OpenAI’s latest model required—an astounding 98% reduction in expenses. This raises critical questions about the future of high-cost AI infrastructure. For example, NVIDIA, the U.S. leader in AI computing, might face significant setbacks if lower-cost alternatives dominate the industry. Similarly, the U.S.’s $500 billion “Stargate Project” for building AI infrastructure could lose relevance.

The unveiling of R1 caused ripple effects worldwide. SoftBank, a key player in the Stargate Project, saw its stock plummet nearly 6%, its largest single-day drop since November 1. U.S. stocks also took a hit—NVIDIA’s share price fell over 5% in after-hours trading, and Broadcom’s dropped more than 4%. Futures for the Nasdaq index fell over 1.2%, and even Chinese A-shares related to AI dipped after initial gains.

The current shifts might highlight a challenge to US: China has discovered a breakthrough in the AI race, challenging the dominance of U.S. companies. While this may create turbulence in global markets, it’s a long-term positive for Chinese assets. As approach the Lunar New Year, market sentiment remains cautious, but analysts predict a post-holiday rally fueled by both domestic and international investments.

The Hidden Player in U.S. Politics: The Rise of UAE’s Lobbying Power

The UAE has emerged as a significant player in shaping U.S. foreign policy, leveraging its lobbying efforts and influence in the Middle East.

A Key Beneficiary of Lobbying in the Middle East

In recent years, the UAE has expanded its influence across the Middle East while playing an active role in U.S. foreign policy decisions. Despite pledging to exit the ongoing conflict in Yemen in 2020, the UAE continues to maintain significant military influence in the region. Alongside other Gulf nations, the UAE normalized relations with Israel through the Abraham Accords, marking a milestone in Middle Eastern diplomacy. Additionally, the UAE remains a key recipient of U.S. military support, purchasing billions of dollars in weapons annually. Culturally, the nation also hosted the 2020 Dubai Expo, a global event that showcased its growing global presence.

Between 2020 and 2021, 25 organizations registered under the Foreign Agents Registration Act (FARA) to represent the UAE’s interests in the U.S. These groups reported over 10,700 interactions with U.S. policymakers and received $64 million for their services.

A well-organized lobbying team based in the U.S. has been instrumental in shaping U.S. policy toward the Middle East. In November 2022, The Washington Post revealed a classified intelligence report detailing the UAE’s extensive efforts—both legal and illegal—to influence U.S. politics in favor of its interests. The report, compiled by the National Intelligence Council, flagged these activities as a national security concern.

Although the full details of the report remain classified, the UAE’s influence operations have been well-documented. While the UAE has long been a U.S. partner on key foreign policy issues, it has employed a variety of strategies—both ethical and otherwise—to expand its sway in Washington. A notable case involved George Nader, a Lebanese-American businessman who admitted to funneling millions of dollars into U.S. elections on behalf of the UAE.

UAE has hired former U.S. military officials as contractors, including individuals who held high-ranking positions such as generals and admirals. Notably, Jims (or James) Mattis, who later became the U.S. Secretary of Defense, advised the UAE military before taking on the role. These individuals were awarded lucrative contracts, raising concerns about potential conflicts of interest—especially when they returned to positions within the U.S. government.

In addition, UAE has spent billions of dollars purchasing U.S. military equipment, making it the third-largest recipient of U.S. weapons in the past five years, behind Afghanistan and Saudi Arabia. However, UAE forces operating in Yemen have faced serious accusations of war crimes, including civilian casualties and torture. Even after withdrawing troops from Yemen in 2020, the UAE has continued to support non-state armed groups through training, logistical aid, and financial backing.

The UAE’s involvement in U.S. political and military affairs has become a recognized national security concern. While military cooperation remains a cornerstone of U.S.-UAE relations, the 2020 Abraham Accords further enhanced the UAE’s diplomatic reach. These agreements normalized relations between Israel, the UAE, Bahrain, Morocco, and Sudan. While presented as efforts to promote peace in the Middle East, the accords have been criticized for increasing the militarization of U.S. foreign policy in the region rather than reducing it.

So…Where Does UAE Lobbying Money Go?

The UAE has invested heavily in lobbying efforts, with companies registered under the Foreign Agents Registration Act (FARA) reporting a total income of nearly $64.5 million for their work on behalf of UAE clients. While more than 20 firms were involved, just five received the majority of the funds. The top recipients were:

Akin Gump: $13.5 million
Brunswick Group: $12.2 million
The Camstoll Group: $10.5 million
Teneo Strategy: $7.2 million
The Harbour Group: $6.6 million

Akin Gump, the top earner, is also one of the biggest contributors to U.S. political campaigns. The firm reported donating nearly $1.1 million—about two-thirds of the $1.65 million total donated by all UAE lobbying firms in 2020 and 2021.

It’s important to note these donations are entirely legal, as no foreign funds were used, complying with Federal Election Commission rules that ban contributions from foreign nationals.

The largest recipient was Terry McAuliffe (D-Va.), who received a $200,000 donation from Terakeet on August 31, 2021. Other prominent Democratic politicians linked to UAE lobbying efforts include Senate Majority Leader Chuck Schumer (D-NY) and House Majority Leader Steny Hoyer (D-MD).

While most of the contributions favored Democratic candidates, the lobbying activity itself was bipartisan. Over 450 political campaigns from both parties received contributions from firms working for UAE clients.

In many cases, donations were made to lawmakers directly involved in meetings with UAE representatives. For instance, Akin Gump reported contributing $528,461 to the campaigns of 104 members of Congress they had engaged on behalf of UAE clients. One notable example involved Senator Todd Young (R-IN), who met with Akin Gump on April 15, 2021. Just a week later, the firm donated $5,000 to his campaign.

Despite extensive lobbying efforts by UAE representatives targeting nearly every Congressional office, their main focus has been on key committees. Specifically, lobbyists working for the UAE contacted staff from the Senate Foreign Relations Committee and the House Foreign Affairs Committee more than 200 times.

One of the most frequently contacted individuals was Lee Zeldin (R-NY), a member of the House Foreign Affairs Committee and co-chair of the House Israel Caucus. Zeldin is a vocal supporter of the Abraham Accords, which established peace between the UAE and Israel. Senior members of political parties and leaders of influential committees have also been primary targets of UAE lobbyists.

The UAE’s lobbying efforts extended beyond Congress to include significant outreach to the media. Reports show that UAE representatives reached out to over 500 media outlets, focusing on major publications such as The New York Times (95 contacts), Forbes (61 contacts), and The Wall Street Journal (43 contacts).

Think tanks were another target, with UAE lobbyists contacting them at least 90 times. Notably, the think tanks contacted most frequently—such as the Middle East Institute, the Atlantic Council, and the Center for Strategic and International Studies—have received millions of dollars in donations from the UAE.