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On a recent flight from New York-Tokyo, I ran into a former Japanese bank official. On the surface I saw a senior, a man who had been fighting. He is working in the 1997 Asian financial crisis (Russia defaulted in 1998, Lehman Brothers in 2008, 2013 “taper tantrum”, Donald Trump 1.0 ERA and COVID-19's “taper taper tantrum”.
Naturally, I asked him what he had to do with the Trump 2.0 trade war. “I’ve been thinking about the distance.” He refers to Gary Larson’s anthropomorphic comic.
He said an airline pilot in particular warned of the unrest of their 300 passengers. In the next panel, we see the pilot waving the yoke back and forth, causing the damage to entertainment.
“We're all on that plane now, and Trump is causing chaos in the controls,” he said. “But Asia certainly didn't have amused.”
Neither bond investors, which simply means more Trump turmoil is everywhere. The same is true of self-causing, which creates a sense of betrayal among Asian central banks, which have long been at the heart of Washington's ability to surpass its means.
Year after year, ten years later, Tokyo, Beijing, Seoul and beyond faithfully purchased U.S. Treasury bills. Now changing. Investors everywhere are questioning the idea that U.S. government debt remains special and not immune to financial gravity laws.
Trump threatens the sanctity of U.S. government debt in a very short time. Governments from Japan to China to Germany want to know the security of large amounts of public savings.
Over the years, a series of U.S. government demand for Asia's Treasury bonds has been taken for granted. However, Trump is the first American leader to directly try to be patient in the Asian central bank. This itself raises questions about the White House’s interest in global stability.
In addition to policy fluctuations, basic fundamentals raise their own questions. When the Trump team fished for more tax cuts and sterilization of the IRS, U.S. national debt was close to $37 trillion.
Meanwhile, Trump's tariff policy threatens to send inflation out quickly. This has given Trump's war with the Federal Reserve a foothold. Trump hopes Fed Chairman Jerome Powell will lower interest rates. Powell believes that inflation is too high to lower interest rates.
The shift in schizophrenia policy has also really shocked investors. In a few weeks, Trump's tariffs on China alone have increased from 10% to 145%. Are they going higher? reduce? This is anyone's guess.
If you were CEO of anywhere that wasn't sure about hiring, hiking salary, investing or risking a new product or strategy last month, you're not very willing to do any of these things right now. And if you are an official who is worried about holding US Treasury bonds, the urge to buy more will be reduced in one minute.
But what about large-scale sales? Any reputation for Japan could cut its nearly $1.1 trillion in government bonds could undermine global credit markets. Beijing dumped a huge chunk of its $760 billion in U.S. government debt.
Last week, rumors said that Bank of Japan, the People's Bank of China, or an Asian monetary authority or another market could reduce the impact on Trump's policy chaos. It can be said that the most attractive financial data in the next few weeks will be the reserves of the central bank.
Of course, this is not that simple. It is reported that officials in Japan, China, South Korea, Taiwan, India or elsewhere are selling dollars that may make us yield higher. This could undermine the global financial system in unprecedented ways. In addition to the massacres in the market, shock waves may also cause our consumers to close their wallets.
In contrast, Asian governments may suffer losses from the treasury may be preferable to global crisis. Indeed, Japanese officials say they do not intend to use U.S. debt as a tool for tariff retaliation.
However, if China goes this path, BOJ officials will face some very uncomfortable decisions and trade-offs. Especially in the case of a bilateral trade talks between Prime Minister Shigeru Ishiba and Trump’s team.
These risks also make Powell's job even harder. If he lowers interest rates to please Trump, inflation could cause higher rates and damage dollar trust. The risk of inflation is also intensifying due to Trump’s tariffs.
The Fed's loss of control over inflation could significantly reduce demand for U.S. Treasury bonds. Trump's design on putting pressure on the Fed's mandate Powell's board of directors may end up doing the same.
People don't need to be addicted to conspiracy theory to worry that China may evade the treasury. Washington's chaos-collision fiscal policy with Trump is becoming increasingly detailed, and the U.S.'s last AAA credit rating may be in trouble.
Moody's silence on investor services was the last to rate the United States as the highest rating. The same goes for S&P Global and Fitch ratings, both of which evaluate the U.S. Economic AA+.
However, as Trump causes damage to the U.S. market, China looks like strength, stability and the backbone of capitalism. Trump's self-deception of the trade war is just one way to reappear China's ambitions for economic dominance.
