Guojin Macro: Trump's extreme pressure may be difficult to be effective again, the counterattack will impact the US credit and fiscal system.

Born in 1946, Trump spent most of his life under the Pax Americana. His sharp instincts allowed him to see the deep-seated problems in America, and his strong performance skills helped him win the presidency twice. His style of extreme pressure and maneuvering with alliances allowed him to taste success in his first term. However, after several years, the international power dynamics have shifted further, and the same tactics no longer work. Perhaps Trump has his MAGA dream in mind, but the risk of making disruptive mistakes is rising. Fortunately, Trump is flexible in his approach and prioritizes his interests. After timely adjusting his strategy, a new round of power play is underway. 1. Sharp instincts, strong performance As a businessman, Trump can be considered successful. Graduating from the Wharton School at the age of 22, he later joined his father's real estate company, Trump Management Company, and stood out among his five siblings at the age of 25, being appointed as the company's president by his father. Despite facing bankruptcy several times, he gradually became a real estate tycoon in the 1980s. What made Trump a household name was his book "The Art of the Deal" published in 1987, which spent 32 consecutive weeks at the top of the New York Times bestseller list. It was this book that described Trump's signature "extreme pressure" strategy: escalating conflicts, exerting extreme pressure, pushing the situation to the edge of disaster, and attempting to reach a deal at the last moment. Trump's extreme pressure was not effective because of the threats themselves, but because of his sharp instincts and strong performance skills that allowed him to often identify and exploit his opponents' weaknesses. This quality helped Trump win the presidency for the first time in 2016. As a political novice, Trump accurately found America's "silent majority" - white-collar and middle-class workers who had slipped into the lower echelons of society as the wealth gap widened and were forgotten by elite politicians and mainstream media. Trump clearly presented himself as "anti-establishment, anti-elite," proposing to bring back manufacturing jobs through tariffs, building walls to drive away immigrants, promising job opportunities, and slogans like "MAGA" and "America First," unexpectedly defeating Hillary. The same scenario repeated in the 2024 election. A bullet that grazed his ear changed the course of history, as Trump shouted "Fight! Fight! Fight!" in the crisis, surpassing Biden in the polls. After Biden withdrew, Trump's team's campaign against Biden failed, and facing the young and eloquent Harris, the election campaign was at a disadvantage. After some exploration, Trump quickly decided to target "inflation," and he again struck a chord with the working-class in the 2024 election with a resounding victory. In his second term, Trump elevated tariffs as a diplomatic tool. In 2024, the US accounted for 39% of the total trade deficit of all deficit countries in the world, with a deficit size of $1.15 trillion, an increase of 34% from 2017. In an era where the US leads in technology, military, and currency, the US relies on military threats, technology transfer, and the dominance of the dollar to gain benefits. In an age where consumer capacity is far ahead, Trump developed tariffs as a means of extracting diplomatic benefits, with the return of manufacturing being the main polemic to win MAGA support. 2. Extreme pressure, maneuvering with alliances In the 1980s, after rising to fame with "The Art of the Deal," Trump began to frequently express his political views in the media, especially criticizing America's foreign and trade policies. One of the most unique aspects of Trump's thinking is his fondness for maneuvering with alliances, as seen in his dialogue on the famous American TV show "The Oprah Winfrey Show" in 1988: Oprah: Last year, you placed ads in several mainstream newspapers in the US criticizing American foreign policy. Trump, if it were up to you, what would you do? Trump: I would make our allies... Not worry too much about enemies, those enemies who are not easy to negotiate with, I would make our allies pay their fair share. We are a debtor nation, and this country will definitely have trouble in the coming years because you cannot continue to lose $200 billion every year. More than 30 years later, this statement became a vivid representation of Trump's political style. In Trump's eyes as a businessman, allies not only have political value but also have commercial value. With his advantage position in the alliance, the more allies depend on him, the more they have to pay for their membership, while those who are less dependent on the alliance are less affected. Similar examples have frequently occurred in Trump's second term, which is something to be wary of for those trying to bind their interests with him. Musk, considered one of Trump's most important political allies, played a crucial role in last year's election. Since Trump took office, the reforms of DOGE have not taken effect, Musk's wealth has shrunk by over $120 billion, Tesla's stock price has dropped by more than 40%, and in the recent tariff policy, Musk, who is closely related to his interests, has no say. Similarly, in January of this year, Bezos (Amazon), Zuckerberg (Facebook), Arnault (Louis Vuitton), Brin (Google), among others, who attended Trump's inauguration ceremony, all saw a significant decrease in their wealth. The same is true when dealing with the Russia-Ukraine issue. Despite Russia having the advantage on the front lines, Trump is still more inclined to pressure Ukraine and rely on Ukraine's high dependence on US aid to demand mineral rights. After the first mineral agreement was signed and ended in disagreement, a new version of the mineral agreement was proposed. As for NATO and the EU, the logic is the same. These qualities once helped Trump taste success in his first term, but times have changed, and the further adjustments in international power dynamics suggest that extreme pressure may not work again, and may even lead him to make disruptive mistakes. Maneuvering with alliances creates anxieties, and when extreme pressure encounters countermeasures, Trump may face the same force of resistance. For example, the recent reciprocal tariffs were once a concern...Causing capital flight to the United States, a significant depreciation of the US dollar, a significant increase in US bond yields, nearly causing a liquidity crisis and financial turmoil, threatening the credibility of the US dollar and the US financial system.3. Be flexible in handling things, prioritize interests The above-mentioned traits of Trump, while bringing him success, also put him in danger. Another trait that has helped him escape danger multiple times is being flexible in handling things and prioritizing interests. Trump places a high priority on his personal business and political interests and is relatively "receptive" to advice. If it benefits his personal interests, he is willing to engage in alliances, and if it harms his personal interests, he can easily find a way out. Therefore, when the equivalent tariffs caused a significant impact, Trump quickly adjusted his policies, marginalized the hawkish Navarro on tariff issues, and began to let the dovish Kudlow be in charge of communicating with the capital market and stabilizing market sentiment, while letting the hawkish Lutnick be in charge of negotiations with other countries to continue to exploit interests. It is reasonable to expect that if Trump's political interests are further affected due to tariff issues, he will adjust his strategy. Besides US Treasury bonds, a few key factors include Trump's voter base, which is the foundation for his reelection next year. Federal Reserve data shows that as of the fourth quarter of 2014, the bottom 50% of American families only owned 2.5% of the national wealth, while the top 0.1% and top 1% of families controlled 13.8% and 30.8% of the wealth. Looking further into the asset structure of families, nearly half of the total assets of the bottom 50% of families are in real estate, with less than 5% in stocks and funds. In contrast, the top 0.1% and top 1% of families have over 40% of their assets in stocks and funds. This not only reflects the current wealth gap in the United States but also shows an important characteristic of Trump's MAGA voter base: as part of the bottom 50% of the population, they do not have much wealth or many stocks, are not afraid of stock market declines, nor are they too afraid of economic recessions; their main concern is inflation. This is also why the stock market has boomed and the US economy has overheated during Biden's term, yet the Democratic Party suffered a severe defeat. Tariffs will obviously lead to inflation risks, with the size of the risks depending on the tariff game. Trump's equivalent tariffs have put global countries, including the United States, in a "prisoner's dilemma": when all countries retaliate, the impact of tariffs on the United States is greatest and more likely to lead to concessions from Trump; for individual countries, compromising with the United States in exchange for trade benefits can provide a relative advantage compared to other countries; but if all countries compromise and tie their interests to Trump, only the United States will benefit the most. The outcome of the game is still unknown, but in the months following the implementation of tariffs, the trend of inflation in the United States is undoubtedly a key focus. In conclusion, Trump is both smart and crude in handling things, prone to making mistakes but also quick to rectify them, and can be quite "difficult". When dealing with Trump, it may be advantageous to focus on one's own affairs, avoid excessive entanglement, and perhaps make more favorable choices. Risk Warning The description and summary of Trump are mainly based on historical information; Trump's policies are characterized by strong performance and high instability. This article was originally from the WeChat public account "Xuetao Macro Notes"; GMTEight Editor: Liu Xuan.