the Rivalry between China and the United States has been one of the world's most important economic and geopolitical stories for years recently however there has been a growing strain in this relationship stock markets open just a few minutes ago and it's not pretty down big especially the tech heavy NASDAQ CN Matt Egan is here to explain what we're seeing and why mat tech stocks plummeted Monday as investors raised concerns about advancements in Chinese artificial intelligence on one side is the Trump L us which wants to maintain its dominance in global trade and Finance on the
other side is China which is trying to play a decisive role in world markets by increasing its superiority in production and exports both sides are using big Trump cards imposing tariffs against each other targeting technology companies and developing diplomatic moves recently the news that China has wiped out $1 trillion dollar that would have put the US economy in a difficult situation has caused a great deal of outcry guest is quite clear on his stance on deep seek saying it's another way China is undermining American players When Donald Trump assumed the presidency under the slogan America
first he developed tough policies against China aimed at closing the trade deficit and protecting American Producers tariff Wars began tariffs were imposed Tech Giants were targeted and the ground was laid for China to invest Less in US Bonds in this process China's and Asia's reactions were not as mild As Trump had hoped on the contrary China has strengthened its own alternative markets and entered into new trade agreements in the asia-pacific region it retaliated against us tariffs creating a challenging Market environment for American farmers and producers however the most challenging move for the Trump Administration and
the US economy has been China's recent sale of US Treasury bonds and the unpredictable impact of Aid driven algorithmic trading on the US Stock Market this is suddenly created A1 trillion doll hole in the US economy when we first hear it it sounds a bit dramatic and even scary a trillion dollars and in one Fell Swoop China's ability to shake the US economically is nothing new scenarios such as what would Washington do if Beijing sold its huge Holdings of US Treasury bonds or would China wreak havoc on American markets with a trade War have been
talked about for a long time but the talk of wiping out one1 trillion is nevertheless unsettling some believe that this figure is the cumulative effect of China's withdrawal from American bonds and stocks the depreciation of some sectors or the difficulty it has put the US in by redirecting Global Financial flows is this an exaggeration or is this really the case in this picture the question is the US economy in trouble comes to mind you know the saying the US is the world's largest economy of course it won't collapse easily but on the other hand we
worry still with China growing so much isn't the US shaking anymore it can be confusing there are huge numbers flying around $1 trillion and this is bigger than the annual budget of an entire country you see people can be intimidated we can't help but ask did such a move really happen did $1 trillion suddenly fly out of the US economy of course the US has a huge economy the idea that there would be an instant collapse just because China sold bonds or China pulled the market is not very realistic but this does not mean that
there will be no impact the loss of a major buyer of US debt such as China means that treasury bond yields will rise and US public debt will become more expensive moreover if the financial markets Panic from time to time the stock market could lose hundreds of billions perhaps close to a trillion dollars in a few days this would lead people to cry 1 trillion has evaporated when we read news like that we humanly Panic oh is the economy collapsing let's talk about Donald Trump's miscalculation his biggest claim was to close the trade deficit with
China and protect American workers but the tariffs have not only increased the damage on both sides China has been left with no alternative and US farmers and producers have been hit by Chinese retaliation American consumers even faced more expensive products as the global supply chain was disrupted thus Trump's we will be the winners rhetoric May have been a bit disappointing nevertheless one way or another Trump has brought the Chinese threat to public attention with these steps China did not sit idly by and seemed more willing to use its economic leverage such as reducing the demand
for us Bonds in this process figures like $1 trillion are being bandied about in a way Trump wanted to hit China but China shook the US is the US economy in trouble I think the US will recover it has been in and out of Crisis for years years but serious analysts remind us that public debt in the US is at record levels that it is difficult to roll over debt when interest rates rise and that the US financing deficit could widen if China and other large Reserve holders do not buy bonds these are things that
could lead to a serious recession in a few years one worries wow could even the big us have trouble rolling over its loans so very large 1 trillion fluctuations could at some Point put the US economy in trouble the US still has the pillars of Technology Innovation defense consumption power and the dollar status as a reserve currency it is not a country that will give up easily but in trouble means slowing in growth deepening budget deficits increasing political tensions and perhaps even a recession China certainly has the potential to weaken Washington's Hand by triggering these
problems Trump may have ignored this potential when he said we win easily in reality even if China wears down it could make moves that could also wear down the US China's $1 trillion doll Trade Surplus existed before Trump took office but he promised to close it immediately he did not succeed and global trade has become more complicated with the pandemic now the question arises is China running record trade surpluses again yes China still has a huge Trade Surplus and the US is still running a trade deficit this justifies the question has Trump's plan completely failed
some studies suggest that even if the US brings back some production it is unlikely to fundamentally change Global competition this is because multinational companies are looking for optimal costs not only in the US China but all over the world of course there are also thesis such as China's investment and fund movement supported by new technologies have caused the us to lose $1 trillion dollar in value in particular it is said that artificial intelligence supported algorithmic trading can create great volatility in American Stock markets a sudden drop in the NASDAQ can cause billions of dollars in
company values to disappear if this continues for a few sessions it is not impossible to reach the trillion dollar lost headlines on the one hand alas how can so much value disappear in such a short period of time while at the same time realizing that the markets are very sensitive the moves of a Chinese startup or fund can really cause such volatility so this Erasure of 1 trillion is a multif faceted issue Bond sales stock market manipulation trade surpluses economic sanctions are a combination of all of them all of them send a message to the
US don't relax we will use our power the US economy is resilient but not entirely safe the public and political circles sometimes Express concern our public debt is too big competitors like China could do us a lot of damage if they wanted to they are surprised and angry that China is rising so fast ignoring safeguards and still running huge trade surpluses sometimes there is public outcry this China has taken our jobs and now it is destroying our financial markets on the other hand Chinese people complain that America is limiting Us in technology and imposing unfair
tariffs an escalation of tension between the two societies is of course frightening for world peace and economic stability when we look at this picture the answer to the question what did Trump miscalculate is largely he underestimated China's resilience and Global networks the the idea that we can win the trade war in an instant with simple tariff decisions did not materialize it also emphasized that the fight is long and complex and requires a patient strategy debt sealing crises political polarization and a wave of inflation are wearing America down and the American economy fears it China sees
this as its advantage in such a situation a$1 trillion or similar numerical shocks are worrying so what happens in the long run the positive scenario is that the two giants reach a comprom romise at some point and restabilize trade and financial relations the negative scenario is that they escalate their mutually damaging moves leading to a two Block World economy which will happen depends on the behavior of leaders and societies at the moment there is great uncertainty even if the US is in a bind it can be creative and flexible and come up with new Solutions
while China can continue to develop its trade power while facing us obstructionism as long as this conflict continues we will more headlines like $1 trillion evaporated in short this issue between the two giant economies is for now a different and striking expression of the US China tension indeed $1 trillion doar may not have disappeared in a single day but the combination of China's moves and the vulnerabilities of the American economy could have the potential for such a total loss Trump may have underestimated China's power in this equation when he took the steps he envisioned as
easy victories at the most it is unclear who will suffer more in this fight but what is clear is that the world economy is very tense and people are worried about what are these two Giants doing
