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THERE IS NO WORLD TRADE WITHOUT CHINA…

Question…what would world trade look like without China? China is the world’s largest manufacturing plant and the largest trading partner for 70% of the world’s economies—the EU, much of Asia, and many developing nations. Its role as a manufacturing powerhouse and supplier of essential goods, from electronics to textiles and critical minerals, makes it nearly irreplaceable in global supply chains.

No country can duplicate China’s highly optimized production ecosystem at scale and cost, making it a partner that no serious business can do without.

In 2024, China exported 3.58 trillion—up 5.9% from 3.51 trillion in 2023, which makes China the world’s biggest exporter. 

While the argument of making American manufacturing great again makes sense, the cost to build in America makes the products manufactured uncompetitive in the world market if you have to go up against China. 

After World War II, in the mid-1940s, America transitioned into a service economy. The shift accelerated through the 1950s and 1960s, with the service sector surpassing manufacturing as the main source of employment and GDP by the mid-1950s.

The service sector now dominates the U.S. economy, contributing over two-thirds of economic activity and accounting for the majority of employment and consumer spending.

Today, four out of five private-sector American workers are employed in the service sector. With that being said, I can’t see American workers making sneakers and sewing garments, so there has to be a trade-off in this tariff narrative. 

This is why I feel that if there is a deal to be made, it has to be a traditional deal where both parties win. The United States can no longer treat China like a developing nation when  China consistently ranks among the top three global investors, accounting for roughly 11% of global outbound investment in recent years. So, if there is a deal to be made, it has to be respectful of China’s position as a global manufacturing powerhouse. 

In fact, the roles have reversed—since we are a service economy, we need China more than the U.S. would have the world believe.

China may not be able to defeat the dollar as the world’s reserve currency, but it can create supply chain bottlenecks, for example. 

China is a mining behemoth: 

• China accounts for about 69%–70% of global rare earth elements (REE) mining and over 87% of REE processing.

• For heavy rare earth metals, China produced 90% of the world’s supply until 2023. 

• China is the leading producer for 30 out of 44 critical minerals identified by the U.S. government.

• China dominates global graphite production, with the U.S. importing 42% from China.

• Other minerals (like antimony, bismuth, tungsten): China supplies 20–70% of U.S. imports.

So, even if production shifts to countries like Vietnam or Mexico, suppliers often remain dependent on Chinese raw materials, parts, or machinery. 

Recently, the U.S. has placed licensing restrictions on the shipment of NVDA H20 chips, and in kind, as of April 2025, China requires special export licenses for seven key rare earth elements and related magnets, primarily targeting “heavy” rare earth metals vital for U.S. defense and high-tech industries. 

This back-and-forth almost feels like two disenfranchised lovers going through a painful breakup, where both parties know they need each other, but they are unwilling to come to terms. 

Both countries are too big to fail, but the question is…can they succeed without each other?

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TRUMP’S GAME OF LIARS POKER…

As a poker player, recognizing a bluff is and can be one of the biggest pay-offs; once you have a read on a player, it’s as simple as taking candy from a baby. All it takes is a little bit of patience, a couple of strategic traps, and a donkey and his chips will soon part. 

I say this to say—could China’s Xi Jinping have a read of Donald Trump and could Trump have tipped his hand in the tariff negotiations? You never want to go up against the big stack unless you are dominant and in position.

Let’s refer to GDP as chip stacks. China with 18 trillion and the U.S. with 29 trillion—although the U.S. dominates with over 50% more chips, all it takes is a few critical errors on behalf of the U.S., and China could secure an amazing upset. 

Now the question is, did Donald Trump blink or show his hand when the treasuries peaked at 4.58% 2 weeks ago by pausing tariffs for 90 days?

Any great player reads the player, the board, and the possible cards the next player has, as well as the percentage that a needed card may hit the table. 

In this case, did Xi Jinping notice the stress points that could give China the advantage or leverage in the trade war? The pink elephant I am referring to is higher treasury yields and a declining stock market. 

Here’s why.

Normally, when the stock market falls, investors sell stocks and seek safety in U.S. treasury bonds. In this case, both the stock market and bond prices were falling, which meant investors felt both bonds and the stock market were unsafe. 

The evidence was the rising yields, which meant investors were selling bonds. This was enough for Donald Trump to heed the words of the bond market. 

The bond market was flashing a red light, and it was so bright that Xi Jinping saw it all the way from China. 

The second issue was the uncertainty that followed as the dollar fell almost 10%, which signaled investors were selling dollars and potentially all related assets. The final straw was that the street didn’t like the name-calling and bad mouthing of the Fed's head statesman, Jay Powell.

It wasn’t enough that the tariff policy shook the entire world, but the laser beam-guided attacks by the president shook the entire treasury and stock market. This was enough information to let Xi Jinping know where China stood in the negotiations

In this case, the sheep became the lion, and it wasn’t long before Trump walked back his comments, stating that he has no intention of firing Jerome Powell. Then, Bessent started soft-speaking about China and the willingness of the U.S. to come to the negotiating table. 

The only problem is that it seems very choreographed as if Bessent was trying to put a band-aid on the market because China stated that there was no trade talks taking place between the U.S. and China, which means the ball’s in Trump’s court to initiate but coming to the table too quick would make Trump look weak and we all know how humble Trump is.

The more detrimental issue was Trump was spooking the treasury market and treasury owners and this could upend the entire financial system, which means all Xi Jinping has to do is be patient and slow play his aces in position while there are two aces in the board with no sign of a royal which means has the nuts.

With that being said, it is a matter of time before the Trump administration has to tread lightly because if not, we risk our country’s stability and credibility at the hands of a self-inflicted trade war. 

Top Wall Street executives from top U.S. retailers and financial institutions privately and publicly cautioned the administration that the tariffs, especially those targeting China, are causing supply chain disruptions, threatening empty store shelves, and creating financial turmoil.

During the Oval Office meeting, the CEOs of Walmart, Target, and Home Depot warned President Trump that his planned tariffs could quickly disrupt supply chains, potentially leading to empty store shelves and higher prices within weeks.

Just one day after the meeting, Trump publicly announced that the new tariff rate on Chinese goods “won’t be anywhere near” the previously announced 145%, signaling a substantial reduction in the scope and severity of the tariffs.

Major Wall Street banks, including Deutsche Bank, have downgraded their outlooks for the S&P 500, citing the expected drag on corporate profits from Trump’s tariffs.

This softening of Trump’s tariff stance was widely attributed to the urgent warnings and economic arguments made by the retail CEOs during their meeting.

In short, Trump had to stop bluffing and go all in with Seven Deuce because the market was sick of his game of Liars Poker. 

 WHEN INVESTING BECOMES A LIFESTYLE YOU WEAR IT!

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Kevin Davis Founder of Investment Dojo and Author of The C.R.E.A.M. Report