Global trade is being reengineered—by force. President Donald Trump has launched a sweeping overhaul of the world’s commercial structure through his bold tariff offensive. Rarely in recent history has international trade dominated headlines like it does now. On Monday, the two superpowers—China and the United States—reached a major step toward defusing their high-stakes conflict.
Donald Trump, master of the social media battlefield, announced the deal in characteristically direct terms on his platform “Truth Social,” calling it a “reset” in U.S.-China trade relations.
According to Trump, U.S. tariffs on Chinese goods will be reduced from 145% to 30%, while China will cut its tariffs on U.S. goods from 125% to 10%. A 90-day moratorium is now planned for hashing out the details. The days of China exploiting the U.S. are over, Trump said, pointing to last year’s staggering $295 billion U.S. trade deficit with Beijing.
Reshaping the Trade Architecture
This tentative agreement follows on the heels of the first major deal the White House concluded with the United Kingdom just last Friday. The diplomatic gears are turning, and it’s becoming clear that we’re on the cusp of a fundamental reshaping of global trade relationships.
Trump’s approach marks a sharp break from the bipartisan consensus of the past three decades—a consensus that outsourced American manufacturing, empowered globalist institutions, and left communities across the U.S. heartland gutted. In Trump’s worldview, trade isn’t just about economic efficiency—it’s about sovereignty, national strength, and restoring dignity to American workers. That vision now forms the core of what he calls the “great reindustrialization.”
Trump has repeatedly called attention to the structural flaw at the heart of the current system, a dynamic economists know as the Triffin Dilemma: the country issuing the global reserve currency—in this case, the U.S.—must run twin deficits in its budget and trade accounts in order to supply the world with credit and currency liquidity.
These exploding deficits correspond to outward flows of U.S. Treasury bonds and dollar reserves, needed to support global trade and credit markets—most of which are still dollar-denominated. As the global economy has grown, so too has the demand for U.S. dollars, putting increasing strain on America’s balance sheets.
Since the establishment of the global financial order at Bretton Woods in 1944, the U.S. has effectively offered the world free access to its financial infrastructure. This open system, a public good in many ways, has resulted in an overvalued dollar and a dramatic deindustrialization of the United States. Manufacturing now accounts for only 10% of America’s GDP. U.S.-based production has simply become too expensive. For comparison: even in industrially declining Germany, manufacturing still contributes around 19.7% of GDP.
The result is a devastating loss of domestic value creation, manifesting in regional economic decline (Rust Belt), drug crises, and cultural decay.
Currency Market in the Crosshairs
Strip away the mythmaking surrounding Trump’s tariff policy, and it’s clear the real battleground is currency. Tariffs are America’s lever for confronting the currency manipulation tactics employed by its trade partners. Trump has long warned about the overvaluation of the U.S. dollar, arguing it robs U.S. businesses of global competitiveness. This also explains his repeated pressure on the Federal Reserve to lower interest rates and unleash credit growth.
At the heart of the issue is the chronic undervaluation of the Chinese yuan, which Trump sees as the root cause of distorted global trade flows. For context: China posted a jaw-dropping $996 billion trade surplus last year—around 1% of global GDP. In a functioning system, that would cause the yuan to appreciate sharply, correcting the imbalance. Instead, the opposite has happened.
This is due to systematic intervention by the People’s Bank of China. Rather than converting its dollar earnings into yuan, it has consistently bought U.S. Treasuries, neutralizing the pressure for the yuan to rise. Chinese companies also issued $88.5 billion in offshore dollar-denominated credit last year. When the PBOC buys that paper with newly issued yuan, it further devalues its currency. Since the last financial crisis, China has managed to devalue the yuan by roughly 15% against the dollar—despite growing surpluses.
Targeting the Power Core of the CCP
Trump’s assault on this currency regime is risky—it strikes at a vital domestic power lever of the Chinese Communist Party. A yuan appreciation would raise Chinese household purchasing power, expanding the domestic consumer market. But that shift would empower China’s private sector, potentially destabilizing CCP political control. Nothing worries China’s ruling class more than an independent, economically ambitious middle class.
In the next 90 days, all eyes will be on the yuan. Even a modest appreciation could signal that Washington and Beijing have agreed on a face-saving plan for gradually realigning trade flows. Should the U.S. government succeed in launching a manufacturing revival, the trade deficit could begin to shrink meaningfully.
Europe: The Hard Nut to Crack
So, is the trade war cooling off after all? When it comes to Trump’s stance on the European Union, don’t bet on it. Expect fireworks. Trump has deliberately targeted the core of Europe’s industrial base—Germany’s automotive sector—with a 25% punitive tariff to apply maximum pressure from the outset. As Trump himself put it, the EU is a “hard nut to crack.” The U.S. runs a $50 billion trade deficit with the bloc. And as with China, central bank policies are key: the European Central Bank’s bond-buying programs and bailout mechanisms have kept the euro artificially weak, perpetuating imbalances.
What’s more, the EU has built an energy-dependent, heavily protectionist trade wall—thinly veiled as climate regulation—to insulate itself from foreign competition. Brussels’ power lies in its control over access to the European market: 75% of customs revenues flow directly to the European Commission’s coffers. Its aggressive regulatory stance toward U.S. tech firms—resulting in billions in fines—will be another sticking point in negotiations. In April alone, the EU imposed penalties of €500 million on Apple and €200 million on Meta under the new Digital Markets Act (DMA).
These examples underscore the protectionist DNA of EU trade policy—one that harms competition and ultimately drains purchasing power from European consumers.
Final Act: America First, Not Global Last
Should these U.S.-EU negotiations culminate in a real reduction of hidden trade barriers and meaningful market access for U.S. companies—especially in agriculture—the drama of “Liberation Day” will have paid off even for Europe. And if this shift reduces Brussels’ grip on trade policy, it should be welcomed as a victory for sovereignty, subsidiarity, and economic freedom—for Americans and allies alike.
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Thomas Kolbe, born in 1978 in Neuss/ Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.
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