Trump Is Set To Cause Another Stock Market Drop

The recent imposition of massive tariffs by Donald Trump, followed by an unexpected pause on certain Chinese products, has plunged financial markets into turmoil. What can we expect in the coming days?

Trump has triggered the trade war

On April 11, 2025, Donald Trump triggered a shockwave by imposing tariffs of 145% on Chinese products. This “Liberation Day”, as the Trump administration dubbed it, was officially aimed at rebalancing trade exchanges and protecting the American industry.

The market reaction was immediate and brutal. The NASDAQ has fallen by 26% from its highs, with technology values particularly affected: Tesla lost 56% and Apple 35%. Meanwhile, U.S. interest rates skyrocketed, climbing from 3.90% to over 4.60% in just a few weeks.

In the face of what some analysts were already calling a “financial cataclysm”, Trump announced a 90-day pause on tariffs for most countries engaged in negotiations, with the notable exception of China. Then, in an unexpected turnaround, he ultimately exempted smartphones, computers, electronic components, and other Chinese technology products from the new tariffs.

Does Trump have 10 moves ahead?

For some, these apparent reversals mask a shock strategy perfectly mastered. The model would recall that of Colbert under Louis XIV, with the tariffs of 1664 and 1667, aimed at reorganizing the French commercial space and then specifically targeting the kingdom’s rivals.

Trump would thus be seeking to implement a reorganization of the global economic space around the United States, with concentric circles: conditional free trade with close allies, progressive tariffs for others, and a near-embargo for China. This structuring would prepare the ground for a confrontation.

The major innovation of this strategy would be the creation of an “External Revenue Service,” a permanent taxation system at a global scale. Trump himself reportedly mentioned that these countries would have to pay very large sums annually. His advisor Stephen Miran also suggested that allies could simply “write checks” to the United States in exchange for privileged access to the American market.

This approach would replicate Reagan’s strategy against the USSR in the 1980s, with the Plaza (1985) and Louvre (1987) agreements, when allies accepted economic sacrifices to contain the Soviet threat. Trump’s method would thus be one of maximum pressure, followed by negotiations, then new pressures if necessary.

The theory of forced retreat

An alternative reading of events suggests that Trump has simply capitulated in the face of financial market pressure and China’s strong position. The collapse of the dollar and the soaring interest rates directly threatened the United States’ ability to refinance its colossal $35 trillion debt.

China, holding more than $1,250 billion in U.S. bonds, has a formidable weapon regarding debt. Without even needing to use it, this threat would have been enough to bring the Trump administration to its knees, aware that a massive sale of U.S. Treasuries by Beijing could have triggered a global systemic crisis.

Several signals may have convinced Trump to back down: the refusal of the U.S. Federal Reserve to lower interest rates due to inflation risks, warnings from Jamie Dimon (CEO of J.P. Morgan) about recession risks, and the flight of foreign capital out of the United States.

For the first time in modern history, global investors were expressing distrust towards U.S. bonds and the dollar.

This situation recalls the case of Liz Truss in the United Kingdom, whose economic policies deemed unrealistic by the markets led to a plunge of the pound sterling, resulting in her rapid resignation.

An inversion of power relations

Beyond these interpretations, an underlying trend is emerging: the inversion of power relations on a global scale. PwC’s projections for 2050 place China as the world’s leading power (20% of global GDP), followed by India (15%), and then the United States (12%).

This reconfiguration is accompanied by a collapse of the declining American soft power. Historically, the United States attracted the best minds on the planet (45% of American doctorates are obtained by international students, notably in strategic fields such as computer science). This ability to attract, based on an attractive societal model and economic opportunities, may erode with isolationist policies.

In the face of these changes, Europe finds itself at the center of the game. China is extending a hand to it, with Xi Jinping explicitly inviting Europeans to “join China in the fight against tyranny”. Some European elites seem drawn to this rapprochement, sharing a technocratic vision of government and a regulatory approach to the economy with China.

However, this Chinese openness masks a risk: if Europe does not shift to the Chinese camp, Beijing could ally with Russia to destabilize the continent, seeking to “tear it apart” or neutralize it to deprive the United States of strategic allies.

Trump accelerates the end of a world

The sequence of Trump’s tariffs, whether stemming from a deliberate strategy or a forced retreat, illustrates the shift of the global economic center towards Asia. This movement does not signify the immediate end of American power but heralds an era of multipolarity and new rivalries.

The American economy retains undeniable strengths: robustness of economic indicators, capacity for innovation, attractiveness of its universities. But the record public debt, vulnerability of the dollar, and increasing dependence on external funding represent structural weaknesses.

In this global reconfiguration, other powers are seeking to carve out their niche. India, in particular, aspires to become “the new workshop of the world” instead of China, which naturally inclines it towards an American alliance. This dynamic could rekindle Sino-Indian tensions at the border.

This transition is set to be a long process, of which the tariffs are just the first visible phase. The outcome of this confrontation, whether through deliberate strategy or forced adjustments, will determine the balance of power for the decades to come.

In the immediate term, Trump may have saved financial markets from a collapse, but the question remains: how long will this precarious stability last in the face of forces reshaping the global chessboard? As Ray Dalio points out, we are witnessing live “a passing of the baton” that is historic between dominant powers, a cyclical phenomenon that has marked the history of humanity.