In the intricate web of global economics, the interplay between the United States and China remains a focal point. The analysis of China's non-tariff barriers and currency policies highlights their significant influence in the ongoing discussion regarding reciprocal tariffs. As China grapples with economic imbalances, experts suggest an increased focus on consumption as a potential remedy. Meanwhile, US Treasury Secretary Scott Bessent underscores the importance of tariffs as a pivotal funding source for the Trump administration's plans. His strategy includes reducing spending and easing monetary policy, alongside efforts to lower Treasury yields.
Attention is drawn to the 10-year Treasury yield, which is expected to decrease as a consequence of President Donald Trump's policies. The contraction of term premiums is anticipated, driven by market confidence in the US government's long-term fiscal outlook. The US government’s current debt plan is considered robust for several quarters, further reinforcing this confidence. In this landscape, President Trump seeks to diversify sourcing and processing of critical minerals, with Australia positioned as a potential key player in this initiative.
The article sheds light on China's likely continuation of its economic imbalances, which could have far-reaching implications. A 3% fiscal deficit-to-GDP ratio is proposed as a target to stabilize economic growth. Concurrently, the recent corrective movement in gold prices has seen the yellow metal surpass the $2,900 mark per ounce troy, reflecting volatility in global markets.
The US Dollar faces an intense downside bias, coupled with declining US yields. This scenario underscores the critical role tariffs play in the Trump administration's strategy, aimed at enhancing US industrial capacity. However, it is essential to note that this analysis is not intended as investment advice. The views expressed are those of the authors and may not align with the official policy or position of FXStreet or its advertisers.