America’s Goal: Forcing China’s “Rebalancing” — Rethinking Investment Strategies for Q2

The United States is currently at a major inflection point. It has realized that preserving its hegemony is no longer a matter of sheer economic or military strength—it must transform the entire system itself. The current dollar-based global order, rooted in the "Triffin Dilemma," has reached its structural limits. Debt levels are unsustainable, trade deficits persist, and without change, the U.S. risks losing its leadership position.

Thus, America is attempting a paradigm shift.Its goal is clear: to rebuild a real economy centered on manufacturing and industry.Rather than relying solely on financial dominance, it seeks a renewed balance of both industrial strength and financial supremacy.

What America Wants from the New System

To achieve this, the U.S. needs strong global demand for its high-tech products.It must successfully reindustrialize by securing markets willing to purchase American-made goods.However, the biggest obstacle to this vision is China.

China has already grown into a formidable force in industries like EVs, semiconductors, and AI.If China continues its rise in high-tech manufacturing, America’s industrial renaissance would be impossible.

Thus, America must:

• Suppress China's Big Tech sector growth,

• Open China's market to American products,

• Push China to open its financial markets to U.S. capital.

  
  

This intention has become clearer through recent statements by Trump and his close advisors.Treasury Secretary Bessent noted on April 4, 2025,

"China's economic model based on exports is not only unsustainable for China itself but also harmful to the world. They must change—and they know it."Meanwhile, Trump said on April 26,"Unless China gives something substantial, we will not remove the tariffs. By substantial, I mean: Free up China. Let us go in and work. Honestly, that's what we wanted, and we almost had it before they pulled back."

Combining these statements, it becomes clear:The U.S. wants China to take on a new role in the global order—produce less, consume more.

Why America Needs a New System

The U.S. has reached the limits of sustaining its hegemony under the current system.While America has accumulated massive debt, China has risen through powerful production capacity and industrial development, becoming a full-scale competitor in both economic and military power.

Under the Triffin Dilemma, the U.S. must keep running deficits while manufacturing nations like China accumulate surpluses.This structure inherently favors the challenger.Thus, the U.S. must flip the board.

Trump’s "Make America Great Again" movement must be understood in this context.To cancel out unsustainable debt and demote China back to a subordinate position,

• America must restore its manufacturing supremacy, and

• Shift part of the debt burden onto other nations.

This is why tariffs are critical.If successful, America would reconsolidate its status as the global hegemon.

China's New Role in America's Vision

The new role America envisions for China includes:

• Abandoning its challenge in high-tech sectors,

• Becoming a consumer-driven economy that buys U.S. goods,

• Opening its financial markets to U.S. capital for American profit.

If China refuses to give up its industrial ambitions, at minimum, it must allow U.S. financial capital access to its economy.Thus, even if China continues developing, America can extract financial profits.

However, from China’s perspective, this would mean surrendering both technological sovereignty and financial independence.Therefore, China is likely to resist.

America's Preparation for a Currency War

Alongside the tariff war, America is preparing a currency war.

Although the U.S. publicly hints at favoring a weaker dollar during tariff negotiations,the reality is: a stronger dollar is strategically necessary.

Why?

• Tariffs will raise import prices—thus, a stronger dollar can curb inflation.

• Dollar and Treasury trust must be restored. A weak dollar would exacerbate trust issues.

• Higher inflation would justify Fed interest rate hikes, further boosting the dollar’s attractiveness globally.

A strong dollar would pull global capital back into U.S. markets.Meanwhile, China would face growing liquidity problems and investment shortages, eventually forcing it to reconsider financial opening.

This sequence is exactly what America desires.

America's Ultimate Strategic Goals

Summarizing, America aims to:

• Rebuild its manufacturing and financial supremacy,

• Subjugate China economically and technologically,

• Establish a new global order centered on American dominance.

China has three basic options:

1. Delay tactics: Stall negotiations, hoping political change (e.g., a new U.S. administration) will shift the balance.

2. Compliance: Accept America’s new system (unlikely given China's internal politics and national pride).

3. Confrontation: Engage in full-scale tariff and currency wars (high-risk, highly destructive).

The most realistic scenario is option 1—China will seek to buy time.Accordingly, America will likely adopt a mixed strategy:pressuring China hard at times while easing at others, aiming to exhaust its strength over time.

Investment Implications

Given this strategic landscape:

• A short-term asset rebound is possible until early Q3,

• But a sharp downturn is highly likely thereafter,

• Recommended portfolio allocation: 70% cash, 30% risky assets.

In short:the asset market may experience a brief rally, but a major correction looms by mid-2025.Thus, a cautious and defensive investment stance is prudent.