Trump gets caught in his own tariff trap. America-China chip war
Trump gets caught in his own tariff trap. America-China chip war
The world's largest company NVIDIA was refused by America to sell its most advanced chip to China.
After this, Nvidia made another advanced chip H20.Advanced Chinese companies like DeepSeek were going to buy it.
Nvidia had invested a lot of money on it.
But in a TV interview last month, US Commerce Minister Howard Lutnick had said that he would sell this chip to China.
On selling, he said, "We are not selling them our best product.Not even the second best, not even the third best.
And then China refused to take this chip.Xi Jinping told his companies to make and use advanced chips themselves.
Who suffered losses due to this?
The world's largest company, Nvidia.
Whose share prices fell?
American Company NVIDIA
This is not the only American company that is bearing the brunt of this trade war.
The list of companies suffering losses is long.
And it is now impossible to prevent the impact of their losses from reaching the customers and the economy.
President Trump brought out his big tariff board and pushed the global economy into the abyss.
The tariff debate was quiet after countries around the world lined up outside the White House.
The data on the US economy has added spice to it again.
The tariffs were imposed to save the US economy but they are having the opposite effect.The US dollar is falling.
The government is collecting record revenue from tariffs but unemployment is rising...
Why is nothing making sense?
Let's first understand how tariffs work and what Trump wanted them to do.
Importing goods means sending your currency to other places in exchange for goods made elsewhere.
Sometimes governments impose tariffs or taxes on imported goods to protect local jobs.
This makes imports more expensive.
People import less, there is less competition for local businesses.
In theory, this should boost local production and keep the country’s money in the country.
The theory goes that tariffs mean imports will fall and the local economy will strengthen.
But that theory is not entirely consistent with reality.
Imports are still continuing, and the dollar has weakened against almost all major currencies in the world.
The US dollar index was at 129 points at the start of 2025 and reached 120 by June.
Its value rose in 2024, while it was relatively stable in 2023.
The decline in the first half of 2025 is the biggest since the 1970s.
How did this happen?
At first glance, tariffs should strengthen the currency, and the normal thing is that if you do that to begin with, it should lead to increased demand for your products.
But instead we saw the dollar fall.
What could be the reason for this?
I think the main reason is falling confidence in US economic policy.
A fall in the dollar simply means putting all US capital up for sale at once, making it cheaper against foreign currencies.
And the reason for this capital sale is that people are less enthusiastic about American financial capital in this environment.
Tariffs were imposed to reduce imports and encourage local businesses.
But America is still importing heavily.
In the first half of 2024, America earned about $50 billion from tariffs.
In the same period in 2025, it has doubled to $100 billion.
US Finance Minister Scott Besant has said that by the end of 2025, this figure will cross $300 billion.
Hopefully it will go away.
So do the American people have it all now?
No, I would say it is the opposite.
It is the American people who are suffering losses in this trade war.
Some capital has come in but this is a huge increase in taxes.
Whenever you increase taxes, capital comes in.
And usually the President does not go on news channels and say, look, I have increased your taxes.
We should all be happy with this.
But this is what is happening right now.
People are paying for this increased tax.
Another thing that has been derailed by these changes is jobs.
Trump's tariffs were promoted as not only protecting jobs, but also creating jobs.
That was true until recently.
144,000 new jobs were created in May and 147,000 in June.
But then came the July report.
Only 73 thousand jobs were created this month, which was much less than the estimated 1 lakh 15 thousand.
But later revised job figures were also released, which showed only 14 thousand new jobs in June and 19 thousand in May.
What do these figures tell us about the real impact of tariffs?
We are seeing the failure of Trump's tariff policies in these figures.
The poor job figures are not surprising because tariffs have had a huge impact on the US economy.
This is a big tax imposed on the customers because the same goods that they are buying from the store will become expensive.
But these tariffs are also taxing businesses.
Most of our imports are intermediate goods.
And when you put high taxes on these intermediate goods, you make American companies less competitive with foreign companies.
And that hurts job growth and economic growth.
This isn't the first time tariffs haven't done what they were supposed to.
In the 1980s, tariffs on sugar made sugar more expensive.
Prices went up, and Coca-Cola had to compensate for the higher prices by using high-fructose syrup instead of sugar in the drink.
Imports were having a devastating effect on our industries.
In 2002, George W. Bush imposed tariffs on steel to protect American producers, but they backfired.
Industries that used steel, such as auto and construction, lost jobs and profits.
During his first term, Donald Trump waged a trade war against Chinese goods by imposing tariffs.
We will charge them as much as they charge us.
China retaliated.
Prices went up.
US exports went down.
So has the math changed?
The situation is worse now than it was then.
What we're doing now is raising tariffs by about 19 percent on average across all types of trade.
If you look at US trade in recent years, it's been over $3 trillion.
And the biggest chunk of that is trade with China.
But it's still only $400 billion or so.
So now we are going to impose such high tariffs on a much larger segment of trade.
So now instead of a $500 budget for consumers, it will affect their budget by $2,500.
And that is very bad for consumers.
And it is also a big blow to producers, who will be paying more for raw materials.
Now no matter where they get these raw materials from.
It is easy to show short-term data and call it a victory for the US.
But economic manoeuvring is not that simple.
There are many other aspects at work related to tariffs.
It is easy to show short-term data and call it a victory for America.
But economic maneuvers are not that simple.
There are many other aspects related to tariffs at work.
They affect other things as well, even those areas which are not noticed.
The volcano of these losses may not have erupted and its lava may not have spread yet, but it is boiling and
bubbling.
Tell us by commenting what you think about Trump's tariff strategy, we will bring further updates to you as well, till then Namaskar!
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