Kyle Bass, Investor: An Analysis of Why the U.S. Holds the Advantage in the U.S.-China Trade War

Taiwan • Business • 04/26 06:31
Kyle Bass, Investor: An Analysis of Why the U.S. Holds the Advantage in the U.S.-China Trade War

Renowned hedge fund manager Kyle Bass stated that the United States holds an advantageous position in the US-China trade war because the trade imbalance exerts greater pressure on China. Bass pointed out that China's weak economy, anomalies in the bond market, and weakness in the consumer market weaken its negotiating power. The US, on the other hand, is able to endure pressure for a longer period thanks to robust domestic demand and stable consumer spending. Bass believes that recent indications of concessions by China indicate that it is at a disadvantage in the trade war.

Key Updates

04/27 14:00

Hwa Sheng Co. sells its Chinese subsidiary's shares and reinvests in Taiwan to invest in new businesses to mitigate risks from US-China tariffs.

Hwa Sheng (stock code: 3202) announced on April 27, 2025, the sale of a 37.04% stake in its Chinese subsidiary, High-Tek Harness Enterprise Co., Ltd. (SAMOA), to recover $10 million to accelerate investments back in Taiwan. The company plans to invest in areas such as organic waste recycling, urban-rural development, and agricultural innovation initiatives, while also improving its financial structure to address challenges posed by the US-China tariff war and avoid the risk of being delisted from the stock exchange.

04/27 12:30

US-China Trade War Heats Up: American Households' Dependence on and Challenges with Chinese-Made Products

The US-China trade war is escalating, with tariffs reaching historic highs, and the reliance of American households on Chinese-made goods has become a central issue. Most everyday items, such as kitchenware, toys, and personal care products, are sourced from China. Even though some production has moved to countries like Vietnam and Mexico, the supply chain continues to rely on Chinese components. The high tariffs have resulted in price hikes, and retailers are worried about disruptions in the supply chain. Experts highlight that it is challenging for the US to fully replace the Chinese supply chain in the short term.

04/26 18:00

The Trump administration's trade war eases, the yield on the US 10-year Treasury bond declines, and Treasury Secretary Besent's influence grows.

The Trump administration recently signaled a de-escalation in the trade war, leading to the U.S. 10-year Treasury yield dropping to 4.267%, which helped stabilize market sentiment. Treasury Secretary Mnuchin played a crucial role in policy adjustments, thereby increasing his influence. The market generally views 4.5% as the critical threshold for the 10-year Treasury yield, making it a sensitive indicator for policy changes.

04/26 14:00

Taiwan's network communications industry utilizes AI and 5G technological innovations to successfully overcome US-China trade barriers and expand into the North American market.

Amid rising trade barriers between the US and China, Taiwan's network communications industry has successfully tackled tariff challenges and ensured a stable supply to the North American market by leveraging AI and 5G technology innovations and making flexible supply chain adjustments. Companies such as Accton, Zyxel, and Realtek have made significant strides in the high-end network communications equipment sector and continue to expand their global presence by mitigating risks through a strategy of production diversification.

04/26 07:29

China waives tariffs on some U.S. semiconductor products, but memory chips will still face high tariffs.

Amid the trade tensions between China and the United States, China has exempted some U.S.-made semiconductor products from a 125% punitive tariff, involving eight IC product tariff codes. Companies are allowed to apply for a refund of tariffs paid between April 10 and 24, but memory chips still face high tariffs. Chinese and U.S. officials have both denied engaging in formal negotiations on tariff issues, indicating that both sides have not reached a consensus in trade talks.

04/26 06:31

Kyle Bass, Investor: An Analysis of Why the U.S. Holds the Advantage in the U.S.-China Trade War

Renowned hedge fund manager Kyle Bass stated that the United States holds an advantageous position in the US-China trade war because the trade imbalance exerts greater pressure on China. Bass pointed out that China's weak economy, anomalies in the bond market, and weakness in the consumer market weaken its negotiating power. The US, on the other hand, is able to endure pressure for a longer period thanks to robust domestic demand and stable consumer spending. Bass believes that recent indications of concessions by China indicate that it is at a disadvantage in the trade war.

04/26 06:00

The United States will levy port fees on Chinese shipping firms and ships, which will have limited impact on Taiwanese shipping firms.

The United States Trade Representative (USTR) announced on April 17, 2025, that it will impose staggered port fees on Chinese shipping companies and vessels made in China as a response to China's unfair practices in the shipping, logistics, and shipbuilding sectors. The new policy will be implemented starting October 14, 2025, with a 180-day grace period. Industry experts believe that Taiwanese shipping companies will be minimally affected because of the low percentage of vessels made in China, keeping a neutral stance on shipping stocks.

04/26 05:01

After talks with the retail giant, Walmart informed Chinese suppliers to resume shipments, with the US side bearing the tariffs, creating new dynamics for Canton Fair exporters.

On April 21, 2025, after a meeting between President Trump of the United States and retail giants such as Walmart, Walmart notified Chinese suppliers to resume shipments, with U.S. buyers shouldering tariffs up to 145%. This action attracted attention at the 137th Canton Fair, resulting in some festive product orders being reinstated, while orders for everyday products remained canceled. Exporters highlighted the importance of maintaining supply chain continuity and considered expanding into South American and Middle Eastern markets to diversify risk.

04/26 03:29

Apple plans to shift the production of most iPhones intended for the U.S. market to India by 2026 to address U.S.-China trade tensions.

Apple Inc., due to the trade tensions between the U.S. and China and the pressure of high tariffs, plans to move most of the iPhone production for the U.S. market to India before the end of 2026. Working with Foxconn and Tata Electronics, Apple is expanding local production capacity even though production costs in India are 5% to 10% higher than in China, to tackle the tariff policies. This strategy is intended to lessen dependence on Chinese manufacturing and to counter the high tariffs the U.S. has placed on Chinese products.

04/26 01:00

Beijing is considering waiving tariffs on U.S. imports as the Ministry of Commerce holds intensive consultations with foreign businesses, which include 131 categories of products such as vaccines.

Beijing is considering granting tariff exemptions on U.S. imports, which include 131 categories of products such as vaccines, chemicals, and jet engines. The Chinese Ministry of Commerce has engaged in discussions with over 80 foreign companies and chambers of commerce, seeking confirmation of key items that require exemptions. This initiative aims to alleviate the impact of the trade war on the economy and foreign investment. U.S. Chamber of Commerce President Hart confirmed that certain pharmaceuticals have already been granted exemptions, and the EU Chamber of Commerce has also made initial progress in negotiations.

US-China Trade Imbalance: Pressure Differences Revealed by the Numbers

Kyle Bass, in an interview with CNBC, pointed out that the trade imbalance between the US and China is one of the key factors that give the US an edge in the trade war. He cited data showing that the US imports about $440 billion worth of goods from China annually, which is about 2% of China's GDP. In contrast, China imports only about $140 billion worth of goods from the US each year, accounting for just about 0.47% of the US GDP.

This imbalance means that once trade is disrupted or restricted, the impact on China's economy will be far greater than on the US. Bass emphasized that this asymmetric dependence places China in a more vulnerable position in trade negotiations.

Post-Pandemic Economic Weakness Intensifies China's Pressure

Bass further noted that China's economic performance has been consistently weak since the COVID-19 pandemic, making it more vulnerable to external shocks. He mentioned that China is currently facing a multitude of economic challenges, including a banking system crisis, high youth unemployment, and a persistently sluggish real estate market.

Additionally, Bass specifically mentioned the anomalous phenomenon in China's bond market. He pointed out that the yield on China's 10-year government bonds has risen to 160 basis points, reflecting investors' concerns about China's economic outlook. He bluntly stated, "They are facing a banking crisis, a youth unemployment crisis, a real estate crisis, their 10-year bond yield is 160, yet they tell the world their economic growth rate is 5%. It's obviously a complete lie."

The deterioration of these economic fundamentals makes it more difficult for China to withstand long-term pressure in the trade war.

America's Consumer Strength and Resilience

Bass emphasized that the US, as the world's largest consumer market, has strong domestic demand support. He believes this allows the US to endure the economic pressures of the trade war longer than China.

"We are the largest consumer nation in the world. No doubt, we can hold out longer than China," Bass stated in the interview. He believes that the resilience of the US economy and the stability of consumer spending are key reasons why the US can "win every time" in this trade war.

Covert Trade Negotiations

Despite China's official denials of trade negotiations with the US, Bass believes that both sides are indeed in dialogue. He stated, "We are indeed having these conversations. China will never admit that we are having these conversations, nor will they ever admit that they are at a disadvantage in the negotiations."

Bass's views echo those of former US President Trump, who recently stated that the US and China are "actively" engaging in tariff discussions, although China's Ministry of Commerce later denied this claim.

Signs of Chinese Concessions

Amid the ongoing trade war, there have been recent signs of Chinese concessions. According to reports, China has lifted tariffs on some US pharmaceutical imports, allowing US drugs to enter the Chinese market without tariffs. This move is seen as a signal that China is trying to ease tensions under trade pressure.

Bass believes these actions further prove that China is at a disadvantage in the trade war. He pointed out that while China is unwilling to publicly acknowledge negotiations or concessions, its actions have already revealed internal pressure.

Investor Confidence Shift

Bass also mentioned that investor confidence in the Chinese market is declining. He noted that the rise in bond yields in China indicates a reassessment of economic risks by the capital markets. This shift in capital flow further weakens China's position in the international financial markets.

He believes this trend will make China more passive in future trade negotiations, as capital market distrust will limit the Chinese government's policy space.

References

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