Blood on the streets: My opinions on the current trade war and an extended commentary on the Chinese stock market along with the stocks that I own

The end of an era

Well, hello everyone, the last few days have well been exceptionally wild and unpredictable. When I posted my last article about the U.S. and the New Cold War— my open rate was about 26%, the lowest that I’ve ever had. To my surprise, it just jumped up to about 49% after Trump’s “liberation day”— which in hindsight, I should’ve expected. To most of us, Trump’s “liberation day” felt like a sorry excuse for extending April’s Fools Day but as of right now, when tariffs have officially been imposed, it seems like anything but a humorous joke. I think it’s only right of me to begin by making one thing clear— this isn’t about exploitative tariff regimes at all— most countries, at least the ones that have been hit by high tariffs don’t either don’t have any or have minimal tariffs against U.S. products. If you can spare the time to read Stephen Miran’s (Chair of Trump’s Council of Economic advisers) policy paper outlining tariffs and how he sees them then things will start becoming a lot clearer and simpler.

Well let’s break it down. Firstly, the formula used to calculate the tariff levels to be imposed on various nations wasn’t based on the tariffs that these countries impose on the U.S. but rather the amount of their trade deficit. If you actually sit down and try to analyze the formula that the White House released then, well even if you have elementary level math skills like me, you’ll quite easily figure that the long elaborate formula basically cancels out to be: trade deficit/imports *100, then in classic Trump fashion, he divides this figure by half to arrive at his final conclusive amount of “reciprocal tariffs” that aren’t reciprocal whatsoever funnily enough. Thus, if there are any countries that are trying to negotiate with Trump on the basis of zeroing out their tariffs then they’re either doing one of two things— underestimating this administration’s “twisted” intelligence and/or trying to buy some time for themselves, considering this to be some sort of opportunity for them if they can just twist a few terms and conditions to their liking. My thinking is that this belief is completely wrong.

Secondly and perhaps more poetically, I am tending to draw more and more parallels between American actions under Trump and the final days of China Evergrande Group, which I've written in detail about in my real estate article (check it out if you’re interested). When Evergrande was on its last legs during the Chinese housing crisis, they started imposing harsher and harsher terms on both their employees and suppliers, they were given a simple choice— quit and lose your job or sell our debt to your friends and family, anyone you can find— essentially either lose your livelihood or comply in our multi level marketing scheme. The employees and suppliers who stuck around ended up doing a lot of harm to themselves when the company inevitably went bust. The employees who had sold dubious debt schemes to their friends and family lost those relationships forever while the suppliers who extended credit lines in exchange for Evergrande commercial toilet paper now lost a lot of money and had no avenue for recovering it at all. The U.S is big but it’s also quite broke with a large debt burden and a significant amount of it which needs to be refinanced this year, now countries are left with a simple choice that Evergrande customers and suppliers also had— continue doing business with a falling giant or call it quits and find a different client. China is killing it quits, this is a clear economic divorce as the Chinese State will not accept economic capitulation and submission. https://www.weijiaju.net/wap-view/detail/82900 this is a news article talking about an Evergrande supplier who lent it 6 billion RMB as a credit line and almost went bankrupt itself. Now, all the countries that are rushing in to negotiate particularly countries in SE Asia like Thailand and Vietnam and India are doing it because their administrations sense opportunity where in fact there’s none to be found. Let me explain.

India, Vietnam, Thailand etc find themselves in a very precarious position that I think is akin to what a small real estate supplier would've found themselves in when Evergrande was collapsing. China, for the longest time, was the US’s (Evergrande’s) largest supplier; it begun to realize that the U.S. was going broke so called it quits and tried to diversify looking for other customers. The U.S. is the world’s largest economy just like Evergrande was China’s largest real estate company; Vietnam, India etc wrongly sense opportunity here, they believe that by offering to buy things like American energy, weapons, aircraft, automobiles etc they’re capitalizing on an opportunity by replacing China and pursuing with the export model growth model. The issue with this approach is that the customer is one basically paying you with overpriced Evergrande esque commercial toilet paper (dollars) and two asking you to use those dollars not as per your requirements but as they dictate you to. Let’s say that Vietnam agrees to buy say a billion dollars worth of American weapons each year— tanks, planes, guns etc and puts them in an armory somewhere— what then is the point of making your citizens toil away in sweat shop factories for $0.30 cents an hour making socks and shoes if the dollars that you were going to get for that labor can’t be used according to what you want to do. U.S. LNG and weapons is inherently wasteful expenditure for Vietnam, who currently runs up large trade surpluses with the U.S. to accumulate overvalued currency (dollars) and uses it to pay for Chinese imports. For countries like India and Vietnam, the future looks to be increasingly tough. Export led growth is well and truly dead and thus what they perceived to be an opportunity— Chinese tariffs— actually turned out to be a curse. If the dollars raised from selling shoes, clothes, electronics etc can’t be used by countries to actually pay for imports that they require like Chinese electronics, cars, toys etc then well the entire use case for the U.S. Dollar completely falls apart. It’s basically toilet paper then and any nation agreeing to capitulate is basically agreeing to work for free. For any country who is willing to capitulate to Trump, it means handing over control of trade sovereignty to the U.S. since every time deficits build up the U.S. can just raise the tariff rate and round and round in circles we go. It’s a losing game and the sooner these countries realize and reorient themselves the better. Perhaps what should be the most interesting thing for policymakers globally is that Trump was a real estate developer himself with a knack for bankruptcies.

My opinion is that the U.S. cannot afford running twin deficits. Especially at a time when trust in the dollar is gradually eroding; what the U.S. requires is not tariff shock therapy but a sound industrial policy. The problem I see is that trust in the UST as a reserve currency is rapidly eroding, it has been for a long time now. The impact of this in my humble opinion is that it will drive the cycle of U.S. debt refinancing down further down further and further, which is why even after Powell cutting rates last year, long term yields still went up. For people who still have USD assets it makes more sense to pile onto short term debt which is more like a checking account i.e. can be withdrawn and moved on from at anytime as opposed to long term Treasury Bills.

There’s no escalation room left for Trump anymore. 10% tariffs (if they stick) don’t move any needle for on shoring. With Trump choosing shock therapy rather than rationality, as Mr Buffett outlines in his almost 20 year old piece on trade and tariffs, trust in the UST is eroding and will continue to erode. The duration of bond tenure has been going down significantly. The Covid time bonds issued under Biden were merely 7 year duration bonds. With more and more people piling into short term bonds, it reduces the bond duration cycle.

I believe that there will come a time when US debt has to be rolled over every year because instead of cutting spending and doing domestic reforms, Trump is stupidly looking to externalize US deficits. If anyone of you have read into the Russian bond crisis of 1998 then you’ll be aware that they were forced into a similar issue as they had to take on large swathes of Soviet debt that had to be refinanced on a yearly basis. Things boiled over finally in 1998 at which point yields in Russia went to around 150% and the Russian government had to default on Ruble denominated bonds.

Which again brings me back to my Evergrande theory. My crazy belief is that the U.S. is Evergrande, trying to off shore and externalize its debt and deficit issues to other sovereign nations who export to it by selling them commercial toilet paper (USTs) to them. Look at it from the point of view of a supplier, you want the buyer’s business and the buyer wants your credit but the buyer does not have the ability to pay. He can only buy if you give him more and more credit on more exploitative (for you) terms.

China has now bailed out of this schtick and everyone else has a choice. Bend the knee and be exploited or take a stand for yourself. As and when it comes to the point of America being some sort of granddaddy consumer market and tariffs being a tax on exporters then well if importers demand for exporters to bear the cost then that means that yanks want lower prices and thus want to consume less. American consumers thus have to compete with global customers then.

The purpose of international trade is to export to pay for imports; it’s simple quite simple, what people don’t understand is that the BOP has to balance it’s an established fact a scientific fact rather. The revenue from exports is used to pay for imports. From China’s perspective, their exports pay for services imports and food imports. China is the largest importer of food in the world. For say Vietnam, their exports pay for their imports from China. If the U.S. is asking for everyone to tariff China, then well the entire purpose of International trade is over since it’s an inherent two way street and can’t function according to the whims and fantasies of an orange man.

Let’s look at some established facts here, the U.S. is addicted to spending money and under no way can it afford real austerity and budget cuts. The military industrial complex and all the Wall Street billionaires financing U.S. politicians will have an inherent problem with this and hence their needs have to be adhered to. Trump campaigned on budgetary cuts but as soon as entering office has announced that he will raise the military budget to $1 trillion and introduce corporate tax cuts much like he did during his first term. Now let’s analyze this for a second, a nation with a spending problem is choosing to increase the military budget and forego tax revenue—it is perhaps one of the most non sensical things that I’ve ever witnessed in my life. The way the bond market has been functioning, it is as apparent as daylight that the market will not be willing to allow Trump to raise debt to carry out this spending at the rate that he so desires. The bond market has shown clear signs of not reacting whatsoever even when there’s rate cuts. This is a very precarious position for the Fed and the U.S. government to be in. They do have the option of sudden large emergency rate cuts and quantitative easing but this is playing right into China’s hands here, who can sell its USTs for a profit and repurpose those dollars into buying a large stockpile of mineral commodities like crude oil, steel, iron etc which have been pricing in a global recession. This will serve a two fold purpose—allowing China to build up an even larger reserve of essential commodities in case of a hot war with the U.S. and/or other global shocks and increasing inflation back in the U.S. as the prices of these commodities go back up, forcing the Fed’s hand into acting and raising rates again. China’s been preparing for this for more than 10 years now and hence they’ve ensured that they hold all the cards.

Now finally coming to the individual equities that I really appreciate particularly in this current environment. If U.S.-China bilateral trade goes to zero which well— it will— then the only logical long term thesis is that Chinese domestic consumption and advanced manufacturing is bound to do well and prosper. Hence my investing philosophy has been adjusted accordingly.

---

Geely (0175.HK)

---

Geely’s strong performance in 2024 has solidified its position as one of China’s most formidable automakers, with a trajectory that increasingly mirrors global leaders like Honda and Hyundai. While BYD has drawn comparisons to Toyota for its dominance in electrification and mass-market appeal, Geely has carved out its own identity as a technologically driven, vertically integrated manufacturer capable of competing across both traditional internal combustion engine (ICE) vehicles and new energy vehicles (NEVs). What makes Geely’s rise particularly noteworthy is its strategic move into battery cell production—a critical step that places it among an elite group of automakers, including BYD and Tesla, that control their own battery supply chains. In late 2023, Zhejiang Geely opened its own battery manufacturing facility in Quzhou, signaling its commitment to reducing reliance on external suppliers like CATL and securing long-term cost advantages as the industry shifts toward electrification.

Financially, Geely demonstrated meaningful progress in 2024, with gross margins improving from 15.3% to 15.9% and operating margins doubling from 2% to 4%. Including contributions from affiliated companies, the group generated approximately ¥10.6 billion in operating profit, with NEVs accounting for the bulk of the growth. This performance is significant because it suggests that Geely’s electric vehicle operations are now profitable on a standalone basis—a rarity in an industry where many EV-focused startups continue to burn cash. The company’s success also challenges the prevailing narrative that only a handful of Chinese automakers, such as BYD, are capable of making money in the EV space. Instead, Geely serves as a case study in how established automakers can leverage their manufacturing expertise, supply chain relationships, and diversified product portfolios to navigate the transition from ICE to electrified vehicles profitably.

A key driver of Geely’s growth has been its Galaxy sub-brand, which has quickly scaled to an annual production run rate exceeding one million units and now competes directly with BYD’s most popular models. Unlike pure-EV startups that struggle with economies of scale, Geely benefits from its in-house battery production, a thriving plug-in hybrid (PHEV) business, and synergies across its broader automotive empire, which includes brands like Volvo, Polestar, and Zeekr. This multi-pronged approach allows Geely to address a wider range of consumer preferences while mitigating the risks associated with a rapid, all-in shift to battery-electric vehicles.

While much of the global automotive discourse pits BYD against Tesla as the defining rivalry of the EV era, the more consequential competition may well be between BYD and Geely. Unlike Tesla, which remains a relatively niche player in China and lacks a strong presence in PHEVs, Geely competes with BYD on nearly every front—battery technology, product lineup, pricing, and scale. Both companies have made vertical integration a cornerstone of their strategies, with BYD’s Blade batteries and Geely’s in-house cell production ensuring supply chain resilience and cost efficiency. As the Chinese auto market continues to mature, Geely’s ability to balance legacy automotive strengths with aggressive electrification efforts positions it as one of the few companies capable of challenging BYD’s dominance.

Despite excellent results, Geely’s stock has fallen significantly from its high and at single digit multiples right now I think it’s a great buy if you’re interested in the broader Chinese NEV industry.

---

Anta (2020.HK)

---

Anta is the largest sportswear retailer in China. Anta is an attractive investment case, especially against the background of rising U.S.-China tariffs and global protectionism. Unlike Western peers Nike and Adidas, which have very heavy exposures to Chinese production and are being saddled by increasingly high tariffs to their largest market in the U.S., Anta has the advantage of a vertically integrated, domestically based supply chain and basically no U.S. revenue exposure. This strategic localization enables the company to retain price power, enhance margins, and provide quality products at more affordable costs—all while tariffs constrict the foreign competition's competitiveness. As tariffs widen the gap between international and domestic players, Anta stands out with a structural benefit in the Chinese market.

Tariffs have and will enhance domestic consumer loyalty towards local brands, hastening the "guochao" or patriotic consumption trend. Chinese consumers, particularly younger consumers, are increasingly turning to brands that are associated with cultural identity and national pride. Anta, being a domestic brand, is well placed to take advantage of this trend, taking market share from foreign incumbents whose products are now seen as both more costly and less culturally relevant. With such, tariffs did not only keep foreign competition away but also heightened Anta's brand equity as seen by the Chinese consumers.

Anta's expansion is also supported by its successful multi-branding and penetration of under-penetrated Tier-2 and Tier-3 cities. Tier-1 markets are saturating, but China's urbanization and increasing disposable incomes are opening up huge new demand in smaller cities. Anta's diversified portfolio of Anta for the mass market, FILA for the premium market, and niche products through Descente and Kolon enables it to reach consumers at all income levels.

After a decent correction from the 95 HKD high and merely trading at 14-15x earnings, I think Anta is an excellent long term buy.

---

Hwatsing Technology (688120.SS)

---

Hwatsing is China's top domestic supplier of chemical mechanical planarization (CMP) equipment, one of the essential pieces of hardware in semiconductor production. As Beijing presses ahead to ensure semiconductor independence under U.S. sanctions, Hwatsing is poised to gain from forced localization in chipmaking equipment. The company currently leads around ~30% of China's CMP marketshare, providing mainstay customers SMIC, Hua Hong, and YMTC withmature-node production (28nm-14nm). As China's semiconductor sector focuses on local procurement, HWATSING is poised to take anincreasing percentage of the $1B+ CMP equipment market in China, displacing limited imports from Applied Materials and Ebara.

The growth drivers for the company are compelling. For one, China's enormous growth in mature-node chip manufacturing (28nm and above) is fueling demand for localized CMP tools. Second, HWATSING is building out its tech, with R&D on sub-14nm CMP systems, which inturn will be able to support SMIC's covert 7nm/5nm program eventually. Third, new advanced packaging (e.g., chiplets, 3D ICs) demands additional CMP processes, again increasing demand. Also, government subsidies under China's "Big Fund III" guarantee ongoing funding assistance for Hwatsing's R&D and capacity additions. If Hwatsing successfully develops competitive sub-14nm CMP tools, it could become a critical player in China’s semiconductor supply chain.

Under the new zero bilateral US-China trade and increasing global tensions, achieving semiconductor self sufficiency is paramount for the China. The stock does trade expensive at about 40x earnings but also has been consistently growing revenues and profits by around the same figure. This is my highest risk to reward play, there’s significant valuation risk here but the upside potential due to the essentiality of the industry to China’s overall technological progress is huge.

---

I would also like to reiterate that I remain bullish on all the names that I’ve covered on here previously like Haier, Midea, Miniso all the restaurant names, net nets etc. I believe that despite present noise they have enough valuation downside protection and a significant growth potential and story ahead.

I would like to conclude by thanking each and everyone of you who sent me supportive comments encouraging me to post despite me being incredibly apprehensive of doing so under the current situation. I’ll individually shout all of you out and I really truly appreciate the support. Thank you to Reads, Tony, Micheal Grynsztejn, Dennis c, HE, JG, and Andy.

---