Deep Game at the Foot of the Gray Rhino: China's Precision Strikes vs. America's TACO
- Dr Frederick Wong
- Oct 15
- 4 min read
— Deconstructing the Long-Term Investment Coordinates of the U.S.-China Trade War from a Multi-Party Consensus
(I) Core Conclusion: A Deep Squat is for a Launch, Not a Cliff Dive
Synthesizing the views of multiple institutions, the market has formed three "underlying consensus points":
A sharp, sentiment-driven drop does not equal a fundamental collapse. A VIX between 20–25, a Hang Seng Index at 22,500, and an S&P 500 at 5,420 are seen as the "touchstone" support zone.
If a framework of "tariff easing + high-level summits" emerges before the APEC meeting in November, global risk assets will replicate the path of "sharp drop in April — two-week recovery — new highs."
The downside for A-shares in the short term is limited. The Shanghai Composite Index is still expected to challenge 4,500 points this year (with the CSI 300 around 5,500). If "interest rate cuts + fiscal stimulus" are intensified in the first half of 2025, a range of 5,000–5,800 points is not an extreme assumption.
In a nutshell: The deep squat is a tactical preparation for a launch, not a systemic cliff dive.
(II) Five In-Depth Implications Distilled from the Multi-Party "Bookshelf"
1. Macro Coordinate: A Permanent 0.3–0.7 Percentage Point Downward Shift in the Global Growth Pivot
Both the IMF and Tsinghua PBCSF have consistently calculated that tariffs + technology controls will permanently increase global supply chain costs by 4–5%, equivalent to an annual "extra payment" of $1.2 trillion in logistics and redundancy taxes.
Due to the combination of "high tariffs + high interest rates," the United States' marginal losses are greater than China's: its GDP level from 2025–2030 will be 0.36–0.7 percentage points lower than the baseline, and its core inflation pivot will rise by 0.3 percentage points.
Investment Implications: The U.S. Treasury term premium will increase by +30bp, and the real interest rate pivot for the U.S. dollar will shift downward. Gold and non-U.S. resource currencies will enjoy a long-term valuation premium.
2. Supply Chain Restructuring: A Long-Term Tax from "Globalization" to "Tri-polarization"
Regional Shares: Mexico's share of U.S. imports has increased from 13.4% to 19.2%; ASEAN's share of China's exports has risen from 12.1% to 17.9%. The growth rate of intermediate goods trade has been lower than that of finished goods for three consecutive years.
Cost Curve: UBS estimates that manufacturing costs for electronics and automobiles have increased by 18–25%, and the average ROIC (Return on Invested Capital) for global capital expenditures has decreased by 3–4 percentage points.
Investment Implications:
Avoid "pure global contract manufacturing" models; favor industry leaders with "regional backup production lines."
China's rare earths, industrial software, and semiconductor equipment sectors enjoy a dual premium from "pricing power transfer + domestic substitution."
3. Asset Pricing: Risk Premium Reset by 150bp, AI Shifts from Growth to Cyclical
Wall Street has unanimously lowered the 2026 EPS forecast for the AI hardware chain by 7%, but the PE ratio has compressed from 52x to 45x, equivalent to a permanent valuation discount of 12–15%.
Reason: Supply disruptions of upstream rare earths + delivery delays of downstream GB200s have made capital expenditures cyclical. AI is being re-tagged from a "growth factor" to a "cyclical factor."
Investment Implications:
Avoid U.S. hardware stocks with "high rare earth content and high valuations."
Use "inventory/utilization rate" instead of PEG for valuation. Pay attention to the domestic substitution window for China's semiconductor equipment, industrial software, and advanced packaging.
4. Monetary System: Dollar Hegemony is Being "Slowly Boiled Like a Frog"
Global central banks are projected to net purchase 1,200 tons of gold in 2024–2025, a record high since the 1971 Nixon Shock. The U.S. dollar's share in SWIFT has declined by 3.7 percentage points in three years, while the RMB's settlement share has doubled to 4.8%.
U.S. Fiscal Position: Tariff revenue accounts for only 2% of federal income, yet it has pushed up interest expenses by $650 billion due to inflation, effectively weakening the U.S. dollar's credit.
Investment Implications:
Gold and RMB-denominated assets (Hong Kong high-dividend stocks, CSI 300 core assets) enjoy a long-term valuation premium.
Commodity currencies (AUD, CAD) and "de-dollarization" themes (digital RMB, cross-border payments) are worthy of long-term allocation.
5. Political Game: The "TACO" Trade is Not Risk-Free; the Gray Rhino Has Taken Up Residence
Institutions widely expect that Trump will ultimately "Chicken Out," but Beijing has already institutionalized its three trump cards—"rare earths + ports + services trade." Even if the White House changes hands, these tools for "structural decapitation" of supply chains will not be withdrawn.
Conclusion: The tariff war has escalated from a "quantitative game" to a "structural game." The gray rhino has become long-term background noise, not a one-off black swan event.
(III) The Consensus Operational Roadmap
Time Window | Scenario | Shanghai Comp. Target | Core Drivers | Key Allocation Focus |
Q4 2024 - Q1 2025 | Partial Agreement | 4,500 | Tariff Easing + Foreign Capital Inflow | Rare Earth Permanent Magnets, Semiconductor Equipment, High-Dividend Stocks |
H1 2025 | Interest Rate Cuts + Fiscal Stimulus | 5,000 - 5,800 | Fed cuts rates by another 100bp + China's fiscal deficit > 4% | Industrial Software, Advanced Packaging, STAR 50 Index |
H2 2025 - 2026 | Extreme Liquidity | 6,000 | Margin financing breaks ¥3 trillion + Massive shift of household deposits | Brokerages, ChiNext 50, Gold ETFs |
(IV) Conclusion: The Long-Term Game at the Foot of the Gray Rhino
The multi-party consensus can be summarized in one sentence—the repricing is far from over. The U.S. and China have upgraded the tariff war from a "quantitative game" to a "structural game," and Wall Street is using its most adept tool, discounting, to write geopolitical risk into its cash flow models.
Key Takeaway for Investors: This is not a one-off black swan, but a resident gray rhino. The competition is not about who runs the fastest, but about who can find long-term safe havens in rare earths, equipment, and high-dividend stocks. It's about who is willing to treat volatility as rent. Whoever does so can transform crisis into the excess returns of domestic substitution.
Fasten your seatbelts and let the rhino dance—this is precisely the most certain investment strategy for the next decade.
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