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07.05.2025 01:06 AM
Trade War as Part of Global Confrontation
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Many may believe that the trade war initiated by Donald Trump is simply a tool to reduce the budget deficit and national debt. However, it becomes clear upon closer examination that it is just one piece of a broader global confrontation between China and the United States. These two superpowers continue to compete for global dominance and leadership, and weakening the rival is part of any government's strategic playbook. While there was no major escalation under the peaceful leadership of Joe Biden, under Trump, who openly clashed with China eight years ago, the fate of the conflict was essentially sealed in advance.

Recently, U.S. Defense Secretary Pete Hegseth stated that Chinese missiles could destroy an American aircraft carrier in 20 minutes. According to Hegseth, China is building an army capable of conquering the world, including the U.S. America loses in every simulation of open conflict with China studied by the Pentagon. Despite being the world's wealthiest country, the U.S. is not investing enough in weapons and its military. Trump has promised to increase defense spending to $1 trillion, but that money must come from somewhere. And where, when the U.S. budget runs a deficit year after year? That's why a new global trade architecture is needed—one where America earns more.

Trump has repeatedly stated that his main competitor is China and that it must be weakened by any means necessary. For instance, reports have surfaced that Trump offered various countries reduced import tariffs in exchange for limiting trade relations with China. After pouring $1 trillion into the Chinese economy, Washington finally realized that American dollars are enriching not just the U.S. but China as well. Trump intends to correct this "injustice."

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Viewed from a distance, like in a strategy video game, Trump's actions make sense. China does indeed earn hundreds of billions from trade with the U.S., which it uses to build military and technological strength. Twenty years ago, Chinese cars and smartphones were a global joke because of their poor quality. Today, Chinese technology has reached a level that triggers serious concern, even across the ocean.

However, Trump's goal isn't only to weaken China financially. He also wants to boost the U.S. economy, and it's this second part that raises the most doubts. American businesses have already submitted a collective letter to Trump outlining the risk of bankruptcy if tariffs are not lifted. U.S. companies with production in China plan to leave the country, not to return to America but to relocate to other low-cost labor markets, and there are plenty of those around the globe.

Wave Pattern for EUR/USD:

Based on the conducted analysis, EUR/USD continues to build a bullish wave structure. In the near future, the wave pattern will depend entirely on the position and actions of the U.S. President. This is a key factor to keep in mind. The formation of Wave 3 of the upward trend has begun, with its targets potentially extending up to the 1.2500 area. Achieving these targets will depend entirely on Trump's policies. At this stage, Wave 2 within Wave 3 appears close to completion. Therefore, I consider buying opportunities with targets above 1.1572, corresponding to 423.6% on the Fibonacci scale.

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Wave Pattern for GBP/USD:

The wave structure of GBP/USD has changed. We are now dealing with a bullish impulsive segment. Unfortunately, with Donald Trump in office, markets could see many more shocks and reversals that do not align with wave analysis or traditional technical logic. Wave 3 of the upward trend continues, with near-term targets at 1.3541 and 1.3714. Of course, it would be ideal to see a corrective Wave 2 within Wave 3 before further gains, but it seems the dollar can no longer afford that luxury.

Core Principles of My Analysis:

  1. Wave structures should be simple and understandable. Complex formations are difficult to trade and often subject to change.
  2. If you're not confident in the market situation, it's better to stay out.
  3. Absolute certainty in market direction doesn't exist. Always use protective Stop Loss orders.
  4. Wave analysis can be effectively combined with other forms of technical and strategic trading approaches.
Chin Zhao,
Analytical expert of InstaForex
© 2007-2025
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