In my note yesterday, we revisited the path of the Trump 2.0 global economic and security campaign to its ultimate target: China.
As we discussed, the Trump administration's moves of the past 19 months are about ending China's multi-decade economic war on the West, which has resulted in economic power and political capture.
How did they do it?
They undercut the world on price. China used currency manipulation (a cheap yuan) to build an export monopoly. The world allowed it. They liked cheap stuff.
And they liked what China did with the dollars it collected from the cheap stuff. They plowed it into Treasuries, which supplied cheap credit for U.S. consumers to buy more cheap stuff.
And so the cycle has perpetuated through the years — transferring wealth from the U.S. (and the West) to China.
That's the trade imbalance that has broken the global economy, and has funded China's influence building over the past decade.
With that, let's talk about the G20 finance ministers meeting in Asheville that concluded today.
It was like no other G20 meeting.
The G20 is presided over by the U.S. this year. And from opening statements made with Scott Bessent and Kevin Warsh sitting side-by-side yesterday, it was clear that the decade-long global agenda designed around the low growth, high regulation, massive spending, demoralizing climate and social policy was over.
This G20 was all about optimism, investment and economic growth.
With business and finance leaders from the world's 20 largest economies at the table, the U.S. brought in the people leading the AI boom to explain the significance of this new industrial revolution.
They piped in Elon Musk for a discussion. He told the room full of people who have been conditioned to 'secular stagnation' that AI will increase the size of the global economy by 20%-30%!
He said there will be a billion humanoid robots in the next ten years, and they will be 5 times more productive than humans.
By the end of the summit today, nineteen of the twenty members were on board with the Asheville communique.
One was not. China.
So, Bessent issued a "chair's statement" instead of a communiqué. At the end of it, in small type, it said this: the statement was agreed by all G20 members present except China, which objected to paragraphs 4, 10, 11, and 13.
Four paragraphs. Let's look at what's in them.
Paragraph 4 is about energy.
It says the smooth functioning of key value chains, including energy, food, fertilizer and critical minerals, is essential to global growth. And it says free, safe and predictable navigation through the Strait of Hormuz is essential to sustaining that growth.
Remember, the clock is running on the economic isolation of Iran. And every country still buying, shipping, insuring or banking the Iranian trade on notice. That's China. And China just dissented on the free and safe navigation through the Strait.
Paragraph 10 is about trade imbalances.
It says countries running excessive and persistent surpluses should remove the distortions that hold down their own domestic consumption and leave them overly reliant on exports for growth.
That's China's economic model. They dissented.
Paragraph 11 asks the IMF to build better tools for measuring those imbalances, and to improve its data coverage of non-market policies and practices.
That's the nineteen members calling on the IMF to do its job, and hold China accountable for unfairly manipulating its trade advantage (and therefore creating global trade imbalances). China dissented.
Paragraph 13 is about sovereign debt.
It calls for broader coordination among G20 official creditors in restructuring the debts of countries that owe a meaningful share of their external debt to G20 members.
That's Belt and Road. China is the largest bilateral lender to the developing world, and it has been the obstacle in nearly every sovereign restructuring of the past five years. China dissented.
Now, let's go back to February of last year, two weeks into this administration. I said China was priority number one, and that the trade war would likely require global participation — maybe putting China in the trade penalty box.
That was nineteen months ago. Today, at a G20 hosted by the United States, nineteen members put their names to a document about surplus countries and export dependence, and China sat alone on the other side of it.
The trade penalty box could be coming.
