After Trump took office as the US President, the huge amount of US debt determined his policy direction to a certain extent. One of the important reasons for his tariff increase was to cope with the pressure of US debt. But in the past month, US debt has exploded.
After the initial "ice-breaking" of the Sino-US tariff negotiations, many textile foreign trade people in the US market breathed a sigh of relief, but what is more worthy of attention for textile foreign trade people is that the RMB has suddenly entered the appreciation channel. Wall Street institutions have raised their expectations for RMB appreciation. Institutions such as Goldman Sachs even predict that the RMB is expected to rise to 7.0 within the year. On May 13, 2025, the onshore RMB exchange rate opened at 7.20, and within 15 minutes after the opening, it appreciated to around 7.18, reaching its highest level since November 2024. As of May 15, the RMB exchange rate soared 2,500 basis points in one month, and the USD/OFFSHORE RMB exchange rate fell all the way from last month's high of 7.42 to 7.1787. From the perspective of the settlement rate, the settlement rate has remained low since the third quarter of last year. Since March this year, as expectations of a depreciation of the US dollar have strengthened, the net settlement rate has rebounded from -8.2% in February to -6.8%. Behind the RMB exchange rate hitting a new high in nearly six months, US Treasuries, as the world's main safe-haven asset, have suffered a large-scale sell-off.
Affected by the international credit rating agency Moody's downgrading the US sovereign credit rating, US Treasury bonds have suffered a large-scale sell-off. On the 19th local time, the yield on 30-year US Treasury bonds soared, breaking through 5% during the session. At the same time, the yield on 10-year US Treasury bonds broke through 4.5% during the session on the 19th. Bloomberg News of the United States commented on the same day that the international credit rating agency Moody's downgraded the US sovereign credit rating. This move pushed up the yield on 30-year US Treasury bonds and pulled down US stock index futures. The current US Treasury bonds are under selling pressure again. Bloomberg News of the United States subsequently commented that "'Sell America' has reappeared. The US fiscal situation will deteriorate further. It is not surprising that the US sovereign credit rating has been downgraded. Large investors are gradually replacing US debt with other assets, and the cost of US borrowing will continue to rise." If we analyze Trump's motivation for imposing tariffs, the trillions of US debts that will expire in June are an important factor. Although no one in the world expects the United States to really pay off the huge amount of US debt, the interest generated by these US debts is also a huge cost. Judging from Trump's behavior after taking office as president, one is to save money through Musk's government efficiency department, and the other is to increase revenue through tariffs. However, the final saving effect is far less than expected and has produced a series of chain reactions. The tariffs also fell into a very embarrassing situation because they hit too wide a range at once. In the short term, the imposition of tariffs will eventually greatly aggravate the US's own inflation and suppress the purchasing power of the American people. After the results of the tariff negotiations came out, the author also asked some traders who export textiles to the United States. They said that the prices of American customers are very tight now, and we ourselves have no profit, so the final export recovery is also relatively limited. In the long run, in order to deal with US debt, the depreciation of the US dollar is a feasible method. In the Plaza Accord, the United States diluted US debt through the relative depreciation of the US dollar. However, this will hit the credit of the US dollar on the one hand, and on the other hand, it will further reduce the consumption capacity of the US market and affect the export of textiles to the United States.
In fact, since the US dollar entered the latest round of interest rate hikes in 2022, the progress of RMB internationalization has been accelerating. China has also signed currency swap agreements with many countries, especially some countries that are short of US dollars, which can trade textiles with China through RMB as a medium. Recently, the US dollar index has been weakening. After the US debt was sold off, the euro has been welcomed by the market as a new safe-haven asset. The euro exchange rate has risen significantly, driving the recovery of Europe's overall purchasing power. As an alternative market to the United States, some textile people engaged in mid-to-high-end production can shift a certain focus of work to these countries. For the US market, it is certainly possible to do business, but at the same time, the risks in the US market have surged, and we must also maintain a bottom-line thinking.
