The Wall Street Journal is reporting this morning that last week the Trump administration granted tariff exceptions to dozens of major American companies. Take this for what it is: a clear political retreat, the first concrete signal that the US trade strategy has hit its pain threshold. Tariffs were never paid by China; they were a self-inflicted tax on American importers and consumers. These politically motivated exemptions demonstrate that the policy is economically unsustainable and its architects are now grappling with severe domestic pressure. For investors, this policy fracture is the sound of an imminent, highly profitable resolution.
China’s Resilience: Strategic Patience Absorbs the Shock
Contrary to Washington’s intent, China’s command-driven economic model has absorbed the trade shocks with strategic resilience. The economy expanded 4.8% year-over-year in Q3 2025, driven by an accelerating industrial output leading into the Golden Week holiday and targeted government subsidies that shored up demand. This is a system designed for long-term endurance, coordinating industrial policy to maintain growth and protect political stability against external shocks.
Meanwhile, Beijing is not waiting for Washington to change its mind; it is executing a purposeful, global pivot. Chinese firms are aggressively diversifying away from the US, expanding economic reliance among ASEAN nations, the Middle East, and Latin America. This international outreach blunts the impact of American tariffs, transforming lost US market share into expanded global influence. American tariffs are strategically ineffective.
The Climax: Fragmentation on the Home Front
The contrast is stark: China demonstrates durability with 5.2% GDP growth over the first nine months of the year, while the US exhibits fragmentation. The tariff exceptions are an admission of vulnerability within US domestic supply chains, forced by business and political pushback. This fragmented American policy response undermines the President’s tough stance and confirms our argument that the tariff strategy is unsustainable. The political cost of the trade war is now demonstrably higher for Washington than the economic cost for Beijing.
Investment Thesis: Position for the Normalization Rally
The immediate market implication of this retreat is powerfully bullish.
The political necessity of granting tariff relief is escalating rapidly, making a normalization of trade relations inevitable. The narrative is shifting from confrontation to concession. Investors should be preparing now for the relief rally this normalization will bring, specifically targeting sectors that have been bearing the brunt of import costs and supply chain uncertainty. This development reduces cost pressures and acts as a hidden earnings boost for US companies.
The momentum of this trade conflict favors China’s strategic endurance. President Trump’s weakening leverage and China’s strengthened global partnerships signal that a return to stable trade frameworks is not just likely—it is assured—a major tailwind for US stocks.
Rally Ahead. Share This With Someone Who Is Still a Bear.