According to analysts, the U.S. has historically engaged in excessive consumption while failing to produce adequately, whereas China has been characterized by high production levels coupled with low consumption rates. However, in a communication to clients, the strategists contended that this longstanding disparity has led to persistent account deficits in the U.S. and surpluses in China.

The trend has reached its high point and is starting to indicate a potential reversal, especially as U.S. President Donald Trump advocates for enhancing American production capabilities “at the expense of […] consumption,” they noted. “Trump’s trade, regulatory, and fiscal policies are starting to alter the structure of growth in the U.S.,” the analysts noted. The White House’s extensive tariffs on imported goods act as “an explicit tax” on the consumption of foreign products while simultaneously providing “an implicit subsidy” to local manufacturers, they noted. At the same time, forecasts indicate that the substantial budget legislation enacted by Trump in July will lead to a decrease in after-tax income for lower-income households, which tend to spend a larger portion of their earnings. On the other hand, analysts noted that higher-income Americans who are more inclined to save will experience an increase in their after-tax earnings.

Some argued that Trump’s extensive immigration policies might negatively impact consumption by reducing the number of shoppers in the U.S. market. Despite the recent data indicating a strong rise in retail sales for July, concerns persist regarding a weakening labor market and the potential for price increases driven by tariffs, which may impact consumer spending in the upcoming quarter. The analysts indicated that real personal consumption expenditures are currently on a path typically observed in recessionary periods. “The powerful U.S. consumer is absent in 2025,” the analysts stated. Consequently, they contend that nations are compelled to modify their growth strategies, particularly China, which is now facing a global landscape lacking a robust U.S. consumer to take in its surplus output.

Beijing may soon have to encourage domestic household spending to prevent a significant economic downturn, as a stronger Chinese yuan could enhance the purchasing power of households in the nation. In light of this situation, they revised their perspective on the Chinese yuan to “overweight” from “neutral.” The analysts advised that investors should maintain a position of reduced cash, a balanced stance on equities, and a preference for fixed income investments.