Editor's note: Ge Lin is a CGTN economic commentator. The views expressed in this article are the author's own and do not necessarily reflect those of CGTN.

The latest flare-up in US-China trade tensions has once again sent tremors through global markets. In early October, US President Donald Trump threatened to impose sweeping 100 percent tariffs on Chinese imports — only to back down the next day. American stock indices faltered, bond yields swung, and foreign exchange volatility intensified. Yet this time, something deeper is unfolding beneath the surface. It is not merely about tariffs or trade, but about the shifting perceptions of power —economic, industrial, and financial — that underpin global capital flows.

For decades, the US financial market has been the undisputed epicenter of global investment. But as Washington doubles down on trade warfare and weaponizes supply chains, this once-stable perception is beginning to erode. Behind this change lies a crucial realization among the world's most powerful investors: Potential retaliatory measures against US trade controls now pose a direct threat to the very survival of the American economic system, as Beijing signals its ability to wield similar tools, linking rare earth export controls to US restrictions on semiconductor technologies.

Capital's awakening

In the United States, political power ultimately rests on economic foundations. No matter how populist a president's rhetoric may sound, no administration can sustain a course fundamentally at odds with the imperatives of capital for long. During the early phases of the US-China trade conflict, Wall Street largely tolerated Washington's hardline stance. The market dipped and recovered, assuming the interruptions were controllable. But that calculation has changed.   

Today, the tensions are no longer confined to tariff spreadsheets. They have reached into the veins of the global supply chain — rare earth minerals, semiconductors, and high-end manufacturing inputs that define the real capacity of modern economies. China's calibrated response in the rare earth sector has redefined the calculus of risk, reminding markets that the control over structural lifelines is not the monopoly of any single nation.

Global capital, for all its geopolitical anxiety, remains pragmatic at its core. It reads signals faster than most people do. As Washington's coercive trade tactics deepen mistrust with the rest of the world, global investors do not wait for reassurances —they move their money. The recent outflows of US assets, alongside the surge in demand for alternative and hedging instruments, are not anomalies. They are admissions.

Exposing weakness and reassessing strengths

The paradox of the current situation is that the US has designed trade frictions to reinforce its dominance, yet those very frictions are accelerating its relative decline. By exposing its own vulnerabilities and the limits of its leverage, Washington has revealed just how fragile its control over global supply chains truly is — and how susceptible it would be if others were to wield similar tools.

Meanwhile, China's markets — once dismissed as "uninvestable" during earlier phases of trade confrontation — have shown strong resilience. Recent performance in Chinese equities, coupled with growing participation in the renminbi payment system, suggests that investors are finally recognizing the true robustness of China's economic fundamentals. The perception of China as a systemically stable player in an unstable world is gradually gaining ground.

The myth of safe assets

For decades, "flight to safety" meant rushing into US treasuries whenever uncertainty loomed. But in the new landscape of global fragmentation, that instinct is being questioned. How "safe" can a market be when its stability depends on an increasingly unpredictable political environment — where government shutdowns and tariff theatrics have become recurring features?

The current wave of capital reallocation tells a story of fading confidence. Investors are seeking refuge not just in traditional havens such as gold, but in broader, multipolar strategies — Asian equities, emerging market bonds, and cross-border commodities that hedge against geopolitical risks. This is not yet a wholesale abandonment of the dollar, but a diversification of beliefs.

The US is no longer the center of global trust. Its risk premium, once compressed by decades of institutional credibility, is slowly widening as strategic miscalculations accumulate. In the end, it is not governments but investors who deliver the final verdict. And their message is increasingly clear: Capital acts without mercy, favoring markets and systems that can withstand stress while avoiding those perceived as vulnerable.