The latter fueled global inflation expectations and sent global yields higher – in some cases up to levels not seen since 2008. The US 2-year yield – that captures Federal Reserve (Fed) rate bets - topped 4.20%, the German 10-year yield hit 3.36%, while the Japanese 10-year yield hit the 3% mark.

Yes, we are there. At 3%, the 10-year JGB is around 125bp higher than the levels that investors once considered would make sense for Japanese institutional investors to repatriate their funds back to Japan, triggering a reverse carry trade. The Japanese investors haven’t sold their foreign assets in a way that would trigger a significant reversal of the carry trade.

Perhaps the rise in US yields has also helped keep the US-Japan yield gap wide enough to avoid a notable selloff. But the Japanese government sold US bonds to intervene in the FX markets, to stop the heavy bleeding in the yen. The latter, in turn, increased the pressure on the US yields, and brought Bessent to cooperate with the Japanese to slow the yen’s depreciation.

But at the end of the day, the USDJPY recovered half of the retreat following the latest US/Japan intervention, and the US 30-year is close to levels that triggered the US Treasury’s announcement to buy back more bonds to counter the selling in US bonds.

This means one thing, there is only so much you can do by intervening. Interventions buy time, but they don’t change fundamentals. The reality is that the war in the Middle East escalates, oil prices rise, inflation eats a part of weak growth numbers, and a global trade war is on its way of destroying decades of cooperation, that helped global economies grow together.

All against China

And make no mistake. The US is very aggressive, yes but the other G20 nations are also adding their two cents. Yesterday, the G20 meeting showed an interesting split between China and the rest of the nations. The split was mainly about China’s trade surplus and its economic model.

The US, EU, Japan unsurprisingly pointed at China’s industrial subsidies, weak domestic consumption and export-led growth as creating excess capacity that is then pushed onto world markets through cheap exports. China rejected that diagnosis and argued that it does not deliberately pursue a trade surplus.

It also disagreed on several other points: it opposed restrictions on critical-mineral exports, calls for countries like China to consume more at home and rely less on exports, and language about keeping key shipping routes open and predictable. Beijing was also unhappy with parts of the discussion on sovereign debt, where China is a major lender.

But what was really interesting is that, the split between the DM (US, EU, Japan, Australia) and China is nothing new, but the other EM nations alignment with the communique is! Because G19 includes countries Brazil, India, Saudi Arabia, South Africa, Indonesia, that aren't automatically aligned with Washington. That means that we have a bigger story than just “US vs China” unfolding: concern about China's export-heavy model and industrial overcapacity is broadening internationally.

Even the IMF says excess global imbalances widened sharply in 2025 and argues that surplus economies should boost domestic demand while deficit economies need fiscal consolidation.

Guess what, China was trying to do so but because they have an aging population due to a terrible policy mistake of imposing that ‘one child’ policy for 35 years, because the aggressive Covic policies had a terrible impact on consumer confidence and because the deepening property crisis hit households savings big time, the option to revive demand at home make had to be taken off the table. Xi had to go back to boosting exports to keep the ball rolling. So here we are.

China grows by exporting cheap products, others are not happy because they can’t produce as cheap as China does, the latter costs jobs at home and results in a wider trade deficit. In simpler terms, money is flowing into China’s pockets through cheap exports. But on the other hand, the cheap Chinese products helped keeping inflation so low in the West for years, and it is a curious time to move production elsewhere. It would aggravate the cost-of-living crisis, push yields further up, and weigh on valuations.

Shein goes public at worst possible time!

It’s in this complicated global context that Shein went public yesterday, it had a chaotic first day, the stock price tanked nearly 10% shortly compared to the IPO price, which was already reflecting a nearly 75% valuation loss compared to the 2022 valuation levels, before ending the day near flat. That first day performance came in contrast to a few spectacular IPOs from Chinese companies like CXMT and Unitree that rallied more than 400-500% during their first day of trading in Shanghai.

The value loss was partly due to ethical issues regarding cotton sourced from Xinjiang, where China is accused of forced labour, fierce competition and an aggressive price war with other Chinese players like Temu and AliExpress that compressed margins, but more importantly, the sharp change in global trade rules, as the US and the EU moved to scrap exemptions for low-value parcels and impose tariffs and additional fees on the cheap packages that Shein ships directly to consumers.

And Shein – as its peers - will have a hard time absorbing these additional costs due to its low margin business model. The company sells very cheap clothes and accessories with very thin margins, meaning that a good part of these additional costs will have to be passed on to consumers.

The problem is Shein’s customer base is very price-sensitive: even a small increase in prices could lead to a significant drop in sales volumes — and therefore profits. In fact, Shein’s US revenue fell by more than 14% in Q1. We will see a similar fall in European business when the outcome of the 3 euro import tax (by category) will show in the quarterly results.

So Shein is down more than 2% on its second day of trading, Alibaba is down 1.80% in HK while PDD remains under pressure on the Nasdaq. The outlook remains bearish unless these companies change direction and find other lucrative markets, or adopt their business model to the new rules of the trade game. But in the short/medium run, the fact that Shein trades at around 15 times forward earnings — roughly double Temu’s parent company PDD — suggests that there is room for a further downside correction.

That said, I like Chinese tech – as you know – and would continue to stick with AI and robotics players that have bigger potential today, than companies dealing with bigger and growing trade barriers.