• China’s aggressive political and economic policies threaten the U.S. economy.
• Key threats include: the risk of war with Taiwan, China’s role in de-dollarization, and bursting the AI stock bubble.
• Precious metals held in a Gold IRA can offer long term protection from China’s policies.

China’s Aggressive Ambitions

China poses a multi-pronged threat to the U.S. economy and, by extension, your retirement funds. As the world’s second-largest economy, China is projected to surpass the U.S. as the global economic leader between 2030 and 2036. Key threats include: the risk of war with Taiwan, China’s role in the BRICS de-dollarization, and its ability to burst the AI stock bubble by launching cheaper, competitive AI systems. These factors could have profound consequences to your financial future.

The Taiwan Conflict: A Ticking Time Bomb

China has escalated its threats against Taiwan with military drills, cyberattacks, and diplomatic pressure. President Xi Jinping wants to forcefully annex Taiwan by 2030 if unification fails. Analysts warn that Beijing’s assertiveness raises the risk of a wider conflict. With the U.S. being dragged in since it has pledged to defend Taiwan.¹

A war between China and Taiwan would have severe economic consequences for the U.S., potentially causing a 6.7% contraction in GDP if the U.S. intervenes. Even a Chinese blockade of Taiwan could reduce U.S. GDP growth by 3.3% within the first year. These projections far exceed the 2.2% contraction in GDP seen during the COVID-19 pandemic. The global economy could lose $10 trillion. There would be major disruptions to semiconductor supply chains and financial markets.²

China’s Push to Dethrone the U.S. Dollar

China is leading de-dollarization to reduce reliance on the U.S. dollar and promote the renminbi (RMB).

China’s central bank has developed a digital yuan. It is being piloted domestically and in cross-border trade with countries like Thailand and the UAE. This initiative seeks to set global standards for digital transactions. It also aims to cut reliance on dollar-based systems. And pushes the U.S. to create its own freedom threatening ‘digital dollar’.

China has also launched renminbi-denominated commodities markets, further reducing dollar reliance. The country is leveraging its dominance in critical mineral supply chains to promote RMB use in the clean energy transition.

China is cutting its U.S. Treasury holdings and boosting its gold reserves to protect its economy from possible U.S. sanctions. By March 2024, China’s gold reserves exceeded 2,264 tons, doubling in five years.³

If China abandoned the U.S. dollar, the impact on the U.S. economy could be devastating. Growth could stall, trade would be disrupted, and a sharp decline in the dollar’s value could fuel inflation. A sell-off of U.S. Treasury securities would raise borrowing costs. It could also trigger a financial crisis due to market instability and capital flight.

The dollar’s status as the world’s reserve currency would be at risk, severely weakening U.S. global influence. Foreign investment would dry up. The U.S. could lose its dominance in the global financial system. Making it economically and geopolitically vulnerable. While an abrupt shift is unlikely, even a gradual transition could inflict lasting damage.

China’s AI Disruption: Bursting the Tech Bubble?

Chinese AI startup DeepSeek may burst the AI stock bubble, triggering massive market turbulence.

DeepSeek has developed AI models comparable to leading U.S. offerings at a fraction of the cost. The company invested only $5.6 million in its latest AI model, R1, which performs similarly to ChatGPT. This challenges the idea that AI needs huge investments. It may devalue firms that have spent billions on AI research.⁴

The revelation of DeepSeek’s capabilities led to a sharp decline in U.S. stock markets. The Nasdaq Composite plummeted by 3.6%, with the S&P 500 dropping 2% and the Dow Jones Industrial Average falling 0.8%. ⁵

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Major U.S. tech companies and chip manufacturers saw significant drops in their stock prices. Nvidia, a major player in AI chips, saw a nearly 17% drop. This loss wiped out almost $600 billion from its market cap. It was the biggest single-day loss ever in stock market history. Other companies like Broadcom and Microsoft also suffered losses.⁷

DeepSeek’s success shows China’s rapid AI progress despite U.S. chip restrictions. U.S. tech controls may not be as effective as intended. Leaving Investors reassessing AI stock valuations, potentially bursting the bubble.

Protecting Your Wealth with Gold

The risks from China are mounting. Now, more than ever, gold is a critical hedge against China’s plans. Their record gold buying aligns with a global trend among BRICS nations to reduce dollar dependency. Central banks are boosting their gold reserves. They seek to hedge against inflation and geopolitical risks. A seismic shift in the global reserve currency landscape is happening as we speak.

For individuals, the same principle applies. Adding gold to a retirement portfolio, particularly through a Gold IRA, may be the best way to protect assets from currency devaluation and market volatility. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://media.defense.gov/2023/Apr/24/2003205865/-1/-1/1/07AMONSON%2520&%2520EGLI_FEATURE%2520IWD.PDF
2. https://www.businessinsider.com/taiwan-war-impact-us-economic-growth-first-year-china-chips-2024-1
3. https://tradingeconomics.com/china/gold-reserves
4. https://beebom.com/chatgpt-o1-vs-deepseek-r1-comparison/
5. https://evrimagaci.org/tpg/deepseeks-ai-model-sparks-stock-market-volatility-165435
6. https://www.ft.com/content/e670a4ea-05ad-4419-b72a-7727e8a6d471
7. https://evrimagaci.org/tpg/deepseeks-ai-model-sparks-stock-market-volatility-165435

 

• Surging bond yields jeopardize Trump tax cut extension.
• Key Congressmen want spending cuts to offset the tax cuts as debt fears mount.
• Retirement funds can be shielded by moving into safe haven assets like physical gold and silver held in a Gold IRA.

Tax Cuts Jeopardized

Extending his 2017 tax cuts was a cornerstone of President Trump’s platform. Now a volatile U.S. bond market is challenging the possibility of fulfilling that promise. Rising bond yields reflect investor fears about the federal deficit and interest costs. They could derail plans to keep the tax breaks. And leave Americans facing higher taxes and a more uncertain financial future.

Bond Market Pressures Mount

In the years since the 2017 tax cuts, the U.S. national debt has ballooned to $36 trillion, with annual deficits exceeding $2 trillion. This surge in debt has caused a significant increase in interest payments. They are now the second-largest federal budget item after Social Security. Treasury yields, which underpin borrowing costs across the economy, are now at their highest levels since late 2023. For example, the 10-year Treasury yield recently rose to 4.79% before settling slightly lower.¹

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²

These rising yields are a concern for lawmakers and investors alike. Rep. Ralph Norman (R-S.C.) noted, “The buyers of our bonds are getting nervous that we’re at the point that we cannot pay it back. That affects every one of us.” As interest rates climb, servicing the debt costs more. Further straining the government’s finances.³

The Challenges of Extending the Tax Cuts

Congress passed the Trump tax cuts, estimated to cost $4 trillion over the next decade, using budget reconciliation. This let Republicans bypass a Senate filibuster. However, to comply with these rules, the cuts to individual income taxes were set to expire at the end of 2025. Extending them now faces formidable obstacles.

Key Republican lawmakers want big spending cuts to offset the tax cuts. They warn that ignoring the deficit could raise interest rates. Rep. Andy Barr (R-Ky.) emphasized, “The bond market is telling Congress that if we don’t get our fiscal house in order, everybody’s mortgage rates, everybody’s credit card rates, everybody’s auto loan rates are going to continue to go up.”⁴

The bond market’s reaction underscores these concerns. Stephen Jen, CEO of Eurizon SLJ Capital, explained, “The bond market has begun to express their discomfort, and inflation being sticky is also a warning for Trump 2.0.”⁵

Political Divisions Add Complexity

Republican lawmakers face pressure from within their ranks to ensure fiscal discipline. Some conservatives, including Rep. Chip Roy (R-Texas), will not support tax cuts without spending cuts. “As we speak, interest rates are going up, our debt is getting refinanced at higher interest rates, and we have more debt,” Roy said, emphasizing the need for fiscal responsibility.⁶

What This Means for You

For the average American, the stakes are high. Higher Treasury yields mean higher interest rates on mortgages, credit cards, and auto loans. Putting even more strain on household budgets.

If the 2017 Trump tax cuts (Tax Cuts and Jobs Act or TCJA) expire at the end of 2025, taxes will rise significantly for many Americans. They will jump an average of 22%. Middle-income families, such as a household earning the median income of $80,610, could face a $1,695 hike. The standard deduction would shrink, the Child Tax Credit would halve for 40 million families, and the top marginal tax rate would rise to 39.6%. Small businesses may lose a vital deduction, and AMT filings could surge from 200,000 to 7.3 million, creating widespread financial strain.⁷

Rep. Barr highlighted the potential upside of addressing the deficit: “What we need to say to the American people is, look, this is not austerity. This is not painful cuts. This is about lowering your mortgage payment.” But achieving this balance will require tough political choices. It will also need significant bipartisan cooperation, a rare thing in Washington.⁸

Conclusion

Rising bond yields and fiscal pressures highlight the need to protect your assets in an uncertain economy. The Trump tax cuts’ fate will affect the economy and your personal finances. One cannot ignore their implications, whether they are extended or left to expire. To protect your portfolio, consider diversify with precious metals. Gold and silver, held in a Gold IRA, can offer long-term security against an increasingly uncertain economic future. To learn more, contact us today at 800-462-0071.

Notes
1. https://www.foxbusiness.com/politics/trumps-tax-cut-plans-face-bond-market-headwinds-gop-lawmakers-warn
2. https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iqyCi_y8OH44/v3/-1x-1.webp
3. https://www.reuters.com/markets/rates-bonds/republicans-congress-warn-rising-us-bond-yields-could-hit-trumps-tax-cut-plans-2025-01-16/
4. https://www.reuters.com/markets/rates-bonds/republicans-congress-warn-rising-us-bond-yields-could-hit-trumps-tax-cut-plans-2025-01-16/
5. https://www.msn.com/en-us/money/markets/warning-for-trump-as-bond-markets-call-bluff-on-gop-tax-cut-plan-reports/ar-AA1xospA
6. https://www.msn.com/en-us/money/markets/warning-for-trump-as-bond-markets-call-bluff-on-gop-tax-cut-plan-reports/ar-AA1xospA
7. https://waysandmeans.house.gov/2025/01/07/millions-of-taxpayers-will-have-to-do-returns-twice-while-paying-higher-taxes-if-key-trump-tax-reforms-expire/
8. https://www.foxbusiness.com/politics/trumps-tax-cut-plans-face-bond-market-headwinds-gop-lawmakers-warn

 

• Even as optimism returns to the economy, risks to the commercial real estate sector are increasing.
• The CRE sector is threatened by massive maturing debt, high interest rates, soaring vacancies and declining property values.
• Physical precious metals held in a Gold IRA can offer long-term protection from the impact of a CRE collapse.

CRE Risks Grow

Even as optimism spreads throughout the economy, significant risks remain—or in some cases, are growing. The commercial real estate (CRE) market is on the brink of a financial abyss. The effects will go beyond property owners. The fallout threatens the stability of the broader economy, and the retirement funds of countless Americans.

Crisis in the Making

In November 2024, the delinquency rate for office commercial mortgage-backed securities hit 10.4%. It was near the 10.7% peak during the 2008 financial crisis. This marks the fastest two-year increase on record, climbing 8.8% since 2022. Persistent high vacancy rates and declining rents have accelerated the CRE sector’s severe downturn. Older office buildings have been hit hardest, with property values plummeting by 50% to 70%. In some cases, these properties are now worthless.¹

Roots of the Problem

The current crisis stems from several interconnected factors:

Bad Investments and Low Interest Rates: The pandemic’s low interest rates spurred a wave of unsustainable loans. When interest rates rose, borrowers faced soaring debt payments, often doubling or more.

Remote Work and Zoning Restrictions: The rise of remote work has cut demand for office space. Zoning rules have blocked efforts to repurpose office buildings.

Loan Restructuring Strategies: Banks have used “extend and pretend” strategies. They restructured loans to delay addressing financial distress. This “survive till 2025” mindset has dominated the market. But the hoped-for Fed rate cuts are unlikely.

Rising Interest Rates and Mounting Debt

Treasury yields, which influence mortgage rates, have soared. Rising inflation, tariff threats, and a $36 trillion national debt have caused this. The 30-year mortgage rate hit 7.76% in November 2023. It will likely stay above 6% for a while. This has dashed hopes of refinancing. Many properties now face financial distress.²

The debt cliff looms large: $570 billion in commercial loans will mature in 2025, with nearly 40% held by banks. In 2026, $1.8 trillion in loans will mature. Borrowers may see a 75% to 100% rise in debt payments due to high interest rates. This escalates the risk of delinquencies and foreclosures.³

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Systemic Risk to Banks

Regional banks, which hold nearly 70% of CRE loans in the U.S., are particularly vulnerable. CRE loans make up 38% of loan portfolios for banks with under $10 billion in assets. For larger banks, it’s only 12.5%. Tomasz Piskorski, a real estate professor at Columbia, warns of tens of billions in potential banking losses. Regional bank failures could trigger a domino effect. It might destabilize the entire financial system. This could cause deposit outflows, forced asset sales, and systemic risk. The collapse of commercial real estate could push an already fragile banking system into total meltdown.⁵

Regulatory Challenges and Insurance Costs

Regulatory scrutiny is increasing as the crisis deepens. Meanwhile, inflation and natural disasters are raising insurance costs. This adds to the financial strain. Richard Barkham, CBRE’s chief economist, notes that high interest rates may prevent a market rebound. This could further hurt property owners and lenders.

Implications for Retirement Funds

The CRE sector’s link to the banking system means risks extend to individual retirement funds. Many retirement portfolios include commercial real estate via REITs or other financial tools. Falling property values and rising defaults could harm these investments. This threatens the retirement of millions of Americans. It could also trigger failing banks and crash the stock market.

The Road Ahead

The Counselors of Real Estate, a global group of real estate advisors, projects that financing challenges will persist. Cautious buyers and sellers will keep market activity low. Cap rates, a key metric for property investment returns, are expected to climb, signaling higher risk and lower property values. Regulatory and cost barriers make it hard to convert office space to other uses.

Conclusion

The warning signs in commercial real estate are clear. The sector’s struggles could harm the economy, the banking system, and retirement funds.
In light of these challenges, diversification strategies are more critical than ever. Gold and other precious metals have long been a hedge against economic uncertainty and inflation. As the CRE sector nears a debt cliff, gold can protect your retirement. It offers stability in a volatile market. To learn how physical precious metals held in a Gold IRA can offer long-term security, call us today at 800-462-0071.

Notes:
1. https://thedailyeconomy.org/article/the-commercial-mortgage-crisis-deepens/
2. https://www.credaily.com/briefs/2025-interest-rate-outlook-and-how-cre-is-impacted/
3. https://www.businessinsider.com/commercial-real-estate-office-interest-rates-risks-industrial-trump-2024-12
4. https://www.creanalyst.com/insights/facing-cres-maturity-wall-what-investors-need-to-know-now
5. https://www.businessinsider.com/commercial-real-estate-office-interest-rates-risks-industrial-trump-2024-12