00:00:00
So, this is crazy. Imagine you're the
00:00:03
most dominant player in the game. You're
00:00:05
so dominant that nobody even questions
00:00:07
it. Nobody's willing to challenge you
00:00:09
because they know that if they do,
00:00:11
they're going to lose. But one day, you
00:00:13
wake up and you decide, "Hey, just for
00:00:14
fun, I'm not only going to challenge the
00:00:17
number two player, but I'm going to
00:00:19
challenge everybody. Not only am I going
00:00:21
to challenge them, I'm going to bully
00:00:23
them into playing the game the way I
00:00:25
want it to be played." But you realize
00:00:27
quickly that there's a catch. All the
00:00:29
cards that you thought you held, it
00:00:31
turns out you don't actually hold. And
00:00:33
at the same time that you're realizing
00:00:36
that you don't have the dominance that
00:00:37
you thought you did, everybody else is
00:00:39
realizing it as well. This is exactly
00:00:41
what's happening right now with the US
00:00:43
and the trade war that it's fighting
00:00:45
with China. And in a scenario where just
00:00:47
a few months ago the US seemed to have
00:00:50
all the global economic cards, it turns
00:00:52
out they don't. Because over the last 20
00:00:55
years they gave up an important thing
00:00:57
and that was their leverage. And even
00:00:59
though nobody asked if the US actually
00:01:01
still had that leverage, they made a
00:01:03
fatal mistake that showed everybody
00:01:05
their hand and could reshape the global
00:01:08
economic order as we know it. Because it
00:01:10
turns out that the US is never going to
00:01:13
beat China in a trade war. And I'm going
00:01:15
to reveal why the US has played all its
00:01:18
cards and why China now has the upper
00:01:20
hand, making it potentially the next
00:01:22
global superpower. But in order to
00:01:24
understand how we got here, we need to
00:01:26
take a little bit of a look at history.
00:01:27
Because there was a beginning to the
00:01:29
end, a significant mistake that the US
00:01:32
made that essentially rolled out the red
00:01:34
carpet, so to speak, for China to
00:01:37
establish, at least in theory, global
00:01:40
dominance. And while nobody thought that
00:01:42
this would play out so soon and so
00:01:43
quickly, the US made a fatal mistake
00:01:45
going to war in a trade war with China
00:01:49
where it turns out China actually holds
00:01:51
all the cards primarily because of
00:01:53
something that the US encouraged China
00:01:55
to do and that was to join the World
00:01:57
Trade Organization in 2001. Now, at the
00:02:00
time, encouraging China to join the WTO
00:02:02
seemed like a good idea. The US hoped
00:02:04
that it would create economic
00:02:05
integration and political reform, making
00:02:08
China a little less communist and maybe
00:02:11
a little bit more democratic. You see
00:02:13
that they thought opening up China from
00:02:15
a trade perspective would also open them
00:02:17
up politically, but it didn't. And this
00:02:19
was a turning point that would
00:02:20
eventually lead the US to a perilous
00:02:22
position. One where they thought they
00:02:24
had all the cards, but obviously didn't.
00:02:27
One where they would pick a fight that
00:02:28
they couldn't win. where China could
00:02:30
just retaliate and retaliate and
00:02:33
retaliate with almost zero concern for
00:02:36
their own economic well-being while at
00:02:38
the same time putting the US at a
00:02:40
significant disadvantage which I'll talk
00:02:42
about in a few minutes. But before we
00:02:44
talk about that, we need to talk about
00:02:46
the impact that China joining the WTO
00:02:49
had on trade with America. Because in
00:02:51
the early 2000s, the US only imported
00:02:54
about hundred billion worth of goods.
00:02:56
But over the next 20 years, that number
00:02:59
would increase to over $500 billion
00:03:01
worth of goods. But while the US
00:03:03
outsourced manufacturing to China and
00:03:05
started importing a significant amount
00:03:06
of goods, China didn't buy as much from
00:03:09
the US as the US was buying from them,
00:03:12
which led ultimately to a pretty
00:03:14
significant trade deficit. But it also
00:03:16
led to one other major problem. And that
00:03:18
was the fact that the US, having
00:03:20
outsourced most of its manufacturing to
00:03:22
China, now was kind of in a position
00:03:25
where they didn't have the tools they
00:03:27
needed to produce the things that they
00:03:29
potentially needed at home, putting them
00:03:31
at the mercy of China without even
00:03:33
realizing it. At this point, they
00:03:35
essentially gave away all of their
00:03:36
leverage if they were ever to get into
00:03:38
any sort of war or trade war with the
00:03:41
nation that was across the Pacific. And
00:03:44
this has become known as the China shock
00:03:46
where Chinese exports exploded after
00:03:48
2001. And at the same time, it's
00:03:50
estimated that somewhere between 500,000
00:03:53
and 2.4 million jobs were erased from
00:03:56
the American economy. Now, these were
00:03:58
manufacturing jobs. And unfortunately,
00:04:00
while the overall impact of more trade
00:04:03
with China was a net benefit to the
00:04:05
entirety of the United States, there
00:04:07
were certain areas of the country that
00:04:09
were more impacted than others by jobs
00:04:12
moving overseas. So most of this new
00:04:14
trade that had a net benefit to the US
00:04:16
as a whole was at the expense of certain
00:04:18
local markets. And by the way, those
00:04:20
certain local markets, well, they kind
00:04:22
of have a pretty big say when it comes
00:04:24
to voting. And even though most of the
00:04:26
rest of the world doesn't remember that
00:04:28
these jobs were lost and certain
00:04:30
industries were impacted, the people
00:04:32
that were impacted, well, they certainly
00:04:34
have a memory that goes back 10 to 20
00:04:36
years. Which when all of this China
00:04:39
stuff started getting politicized in
00:04:41
2016 was the reason why Donald Trump on
00:04:45
his first and second term, well, was
00:04:47
able to get voted in by those states
00:04:48
that had been affected by the China
00:04:50
shock. And all it took was the
00:04:52
suggestion that jobs needed to come back
00:04:54
to the US in order to make that happen.
00:04:57
But the question is, how easy is it for
00:04:59
those jobs to return? And the answer is,
00:05:01
well, it's highly unlikely. You could
00:05:04
probably bring the manufacturing back to
00:05:06
the US, but if you bring it back to the
00:05:08
US, it's probably going to be automated
00:05:10
in such a way that those jobs will never
00:05:13
reexist. The onshoring of manufacturing
00:05:16
might be something that's possible in 3
00:05:18
to 5 years, but the return of the jobs,
00:05:21
well, it's highly unlikely. But
00:05:23
nonetheless, China joining the WTO
00:05:25
showed that there were significant
00:05:26
cracks in the system. The first was that
00:05:29
there was persistently a US trade
00:05:30
deficit with China, which makes sense in
00:05:33
a lot of ways. When you are the world's
00:05:35
most prosperous country and you have the
00:05:37
most money to spend and you're consuming
00:05:39
the most, you're probably going to be
00:05:41
consuming goods from other suppliers and
00:05:43
other countries. But there was more to
00:05:44
it than just that. There was also the
00:05:47
accusations of currency manipulation.
00:05:49
China making its goods cheaper by
00:05:51
manipulating its own currency. There was
00:05:53
the unfair subsidies that were being
00:05:55
given to Chinese companies to make them
00:05:57
more competitive in the international
00:05:58
market. And there was the fact that
00:06:00
state-owned enterprises dominated the
00:06:03
Chinese manufacturing world, which made
00:06:05
it really hard for countries elsewhere
00:06:07
to compete, whether they were American
00:06:09
or otherwise. So even though China
00:06:12
joining the WTO and significantly more
00:06:14
trade with China was a net benefit to
00:06:16
Americans, the memories were still
00:06:18
there. And that combined with Americans
00:06:20
taking exception to Chinese
00:06:22
manufacturers breaking the rules led the
00:06:24
US to do something that they probably
00:06:26
shouldn't have done. and that was fight
00:06:28
back to challenge the second place
00:06:30
player at a game where they were already
00:06:33
dominant were already winning and
00:06:35
potentially if they made the wrong move
00:06:38
could show the entire world that they
00:06:39
weren't the dominant player that
00:06:41
everybody thought they were. And this
00:06:42
started in 2018 with Trump's first trade
00:06:45
war with China. And as Trump took up a
00:06:47
fight with US manufacturers, China
00:06:49
turned around and took up a fight with
00:06:51
US farmers. Meaning that an industry, a
00:06:53
group of people that weren't in a fight
00:06:55
were all of a sudden brought into a
00:06:56
fight. And that should have been the
00:06:58
first sign that picking a fight with
00:07:00
China was not a good idea because it
00:07:02
could lead to collateral damage. In
00:07:04
industries that had nothing to do with
00:07:06
the trade war to begin with,
00:07:07
manufacturing jobs get destroyed. US
00:07:09
goes to war with China, China destroys
00:07:12
farmers. Now you've got two industries
00:07:14
that are destroyed instead of just one.
00:07:16
Now, this was mostly settled, but fast
00:07:18
forward 5 years and here we are once
00:07:20
again. This all starts in February 2025
00:07:23
with a 10% tariff being reintroduced to
00:07:26
multiple countries. Then in March it
00:07:28
increases to 20%. And this is all framed
00:07:31
as a fentinel issue. It's a drug issue.
00:07:33
It's national security. But it's not.
00:07:36
It's a attempt to reshape the world
00:07:39
order. a world order where the US is the
00:07:41
dominant country and expects to continue
00:07:43
to be, but uses that power to bully
00:07:46
other nations only to find out that the
00:07:48
power it thought it had, well, it wasn't
00:07:51
actually there. And that's where we end
00:07:53
up in April of 2025. The US realizing
00:07:56
that it doesn't have the power it
00:07:57
thought it did and that other countries,
00:07:59
especially China, aren't backing down.
00:08:02
Because as this is all happening, China
00:08:04
starts to realize that it actually holds
00:08:06
a lot more cards than it originally
00:08:08
thought it did. And as this tit fortat
00:08:10
war plays out, you see the US impose 10%
00:08:13
tariffs. Then it increases them to 20.
00:08:16
And China just sits on the sidelines and
00:08:17
goes, "Okay, whatever." But then all of
00:08:20
a sudden, the US raises tariffs, another
00:08:22
34%. And China goes, "Okay, you know
00:08:25
what? We've had enough. We're going to
00:08:26
retaliate." So they put 34% tariffs on
00:08:30
the US. The US, Donald Trump says,
00:08:33
"Don't do that. You're going to regret
00:08:35
it. If you don't pull back those
00:08:37
tariffs, you're going to be in trouble
00:08:39
and we're going to increase tariffs
00:08:40
another 50%. Well, China doesn't back
00:08:42
down. So tariffs go up another 50%. And
00:08:45
at the end of the day, we end up in a
00:08:46
situation where the US now has 145%
00:08:50
tariffs on Chinese goods and China has
00:08:53
125% tariffs on US goods. And they
00:08:57
basically said this is as far as we're
00:08:59
going to go, at least with respect to
00:09:00
tariffs, because there's no point in it
00:09:03
going any further. the amount that we
00:09:05
have increased tariffs against each
00:09:07
other has pretty much destroyed all
00:09:09
trade that we're going to do. They've
00:09:11
basically said to the US, increase the
00:09:13
tariffs as much as you want because
00:09:15
there's a point where it doesn't matter.
00:09:17
And when we get to that point, what
00:09:19
you're going to realize is that you need
00:09:21
us more than we need you. And this is
00:09:24
where you see the breaking point. We're
00:09:25
at allout war with one of our biggest
00:09:27
trading partners and without a doubt one
00:09:29
of the most significant suppliers of
00:09:31
goods to the US consumer. And the WTO
00:09:34
estimates that this is going to reduce
00:09:36
trade between the US and China by up to
00:09:38
80%. But worse than that, it's going to
00:09:41
fragment trade along geopolitical lines.
00:09:44
Meaning that China and the East is
00:09:47
probably going to take its ball and go
00:09:48
home and leave the West to figure out
00:09:50
stuff on their own. And there's a huge
00:09:53
problem with this, which I'll talk about
00:09:54
a little bit later on, but it has to do
00:09:57
with a control that China has of some
00:10:00
pretty important products. and also some
00:10:03
pretty important resources. But before
00:10:05
we talk about that, let's talk about the
00:10:07
impacts that these tariffs are going to
00:10:09
have to the Chinese economy. Because
00:10:11
when tariffs went up by 50%, it meant
00:10:14
that China's economy was probably going
00:10:15
to shrink about 1.5%. But then when the
00:10:18
tariffs went up to 125%. Well, the
00:10:21
amount of damage that the additional
00:10:22
tariffs did was not quite as
00:10:24
significant, leading to only a 2.2%
00:10:27
reduction in GDP. In economics, this is
00:10:30
called diminishing returns. So the first
00:10:32
50 basis points in tariffs did a
00:10:34
significant amount of damage or
00:10:36
potentially did a significant amount of
00:10:37
damage, but every additional 50 basis
00:10:39
points from there does less and less
00:10:42
damage because the damage is already
00:10:43
done. And while it seems like going from
00:10:46
145% to 300% would be damaging, the
00:10:49
reality is you can't kill something
00:10:51
that's already dead. The US by imposing
00:10:53
the tariffs basically killed trade with
00:10:56
China and increasing them any further
00:10:59
has pretty much no effect. Except for
00:11:01
the fact that it gets significantly
00:11:03
harder for the US consumer to get the
00:11:05
goods that they want to buy at the
00:11:06
prices they want to buy them at. But
00:11:08
that's not even the biggest problem
00:11:09
because China has an upper hand. And
00:11:12
nobody realized this until Donald Trump
00:11:14
went to war with China. And that upper
00:11:17
hand actually has very little to do with
00:11:19
China and has more to do with the
00:11:22
weakness of the US economy that nobody
00:11:24
even realized was there. And that
00:11:26
structural weakness was three-fold.
00:11:28
First, it's how much people
00:11:30
underestimated the US consumer's
00:11:32
reliance on cheap goods from overseas,
00:11:34
especially from China. Two, it is the
00:11:37
US's hollowedout manufacturing base.
00:11:39
Donald Trump is absolutely correct in
00:11:41
suggesting that the US needs to bring
00:11:44
manufacturing back home. Unfortunately,
00:11:46
what he doesn't realize is that it needs
00:11:48
to be done gradually because if you lose
00:11:51
your biggest supplier pretty much
00:11:52
overnight, but it takes three to five
00:11:54
years to build out the factories that
00:11:56
you need to build the products that you
00:11:58
want to build, well, you're going to
00:12:00
have a pretty significant amount of pain
00:12:02
over several years. And the third was
00:12:04
the dependency that US companies have on
00:12:07
foreign supply chains because a lot of
00:12:09
what's made in USA is also made abroad
00:12:12
before it's assembled in the USA. But
00:12:14
that's not even China's biggest
00:12:16
advantage here. It's the reordering of
00:12:18
global trade that is going to be so
00:12:20
important. But before we talk about
00:12:21
that, let's talk about who is actually
00:12:23
going to get hurt in the US. Because for
00:12:25
the most part, it's going to be first
00:12:28
and foremost consumers. There's going to
00:12:30
be price spikes. There's going to be
00:12:31
inflation as a result of higher tariffs,
00:12:34
higher costs, and having to buy goods
00:12:36
from countries that aren't China that,
00:12:38
by the way, are going to see the writing
00:12:40
on the wall and the opportunity to raise
00:12:42
prices on US consumers primarily because
00:12:44
they'll be able to. If you can't buy
00:12:47
Chinese goods for the same prices you
00:12:49
used to, in fact, you're going to have
00:12:51
to buy them for 145% more than you did
00:12:53
previously, well, that gives other
00:12:55
countries around the world the ability
00:12:56
to increase prices. And they don't even
00:12:59
have to increase them the full 145%.
00:13:01
They can increase them 100% and it'll
00:13:03
still be a better deal than the Chinese
00:13:05
products, but the price for US consumers
00:13:07
still goes up. Then there's the impact
00:13:09
to US small businesses who don't have
00:13:11
the ability to trade with pretty much
00:13:14
anybody. They're going to see prices
00:13:15
rise as well. In fact, what you're
00:13:17
probably going to see because of the
00:13:19
higher prices if they do happen is a lot
00:13:22
of small businesses going out of
00:13:23
business because they won't be able to
00:13:25
compete with bigger manufacturers or
00:13:27
foreign manufacturers from countries
00:13:29
that aren't China. And here's the big
00:13:31
one. The people that are going to feel
00:13:33
the most impact are probably the farmers
00:13:35
who at this point have pretty much lost
00:13:38
all access to the Chinese market. This
00:13:40
is going to be devastating to local
00:13:42
farmers who relied on that market for
00:13:44
trade. Oh, and don't even get me started
00:13:46
on manufacturers who aren't going to be
00:13:48
able to pivot fast enough. The idea that
00:13:51
Apple, for example, is going to be able
00:13:53
to bring the production of iPhones back
00:13:55
to the US in a quick manner is
00:13:58
ridiculous. No. Instead, what they're
00:14:00
probably going to do is they're probably
00:14:02
going to ramp up the production in India
00:14:04
instead or move production to Vietnam or
00:14:07
to other countries that aren't China.
00:14:09
They aren't going to onboard them and
00:14:11
bring them back to the US. They're just
00:14:13
going to move them to other countries
00:14:14
that have the capacity that aren't in a
00:14:17
trade war with the US. And the US
00:14:18
government has already realized that
00:14:20
this is a problem. As of this filming,
00:14:22
just hours before, the US pulled back
00:14:25
all the tariffs on computers and
00:14:28
electronics. Primarily because they
00:14:30
realized that something like the iPhone
00:14:32
would go up in price by up to 3x if they
00:14:35
continued down the path that they were
00:14:36
on. But that doesn't mean that China is
00:14:38
going to back down just because the US
00:14:41
lowered the tariffs on electronics. No,
00:14:44
China has made it very clear that they
00:14:45
are willing to fight till the bitter
00:14:47
end. And importantly, what they've
00:14:48
realized is that they've actually got
00:14:51
some leverage that they didn't realize
00:14:52
that they had because China's
00:14:54
essentially built an economic fortress.
00:14:57
Now, whether it was because they did
00:14:58
shady things when it came to trade that
00:15:00
other countries couldn't do or not, it
00:15:02
doesn't matter. They're the world's
00:15:03
number one manufacturer. That gives them
00:15:05
leverage. They are the dominant player
00:15:08
in global exports. That gives them
00:15:10
leverage. They have a massive domestic
00:15:13
industrial base. In other words, all the
00:15:15
factories, all the machinery,
00:15:17
everything's already there. That gives
00:15:19
them leverage. And they've also got one
00:15:21
of the biggest populations, if not the
00:15:23
biggest population in the world. Sorry,
00:15:24
I should probably have that data on hand
00:15:26
as I'm making this video, but I don't.
00:15:28
But nonetheless, their internal demand
00:15:30
is definitely a significant benefit. And
00:15:33
there's things that they can do in order
00:15:35
to increase the internal domestic demand
00:15:37
as well by doing things like, I don't
00:15:39
know, printing money and stimulating the
00:15:41
economy, which puts them at an even
00:15:44
greater advantage when it comes to this
00:15:46
trade war. But on top of that, they've
00:15:47
also got supply chain control. A lot of
00:15:49
goods that are made in other countries
00:15:51
have some sort of tie to the Chinese
00:15:53
economy. There are 80 plus product
00:15:55
categories that rely on China. And a lot
00:15:57
of those categories, a lot of the most
00:15:59
significant categories are things that
00:16:02
the world needs to move forward in order
00:16:05
to lessen their reliance on oil. Things
00:16:08
like rare earth metals, electric
00:16:10
vehicles, solar panels. These are all
00:16:12
areas where China has a near monopoly.
00:16:16
And not only that, the production of
00:16:18
things that go into these types of goods
00:16:22
is already integrated in global
00:16:23
production lines. There isn't a single
00:16:25
vehicle on the planet that doesn't get
00:16:27
some sort of product that comes directly
00:16:30
from China. Whether it's made in the
00:16:32
USA, made in Canada, made in Mexico,
00:16:34
made in Germany, made elsewhere. Every
00:16:36
single one of these production lines has
00:16:38
some sort of component that relies on
00:16:41
Chinese exports. And that's true not
00:16:43
just for cars, but for a lot of goods
00:16:45
that are produced and consumed by, you
00:16:47
guessed it, US consumers and global
00:16:49
consumers alike. But here's where it
00:16:51
gets really scary, cuz we're already
00:16:52
seeing regional alliances change.
00:16:55
There's talks of strengthening a free
00:16:57
trade agreement between South Korea,
00:16:59
Japan, and China. We've already seen two
00:17:01
of the US's most significant allies in
00:17:05
Japan and South Korea, at least in Asia,
00:17:09
start to have further conversations with
00:17:10
China about how they can work together.
00:17:13
So, two partners of the US, who the US
00:17:16
thought was its allies in these games,
00:17:18
are starting to have conversations with
00:17:19
the competitor. And these three
00:17:21
countries alone have a combined GDP that
00:17:24
is 22% of the global economy. And they
00:17:27
combined for a total of 18.3% of world
00:17:30
trade. And while these talks were
00:17:32
happening prior to this, they literally
00:17:34
hadn't had conversations about it in 5
00:17:36
years. But when the US decided to play
00:17:39
this game and test its dominance, guess
00:17:41
who started talking again? Now, Chinese
00:17:43
state media suggested that China, Japan,
00:17:46
and South Korea would jointly respond to
00:17:47
US tariffs. And obviously, South Korea
00:17:50
and Japan came back quickly and said
00:17:51
this isn't true. But they did have a
00:17:54
joint response, a joint press release
00:17:56
from their meetings, which suggested
00:17:58
that they were open to having more trade
00:18:01
as the US seemed to want to go into an
00:18:04
isolationist stance. Basically, the US
00:18:07
doing what it did led Japan and South
00:18:10
Korea to go, "Hold on a second. We're
00:18:13
not sure if our partner is going to be
00:18:14
our partner, so maybe we should start
00:18:17
talking to the other guy." And this is
00:18:18
happening around the world. We're seeing
00:18:20
Canada start to talk to the European
00:18:22
Union about strengthening its trade
00:18:24
relationships. We're seeing once
00:18:26
reliable Asian trading partners start to
00:18:29
talk to each other about how they can
00:18:30
circumvent the US. And China's already
00:18:34
the single biggest trading partner with
00:18:35
Africa. And by the way, back when Donald
00:18:38
Trump got elected, China saw all this
00:18:40
coming. And guess what? They opened
00:18:43
their doors. They opened their borders
00:18:45
to these small nations, undeveloped
00:18:47
nations, and said, "Hey, if you want a
00:18:50
really reliable trading partner, we'll
00:18:52
be that for you." Which is essentially
00:18:54
China opening up to the world and
00:18:55
saying, "You know what? We're open for
00:18:56
business." And it seems like the other
00:18:59
big superpower, well, they're not. So,
00:19:02
would you like to deal with them or
00:19:04
would you like to deal with us? And this
00:19:06
is how the world order gets rearranged.
00:19:09
Now, as I mentioned, China saw this all
00:19:11
coming. In 2018, the writing was on the
00:19:13
wall. They realized really quickly in
00:19:15
2018 that they didn't want to have all
00:19:17
their eggs in the US basket. So, they
00:19:20
spent the last 7 years preparing for
00:19:22
something that really shouldn't have
00:19:23
happened, but did. So, let me show you
00:19:26
how. First of all, there was a clear
00:19:27
diversification of trade. The US said,
00:19:30
"We don't want to be trading only with
00:19:31
China." So, they reduced the amount of
00:19:34
goods that they were importing. Well, at
00:19:36
the same time, China reduced the amount
00:19:38
that they were importing from the US as
00:19:39
well. But, as you'll see in a minute,
00:19:41
China's trade actually went up
00:19:43
significantly. Well, it stayed pretty
00:19:46
much even with the US, meaning that they
00:19:48
just diversified who they were trading
00:19:50
with, which becomes a major problem for
00:19:52
the United States. You'll see why in a
00:19:54
second. And it turns out that the US
00:19:56
needs Chinese exports more than China
00:19:59
needs US imports. Over the last 20
00:20:01
years, China's share of US imports has
00:20:04
gone up substantially. But the
00:20:06
percentage of goods that are being
00:20:08
bought by the US that China produces has
00:20:11
gone down. Meaning that China is
00:20:13
exporting more and more to other
00:20:15
countries that aren't the USA. And this
00:20:18
becomes problematic for the US because
00:20:20
China doesn't rely on the US to buy its
00:20:23
goods. But the US very much relies on
00:20:26
China to buy some pretty significant
00:20:29
consumer products, which gives China an
00:20:31
upper hand in this trade war. And where
00:20:33
this gets really interesting is when you
00:20:35
look at the difference in trade between
00:20:37
2018 and 2023. Because in 2018, the US
00:20:42
bought 19.8% of Chinese exports. In
00:20:46
2023 they bought only 12.8%. Now what's
00:20:50
interesting is that the total amount of
00:20:52
exports in 2018 from China was 2.76
00:20:56
trillion. In 2023 it was 3.42 trillion.
00:21:00
So China exported significantly more but
00:21:03
the US's share of what they exported
00:21:05
went down. And when we look at the
00:21:07
nominal amount of this, what you can see
00:21:10
is that in 2018, the United States
00:21:14
imported from China about $547 billion
00:21:16
in goods. In
00:21:18
2023, they only imported $436 billion
00:21:22
worth of goods, which is about a hundred
00:21:24
billion reduction in the amount that
00:21:26
they've imported. But if the US is
00:21:28
importing less from China, but China is
00:21:31
exporting more to the global economy,
00:21:34
what that means is that China is
00:21:36
becoming an even bigger player, one that
00:21:38
is way less reliant on the US than the
00:21:42
US believes it is. And ironically, while
00:21:44
all of this was happening, while the US
00:21:46
was reducing the amount that it imports
00:21:48
from China, Canada and Mexico were both
00:21:51
increasing the amount that they imported
00:21:53
from China, getting their hands on some
00:21:55
of those cheap Chinese goods that
00:21:57
Americans were importing less of. And as
00:21:59
we get further and further into this US
00:22:02
tariff issue, that's going to happen
00:22:04
globally. Everyone is going to start
00:22:06
buying goods from China that are cheaper
00:22:09
because the US is no longer demanding
00:22:11
them. And that is going to give China
00:22:13
even more leverage on a global stage
00:22:15
because the US is becoming isolationist.
00:22:19
They're becoming erratic. In fact, by
00:22:21
the time you watch this video, half of
00:22:22
what I said could be totally different
00:22:24
from the perspective of what the tariffs
00:22:26
are. I mean, even this morning as I was
00:22:29
looking at the news right before filming
00:22:31
this, Trump had gone ahead and changed
00:22:33
it so that electronics and computers
00:22:35
weren't going to be tariffed anymore.
00:22:37
Which is essentially Donald Trump
00:22:39
blinking in this whole trade war. Going,
00:22:42
you know what? China called my bluff and
00:22:44
now what am I going to do? I have to get
00:22:46
rid of these tariffs on electronics
00:22:47
because if I don't, well, prices are
00:22:50
going to go up and the US consumer is
00:22:51
going to hate me when they can't get
00:22:52
their hands on that Samsung or that
00:22:55
iPhone that they've always wanted or
00:22:57
that they expect to be able to buy for X
00:22:59
number of dollars, but it now costs
00:23:01
three times that. And not only that, in
00:23:04
the face of all this erratic behavior,
00:23:07
China seems to be, at least on a global
00:23:09
stage, the more reliable trading
00:23:11
partner, which is causing the world
00:23:14
order to realign. We're starting to see
00:23:17
Asian countries that once had a very
00:23:19
strong relationship with the US and not
00:23:22
so much of a strong relationship with
00:23:24
China start to rethink, you know, their
00:23:27
relationships with the Chinese
00:23:29
government. And we're also seeing places
00:23:32
like Canada rethink their relationship
00:23:34
with the US and other potential trading
00:23:36
partners around the world. And this
00:23:38
leads us to a conversation around what
00:23:39
would happen if the US and the China
00:23:41
really did decouple. Who would face the
00:23:43
biggest challenges and the most pain?
00:23:45
Well, the US has fragile supply chains.
00:23:48
We've already established this. Their
00:23:49
manufacturing went to China, which means
00:23:51
the supply chains are relying on China.
00:23:53
And if China goes away, well, we've got
00:23:56
a 3 to 5year problem of bringing
00:23:58
manufacturing back home, which is
00:24:01
probably something that doesn't make a
00:24:03
lot of sense in the first place,
00:24:05
especially when you start to realize the
00:24:08
US's thought process around immigration
00:24:11
and what you would need from an
00:24:12
immigration perspective to fill all the
00:24:14
jobs to manufacture all the things. And
00:24:16
then on top of that, you've got this
00:24:17
massive consumer impact. It's the
00:24:19
consumer goods that are going to be most
00:24:21
impacted by tariffs on China. Now, flip
00:24:23
this around and look at the Chinese
00:24:25
impact and they've got resilient supply
00:24:28
chains. They can make whatever they want
00:24:29
for whoever they want. And on top of
00:24:32
that, they've diversified their exports
00:24:34
to other countries already. So, yeah,
00:24:37
our 12% trading partner might buy less,
00:24:40
but we can just sell those goods to
00:24:42
other countries for less. And well,
00:24:44
there's some argument that that's not
00:24:46
good for the world economy. The reality
00:24:48
is China can survive. And when we put
00:24:51
this into a applesto apples comparison,
00:24:53
it looks like this. The manufacturing
00:24:56
base in the US is weak and it's strong
00:24:58
in China. Supply chains in the US are
00:25:00
fragile and self-sufficient in China.
00:25:03
Consumer impact in the US is going to be
00:25:05
high. In China, it's probably going to
00:25:07
be pretty low. And the export
00:25:09
diversification in the US where we can
00:25:11
send our goods is well not that great.
00:25:15
While in China, it's quite significant.
00:25:18
And not only that, when you look at the
00:25:19
goods that the US exports to China
00:25:21
versus what China exports to the US, it
00:25:24
becomes really clear that most of what
00:25:26
China buys from the US is not for
00:25:29
consumer use. Soybeans being the one
00:25:33
that's closest to that, but it's mostly
00:25:35
aircrafts and engines, integrated
00:25:37
circuits, pharmaceuticals, and
00:25:39
petroleum. On the other hand, what China
00:25:41
exports to the US is things that people
00:25:43
want to buy that when they become more
00:25:45
expensive are going to create pain for
00:25:48
American consumers. Things like
00:25:50
smartphones, laptops, batteries, not
00:25:53
just for the things you use every day,
00:25:55
but for things like electric vehicles
00:25:57
that are becoming so popular. And then
00:25:59
toys and telecom equipment. All of these
00:26:02
things when they go up in price are
00:26:04
going to affect the amount of money that
00:26:06
you have available in your pocket to
00:26:08
spend on a daily basis. These tariffs,
00:26:11
believe it or not, are going to hurt you
00:26:13
as a consumer more than they're going to
00:26:15
hurt anybody else. And then when it
00:26:17
comes to the sticker shock, this is
00:26:19
where it gets really interesting because
00:26:22
China exports pretty much everything
00:26:24
that they export to the US to a
00:26:27
significantly greater scale to other
00:26:29
countries. The amount that China exports
00:26:31
to the US is denoted by the black parts
00:26:33
of the line. The amount that China
00:26:35
exports elsewhere is the blue. There
00:26:37
isn't a single product that China
00:26:39
exports to the US that they don't export
00:26:43
significantly more of to other
00:26:44
countries. And when it comes to what the
00:26:47
US exports to China, well, there's only
00:26:50
one thing, one item that China relies on
00:26:54
the US for, and that's jet engines.
00:26:56
everything else they import at a greater
00:26:59
scale from other countries than they
00:27:00
import from the US. So, China just like
00:27:03
an individual looked at this whole
00:27:04
scenario in 2018 and said, "Hey, we need
00:27:07
to diversify." And they did. And because
00:27:10
they diversified, they were able to
00:27:11
insulate themselves from this global
00:27:14
competitor, this bully, this dominant
00:27:17
player that other countries are now
00:27:19
realizing as China stands up to them
00:27:22
isn't as dominant as everybody thought.
00:27:24
So, let's talk about the winners versus
00:27:26
losers in this whole trade war because
00:27:29
it's very clear that the US consumers
00:27:32
are the people who are going to suffer
00:27:33
the most. When China retaliates, it's US
00:27:37
businesses that are going to feel the
00:27:39
pain, not Chinese businesses, which in a
00:27:41
lot of cases are governmentowned or
00:27:43
government subsidized anyways. And China
00:27:46
holds the keys to industrial inputs for
00:27:49
things like solar panels, electric cars,
00:27:51
batteries that the US needs. And there's
00:27:55
not much of a chance the US is going to
00:27:57
be able to get them if China's not
00:28:00
exporting to them. So the question is,
00:28:01
can this be reversed? I mean, reshoring
00:28:04
the idea that jobs are going to come
00:28:05
back to the US and manufacturing is
00:28:07
going to come back to the US, that's a 5
00:28:09
to 10ear project. And more than likely,
00:28:12
it's my guess that most American
00:28:14
companies are just going to wait four
00:28:15
years until there's a new president to
00:28:17
see what happens. And if they do end up
00:28:19
reshoring the manufacturing of a lot of
00:28:21
these products, guess what? They're
00:28:23
probably going to use automation rather
00:28:25
than people in order to do it. Meaning
00:28:27
that the amount of jobs that are going
00:28:28
to return to the US is nowhere close to
00:28:31
the amount of jobs that were lost during
00:28:33
the China shock. And don't even get me
00:28:35
started on US industrial policy and how
00:28:38
fragmented that is. and how we've pretty
00:28:41
much just lost touch with what it means
00:28:43
to be a producer. But here's the real
00:28:46
consequence. A new global trade map. The
00:28:48
US once being the epicenter, the biggest
00:28:51
consumer, the customer that everybody
00:28:54
wanted because they could spend the
00:28:55
most. Now, in this crazy world where
00:28:59
they've uncovered that they're no longer
00:29:01
the dominant player and that some other
00:29:03
countries hold some cards, well, all the
00:29:06
other countries are going to look to
00:29:08
this one player that's no longer
00:29:09
reliable and say, "Maybe we don't want
00:29:13
to get too invested with them and
00:29:14
instead start trading around them."
00:29:16
Canada could go to Europe and Australia,
00:29:19
maybe even China and some other Asian
00:29:21
countries to get their goods. They could
00:29:23
even start exporting the goods that they
00:29:25
export to the US to those countries as
00:29:27
well if it's mutually beneficial. China
00:29:30
obviously has the entire world that they
00:29:32
can export to. So, they're probably not
00:29:34
concerned. There might be a little bit
00:29:36
of a short-term pain, but in the end,
00:29:38
it's probably going to be long-term
00:29:40
gain, especially if they start to rise
00:29:43
to a dominant position. And the only
00:29:45
people that end up losing in this entire
00:29:48
situation are the American citizens
00:29:50
because the dominant player, the one
00:29:53
that didn't have to prove that they were
00:29:55
dominant. All they had to do was keep
00:29:57
playing the game and let everyone else
00:29:59
be afraid of them. Well, they went too
00:30:01
far. And when you go too far, you play
00:30:04
your cards and you start to show people
00:30:07
that maybe there's some flaws in your
00:30:09
thinking. And you start to realize that
00:30:11
maybe some of those flaws were things
00:30:13
you didn't even realize were there, like
00:30:15
your inability to manufacture goods for
00:30:17
yourself, which makes it so that you are
00:30:19
at the mercy of the country you're going
00:30:20
to pick a fight with. Well, maybe that
00:30:22
ends up being the thing that cementss
00:30:25
your legacy as the last great global
00:30:28
superpower. But nonetheless, this is all
00:30:31
real interesting. I don't think the US
00:30:33
can win this trade war with China. I
00:30:35
think the only thing that is possible is
00:30:38
that they both back down and try to find
00:30:41
some common ground once again like they
00:30:43
did in the early 2000s. And if they can
00:30:45
do that, then everything will mostly go
00:30:48
back to normal, although not entirely.
00:30:50
But if they don't and the US China trade
00:30:53
relationship is severed, well, it could
00:30:56
get significantly worse and the problem
00:30:59
could no longer be economic, but it
00:31:01
could end up being military or worse.
00:31:03
So, let's hope that everybody comes to
00:31:06
their senses on this whole thing, puts
00:31:08
away their economic weapons, and
00:31:10
ultimately finds a way to trade freely
00:31:13
and constructively instead of doing
00:31:16
whatever the heck it is they're doing
00:31:17
right now. Oh, and by the way, if you
00:31:19
want to see what always happens before a
00:31:21
superpower falls, make sure you check
00:31:23
out this video right here.
