As another week in Trumptown ends, there is no end to the mindless chaos. Anyone listening to his daily nonsense in the Oval Office is walking away with more questions than answers. He is literally using lies to keep the stock market from tumbling yet further. In my view he is DESPERATE to do a deal with China. His claims that his team is actively talking to Beijing appears to be nonsense however. China has said to the global press, it hasn’t held negotiations with the US, “let alone reached an agreement.” Trump is lying again to prop up the stock market. We have reached a point of market manipulation that has not been seen in modern history.
There appear to be no concrete deals on the table and China are circling, offering a the hand of friendship as a stable reliable trading companion to US global trade partners Trump threw under the bus. Time and time again over the past three weeks, Trump has been forced to roll back tariffs, but please don’t lose sight of the fact that even with rollbacks, the world is being forced to navigate a blanket 10% extortion racket by a lunatic who simply likes throwing his weight around.
Data is king and Trump remains the buck naked Emperor. In March, sales of existing homes suffered their biggest monthly drop since, wait for it…..1922! The whole Trump narrative is now based on ‘jam tomorrow’. No more mention of DOGE dividend payouts as trillions are lost from US company values. All this BEFORE the real effects of the tariff fiasco hits the pocket books of everyday Americans. The markets are currently holding up on good earnings numbers, but these reflect largely pre tariff earnings. We appear to be in a situation familiar to small children who have done something wrong. They know their parent will find out, but the longer they lie about it, the longer it will be before they are grounded.
I’m going to discuss China at some length today. I know this is a turn off for some, but I’m not here to just write about the idiot that is Trump. I want to try to help you understand that there’s a really big picture amidst all the chaos going on in the US. The geopolitical ramifications are critical to understanding how the US will emerge from this self imposed economic isolation. I guarantee that if you stay with me today, you will emerge much better informed and understand the real implications of Trump going after the second largest economy in the world.
China has been planning the demise of the dollar for a long long time. Just as they opened up their country to foreign investment in the Nixon years, they think not years but DECADES ahead. JD Vance might call them peasants, but those peasants used the profits from western investment NOT to pay shareholders and CEOs obscene amounts of money. They used it to invest in the future of China. It is some measure of the dichotomy at play here, in that the west for decades has viewed China as a country that eats dogs and makes cheap fake goods. It was and still is, viewed by ignorant Americans as an imitator not an innovator.
The truth is, without fanfare, China has used western investment to build the largest most technologically advanced manufacturing hub in the world. They recognised that manufacturing automation speeds up delivery and efficiency, but will lose jobs as a result. However, as a state controlled market, they are in a much better position to invest in a universal wage strategy, as manufacturing automation sees them being forced to reconsider how to adapt. Unlike western capitalist economies, China is not a slaves to corporate shareholders, that’s exactly why they were able to invest 30% of their GDP into infrastructure. This means they are better placed to weather the storm of the elephant in the room, AI, which will be a further job killer across all economies.
Anyone who is telling you AI will create more jobs than are lost is simply lying to you. Even the most generous reporting estimates that AI will displace up to 20% of jobs. This is a subject for a whole post of its own, but I raise it simply to say global economies are not just fighting a lunatic in the White House, they are fighting the realisation of a whole new employment landscape hurtling down the track. The irony is, the jobs that will be lost will likely impact college educated middle class workers.
Unlike the US, China has a highly educated population that does not suffer the economic hardship that can result from paying your way through college. It’s not for nothing China is called the People’s Republic of China. It’s a completely different mindset. If you look at societal progress of China alongside the US, it’s frankly embarrassing. The US is in the little league and before you brand me a Chinese propagandist, the content in this piece is well researched and factual.
Can America destroy China economically? It’s unclear, but what I can tell you without fear of contradiction is, China can handle poverty much better than the US, so I just see it as mutually assured destruction if Trump continues to be an economic kamikaze pilot. In short, the US is not able to see off China on its own, as Trump’s latest tariff capitulation proves.
China knows that increasing tit for tat moves on tariffs is a relatively blunt weapon, so it appears they may be considering using their digital currency (renminbi) for bilateral trade. I want to bring some focus to this because I think it’s really important to widen the lens through which we are viewing the US trade war with China. As I have said previously, the Chinese psychology when it comes to long term strategic planning, is second to none. I have already discussed China’s HUGE achievement in reducing poverty over a very short timespan and it’s investment of 30% of GDP in infrastructure against the US average investment of 2.5%.
Chinese leaders adopt a foundational approach to economics. They believe the key to prosperity is education, infrastructure and technology. All areas which has seen huge investment not just in China but in Africa and Latin American countries, as part of the Belt and Road initiative. They have built deep water ports airports and roads to transport key minerals that they know are the key to success for not just China but globally. It really does make Trump’s comedy hour expansionism ambitions look like a bad dad joke.
Unlike Bitcoin, the Chinese digital currency is backed by the Chinese Government. It has now officially been launched and tested. The new 1.2 trillion digital Yuan System for the purpose of trade settlement has also been integrated into the Belt and Road initiative. This move will provide an opportunity for trade settlements to bypass the SWIFT payment system, reducing transaction times from 3-5 days to around 7 seconds! While I DON’T think they will introduce the mandatory use of renminbi to settle bilateral trade, it does give rise to pause for thought. If mandated, it would would force the US to buy Chinese currency on a large scale. This would increase renminbi’s use and demand while pushing up the exchange rate against the US dollar. While not certain, an appreciation of the renminbi would likely treasure currently reluctant global investors that China’s economic foundations are sound.
Regardless of how you view this, it highlights that China remains a strategic thinker. They saw this tariff war with Trump coming and likely have a long planned approach to mitigation. The other thing I think China is hoping for, is that this newly integrated digital currency will help stimulate much needed domestic consumption which Xi is very keen to see. There’s little doubt, this is a complex set of geopolitical moving parts. While clearly this is an opinion piece, I hope it provides some insights into possible outcomes.
The point is, Trump is playing with live ammunition, not that he could as a convicted felon of course, but metaphorically speaking, this could result in an Alec Baldwin moment for America.
I don’t want to get into the weeds because I know, economics aside from being pretty complex, once we get into the realm of digital currencies, it can be a bit of a turn off and we wouldn’t want you bailing out on me. The takeaway from the above is, Trump has started something and nobody knows where or how it’s going end, but one thing is for sure, LOTS of innocent people are going to be financially harmed by it. I think what I am trying to do here is open your mind to the dangers of playing with fire. At the moment, Trump has spilled some gasoline on himself from the can he intends to use to burn down the Chinese economy. If he’s not careful he could metaphorically find himself in an unintentional Gandhi moment.
In the next week or so, the chickens will come home to roost and my fear is, Trump will be that desperate to deliver a distraction he will do something stupid like attack Iran. Always remember, this is a man who does not give a damn about anything or anybody except him.
I definitely appreciate the tutorial on the Chinese position in the tariff war. It seems to be still another example of our President playing checkers with an opponent who is a chess master. Not a game that is likely to end well for our country. He will be embarrassed and shown to be a dilatant again but as you so clearly state, many others will have their livelihoods and actual lives destroyed. Significant to note is that we who will be the most impacted by this pissing contest need to be as well informed and somehow well prepared to cope. For this, I personally want to thank you!
Also worth remembering that China is the biggest purchaser of the US Government’s bonds - ie your national debt. It’s been another long-term strategy.
If they stop buying new debt (bonds) , where does the US Government go instead to raise money cost-effectively? If they just wait for their capital to be repaid, they really will be unleashing hell on the US economy. And indirectly, the world’s economies. It’s a Doomsday scenario. But then so was Trump dismantling American democracy in a matter of months.