The Podcast of the Lotus Eaters - April 15, 2025


PREVIEW： Brokenomics ｜ Trump’s Tariffs - Part II


Episode Stats

Length

37 minutes

Words per Minute

186.63222

Word Count

6,909

Sentence Count

405


Summary


Transcript

00:00:00.000 Hello, and welcome to Brokernomics. Now, let's come back to the tariff thing, because basically
00:00:06.620 nobody has talked about anything else. And yesterday we got the announcement that there's
00:00:10.780 going to be a 90-day pause. As you recall, I predicted that was very likely going to be
00:00:16.380 something that happened. And the furore around this has been joyful to behold. I've been watching
00:00:25.360 some of the reactions to it, and chuckling heartily to myself. So first of all, let's
00:00:32.600 establish what actually happened yesterday. It won't be yesterday, but I seem to see this
00:00:36.800 goes on Tuesday. I'm recording this on Thursday beforehand. Unfortunately, our editors insist
00:00:42.020 on having time to do button things. But anyway, so what happened yesterday is Trump put a 90-day
00:00:50.920 pause on most of the tariffs, except for those guys who retaliated. And China in particular,
00:00:59.120 he stuck up to 125% tariff because they tried to retaliate the hardest. And everybody else
00:01:06.780 gets a 10% tariff. And the reaction that I'm seeing is wonderful, because basically everybody
00:01:14.920 who went against this is trying to say that Trump cucked and he's U-turned and he's run away from
00:01:23.920 these stuff. No, he didn't. He's got 10% across the board as a minimum, significant tariffs on China,
00:01:32.820 which is, you know, the analysis here is that was always the focus. And he's also flushed out
00:01:39.000 all of the people who are not aligning with his vision for the world, those who retaliated.
00:01:45.880 And we have to see the details on what tariff they get. I'm not sure if they get the 10% for
00:01:49.700 the 90 days or whether they get higher. I suspect they're going to get higher on this.
00:01:53.220 So first of all, some points on the negotiation. You have to appreciate that we live in a world
00:02:01.900 world where there is an anti-Trump reeing machine. And that reeing machine has a certain amount of
00:02:10.780 reeing that is going to do on any particular subject. So let's pick an example. Let's say that
00:02:18.080 Trump came out and he said, you know, I like the kitten. I can't do the voice. But let's say he came
00:02:24.580 out and said, I like the kittens, but I prefer the puppies more or something, you know, whatever.
00:02:28.320 And if that was the only news story for the week, then all week there would be that amount,
00:02:35.060 the fixed amount of reeing is what you would hear on that subject and people going absolutely
00:02:39.920 berserk about that. Likewise, bring it back to tariffs. If Trump had come out a week ago and
00:02:47.040 said, look, I'm going to put 125% on tariff on China and I'm going to put 10% on everybody else,
00:02:53.720 the amount of reeing we've seen over the last week would be the same amount because there was
00:02:58.860 a fixed amount of reeing to go around. And what he's actually done is he started off with an
00:03:05.520 outrageous claim, which was sort of high tariffs across the board everywhere. I mean, a few people
00:03:09.720 got the 10%, like, you know, here in Britain, we got the 10%. You know, it would have been the same
00:03:15.960 amount. Whereas actually, he came up with that large amount and then he pulled it back to a more
00:03:21.780 sustainable position. And the bond market is a factor in that. We go into it. And now the rest
00:03:28.120 of the world is thinking, oh, fantastic. We dodged a bullet there. That was brilliant. We got a superb
00:03:32.680 outcome. So basically, he got to... I mean, actually, originally, the market thought that the smart
00:03:40.980 money... I mean, this wasn't discussed so much, but, you know, the analysts were largely thinking it's
00:03:45.460 probably going to be about 10%. And it was 10% in the end, apart from China, which he's trying to
00:03:50.920 isolate. Again, we come back to that. So he basically got there. But now everybody thinks
00:03:56.940 that they won. Whereas if he'd started there, everybody would be fighting him on the 10%.
00:04:04.140 Whereas now they're congratulating themselves that they won. So he gets everything that he wants.
00:04:10.120 And there are additional benefits as well. I mean, people are now having to come to him. People are
00:04:14.940 reacting to him. I mean, there is actually a lot of winning here. And I'm going to get into
00:04:19.560 why it is all winning. Also, a quick note, why am I coming away with a different perspective
00:04:26.000 to so many other commentators? In fact, I'm basically the... pretty much the only commentator
00:04:32.380 who... well, actually, that's not fair. In our sphere, I'm pretty much the only commentator
00:04:37.380 who's been saying this. All of the global macro guys are pretty much with me on this. The people
00:04:43.560 who really understand global macro, but you don't tend... they don't tend to move in our spheres.
00:04:48.200 They tend to move in their own global macro spheres. I kind of tag onto that spheres when
00:04:52.900 I see what they're talking about. So, you know, we all get it. The difference is, is the global
00:04:59.160 macro guys, you know, such as myself and all the rest, is we don't judge stuff by the headlines.
00:05:05.220 If you have been in the position of the last week of trying to interpret everything through
00:05:14.140 whatever the headline is, well, I mean, garbage in, garbage out, basically. No wonder you've
00:05:21.920 been getting this wrong because you've been... you know, you're being presented with charts
00:05:26.400 that have been clipped to give a very narrow time frame that support the argument whoever clipped
00:05:32.060 the chart. Whereas when I look at this stuff, I look at the chart and then I zoom in and
00:05:36.360 I zoom out and it's like, okay, well, what's actually going on here? Also, I had a pre-existing
00:05:42.240 framework for understanding what was going on and I dug into it. In fact, let's get into
00:05:49.320 some of the detail. Let's give you some data points. So let's start with... hopefully my editor
00:05:53.740 can show the AI summary of the art of the deal. So rather than sit here and read the art of the
00:05:59.020 deal to you, I just got the AI to, you know, I said the prompt was something like condense
00:06:04.480 the art of the deal into 10 points or 10 bullet points or less. And it's given me what you can
00:06:12.540 hopefully see on the screen, Mr. Editor. Number one, outrageous opening position. Start with a bold
00:06:21.240 extreme demand to anchor negotiations in your favour to gain room to manoeuvre. Let's have a think about
00:06:28.240 it. Because again, some commentators in our sphere are saying that, you know, it's just cope.
00:06:33.560 It's just cope to say it's art of the deal. If it is cope, why does it look like this? Why does it
00:06:40.580 look exactly like this? So step one, start with a bold extreme position. Gives you room to manoeuvre.
00:06:45.920 Step two, always retaliate. Hit back hard against any challenger to deter future attacks and maintain
00:06:52.820 control. Again, dear audience, I ask you, is that what happened? Yes. Yes, that is precisely what
00:07:01.140 happened. Ergo China. I mean, who's always the goal in the first place? Point three, think big,
00:07:06.240 set ambitious goals to drive bigger outcomes. I don't think we could accuse him of not thinking
00:07:12.360 big on this. I mean, he's basically going for a reordering of global trade. So yeah, we give him a
00:07:17.780 tick on that one. Know the market. Master the details and trends to outsmart the others.
00:07:24.860 Yes. Yes. Again, I mean, he did that. I mean, the trend is quite simple here. The market details
00:07:31.040 are quite simple. America imports more than it exports. And in any tariff round, as long as
00:07:39.420 America always does the above point, well, the above point of always retaliate, then it's always going to
00:07:45.960 hurt the net exporter more than the net importer. So yes. Leverage strength. Use your edge, confidence,
00:07:54.040 resources, or timing to dominate the deal. I did see a question further down that I want to come to
00:07:59.300 because I'm going to try and answer your questions in this brokonomics as well. So, you know, did he
00:08:05.840 use leverage and timing? Absolutely. We're coming to that. Protect the downside. Limit risks while
00:08:12.380 chasing rewards. Yes. So in terms of limiting downside. So the bond market was a factor and
00:08:18.720 we come and talk about that. It's being massively overblown by commentators going after headlines
00:08:23.160 only. But yeah, we come back to that. Seven. Promote relentlessly. I mean, I won't even read
00:08:28.080 that one because, you know, it's Trump. You know, he promotes relentlessly. And strategic withdrawal.
00:08:33.820 Know when to back off and take a good deal if the maximum isn't achievable. Yeah. So, you know,
00:08:43.560 the maximum, again, some people are trying to judge this on the basis of his opening gambit
00:08:49.820 was very high tariffs across the board. Was that achieved? No. Aha. Therefore, he's cucked and
00:08:55.740 therefore he's U-turned and therefore MAGA lost, blah, blah, blah. I just reiterate, as we sit here
00:09:02.340 today, the China tariffs are 125% and he's got 10% across the board. Those did not exist until
00:09:09.040 yesterday. You know, they came into force yesterday. They were changed at the same time they came into
00:09:14.000 force. He's got a good deal. So the, you know, the net position of American imports, whatever,
00:09:21.100 something like 350 billion, you've got to expect there to be some trade-off with, you know, perhaps
00:09:28.120 few imports coming in as a, you know, is it his goal? Let's say it nets off to 300 billion,
00:09:33.120 average 10% tariff rate. What will exclude China from the calculation for now? So that's, no,
00:09:39.700 it's more than 300 billion. It's significantly, the 10% will yield 300 billion. It's 3 trillion being
00:09:50.120 the, being, being, being the, being the difference. Right. So, um, yes, all of those things in the list
00:09:57.780 is, is what he's achieved. That, that is literally the art of the deal. Uh, and he's done it. So if,
00:10:04.780 if anyone wants to tell me that it's cope, um, why is it the same picture? Why is it literally the
00:10:11.200 same picture? Um, I of course, um, have felt the need whilst maintaining the, um, uh, you know,
00:10:21.360 maximum, minimal sense of, of modesty. I've had to take a bit of a victory lap, um, on this, uh, and,
00:10:28.640 and explain why it's done so well. So what I, what I pushed out there was, um, let's see if we can show
00:10:34.140 on screen the Dan Tariff predictions. Uh, this is a, uh, there's a little graphic that I put up on,
00:10:40.160 on Twitter and, and let's just check back about all the predictions that I made both on this, uh,
00:10:46.600 Brokernomics last week, uh, and then on the, on the three streams that I did in, I did, um, two on
00:10:52.200 the Lotus Eaters and I did one on AA's channel where, um, you know, I got into a whole bunch of,
00:10:56.080 uh, discussions about stuff and, and during those, um, uh, four, yeah, during those four streams,
00:11:02.460 um, I made a number of predictions and we can go back and we can test to find out how I did.
00:11:08.760 So, uh, prediction number one, um, I always stressed it's about China. I think that gets a
00:11:15.480 tick it because clearly the focus is all about China. So big tick to me there. Uh, what else have
00:11:23.420 we got? Um, other tariffs are very much negotiable. Were the other tariffs? Yes, they were. Yes,
00:11:29.600 they were. So, um, you know, um, ground has been given on all of the other tariffs, uh, and the
00:11:34.600 focus has been on China. So yes. Um, what else did I say? A baseline tariff will remain. Did a
00:11:41.400 baseline tariff remain? Yes, it did. Uh, 10% as we talked about. So another massive green tick for me
00:11:47.420 there. Uh, what else did I say? I said a 90 day pause is very possible. A 90 day pause happened.
00:11:54.000 So yes, another, uh, firmly glowing green tick, um, goes there. Uh, what else did I say? Um,
00:12:02.200 ignore the political fallout narrative. It's temporary. Um, there were, um, there, there were
00:12:08.320 voices saying, um, it sunk MAGA, you know, midterms are going to be dead, all that kind of thing.
00:12:14.600 It's like, no, no, no, no, no, no, no, no, no, no, no, no, no, no, that, that, that, that, that,
00:12:19.480 that will be forgotten. Um, if it was still going on by the midterms, yes, I can imagine there'd be
00:12:24.080 some issues, but as I talked about a number of times, the business cycle is turning, the liquidity
00:12:27.900 cycle is turning. Things will be, I mean, when are the midterms? Is it early? No, is it November
00:12:33.140 2026 or something like that? Um, you know, you, you, we've, even if it's November of this year,
00:12:37.840 you've got plenty of time, um, in order for the business cycle to turn and the liquidity cycle to
00:12:44.200 turn. I'll come back to that as well. So, um, yeah. So do we need to, do we, did we need to get out?
00:12:48.800 Did we need to get as hyperventilating and hysterical as we've got over the course of
00:12:54.320 the last week about, oh, this is, this is going to do Trump in? No, no. So another big tick for me
00:13:00.060 there. Uh, what else? Um, uh, approach is for max negotiation. I said, um, I, I, I think I want
00:13:08.460 to come back to this. No, let's get into it now. Let's get into it briefly now. Uh, one of the things
00:13:13.000 that Trump waved around when he gave the initial presentation for this is he held up a book and that
00:13:18.460 book is basically a, a summary documents of all the, um, um, anti open market practices taken
00:13:28.100 against American goods around the world. And that book, um, it's, it's, it's been produced for the
00:13:33.980 last 30 odd years. It's been getting thicker and thicker the whole time. So things, not just things
00:13:39.080 like tariffs, but currency manipulation and another, you know, uh, trade barriers that are put in place
00:13:44.160 and all that sort of thing. And the U S has been diligently working on, um, eliminating those
00:13:51.980 things for the last 30 years. And what success have they had? What, what success of the presidents
00:13:58.360 over the last 30 years had? Well, the answer is none, no, no progress whatsoever over the last 30 years.
00:14:05.600 So, um, you know, um, you know, when people tell me, you know, this was handled badly and it was
00:14:10.160 bungled, well, yeah, but it worked. So, well, you know, what exactly the, the, the globalists, um,
00:14:17.720 you know, the last 30 years of presidents, globalist presidents, uh, they've been doing it the globalist
00:14:22.360 way, which is to say, you know, okay, we're going to send a trade delegation, uh, to the WTO and
00:14:27.800 they're going to take, um, some nice biros and some clipboards and they're going to stand up and
00:14:32.320 they're going to make their point politely and then they're going to sit down again. And did that
00:14:36.380 work? No, no, that didn't work. Uh, did Trump's approach work? Yes, it did. Uh, he, he, he went in
00:14:43.620 for max leverage, uh, max negotiation strength. He, he shoved this right to the top of everybody's
00:14:50.660 agenda. Um, every world leader, uh, this is suddenly their number one issue. Do we think that
00:14:57.580 sending another delegation to the WTO would have got this? No? Okay. Well, tell me how this was
00:15:05.380 bungled then. Right. Um, what else is, what, what else did I, uh, predict? I, I predicted that the, uh,
00:15:10.800 debt cost is the limiting factor for how far you can push this. Remember, I kept talking about, um,
00:15:15.080 the cost of rolling over the debt. Now, no, I will admit that has not been achieved in the short term.
00:15:19.640 I'll give you that. Uh, but it certainly was the limiting factor, wasn't it? And, um, effectively what
00:15:25.400 happened is the, the cost of debt, um, originally started to fall straight after the announcement,
00:15:31.180 but because the reaction, um, particularly from China was so strong, it was across the board,
00:15:36.460 uh, debt costs started to rise and it got roughly back to where it started. Um, and it was evident
00:15:42.180 that, um, that, um, uh, that crucial metric, because there's so much debt to roll over, um, was not
00:15:50.220 trending in the right direction. Uh, this was the time to, um, basically, uh, to take the wins that
00:15:56.380 you could get, but you could, you probably couldn't push any further than that at this time.
00:16:00.100 I mean, maybe you could have done. Um, I mean, the, the U S, um, needs to get that debt rate down
00:16:05.540 and there were two significant debt, uh, roll over days. One was yesterday and, uh, another was, uh,
00:16:12.380 well, another is today. Uh, not, not today as you know it, but today as I know it, which is,
00:16:16.460 which is Thursday before you, before you watch this, um, it was like 4.3%. They got some 10 years
00:16:23.060 away or something like that. So, um, you know, they, they, they, they could have absorbed a bit
00:16:27.100 more than that. Uh, but they obviously felt that because yesterday was the day that the tariffs were
00:16:31.260 coming in because they'd got so many people reach out to them to say, uh, you know, let's begin
00:16:36.280 negotiations because China had so beautifully retaliated, which gave them everything they want,
00:16:41.920 which is the isolation, the decoupling from China. Uh, they, they, they, they basically
00:16:46.740 had, they had enough of what they wanted. And so they could, they, they could bank the
00:16:50.860 wins at this point. They could hit the payout button on the, um, on the machine and, uh,
00:16:55.980 they, they could cash out their winnings at that point. Uh, so they did that. Um, I made
00:16:59.740 some other predictions. A new currency accord is coming, something like a Mar-a-Lago accords.
00:17:04.460 Um, that, that is a to be decided at the moment, but I think everything is lining up
00:17:08.720 behind it. So I'm, I'm happy to reiterate that prediction. What else did I bring? Uh,
00:17:13.040 Trump will force the world to choose between us and China. It will certainly be coming back
00:17:17.400 to that one. Um, I've, but I, yeah, that's to be decided, but I think that is what's going
00:17:23.200 to happen. Um, the business and liquidity cycle was substantially improved by the midterms.
00:17:28.560 I mean, that's what I've been talking about on brokonomics for best part of a year. Now
00:17:32.640 we're in, we're in, we're in a debt refi cycle. Um, and you can see the business cycle
00:17:37.200 and liquidity cycle is, is, has been turning. It is trending upwards. It's a bit slow at
00:17:41.340 the moment, but it always is at the beginning. Um, that will start to wash through into markets,
00:17:45.860 um, towards the end of the year. Uh, you know, I'd, I'd just been saying that for so long
00:17:49.340 now. Um, I, I, you know, I'll just reiterate it here, but I still think it's going to be.
00:17:53.640 Um, and the last prediction is no Americans are not going to be sowing their own Nikes, uh,
00:17:58.220 but the marginal, um, high value goods will start to relocate. That was one of the points,
00:18:02.780 uh, that AI and I discussed, uh, on his stream the other day where we basically agreed that,
00:18:08.300 you know, um, Chinese, uh, curtain poles, the ultra plasticky low value goods. I don't expect
00:18:16.260 that to be made in the United States, but some of the higher, um, uh, value goods that are a bit
00:18:23.240 more marginal as to whether it's produced in China or, uh, you know, possibly in the US. And we gave
00:18:27.480 the example because they likes his, uh, cigars of the, uh, cigar humidor, you know, maybe more of
00:18:32.680 those will be made. Whatever. There's a whole bunch of products where, um, the US is only just
00:18:39.480 viable or, um, barely not viable where, uh, this will basically shifted enough so that it starts
00:18:47.860 end up happening. But, but no, Americans are not going to end up sowing Nikes, you know, that,
00:18:52.460 that, that is not something. And I, I, I'll try and come back to that. Um, next thing, um,
00:18:57.780 while I'm saying my victory lap, because of course, um, my brilliance is not recognized to
00:19:02.620 the extent that perhaps it should be, but let, let, let, let's take, uh, my macro arguments,
00:19:06.660 which is another thing that I'd put up, um, uh, several days earlier before this, uh, as to my
00:19:12.660 reasoning on this, my, my macro arguments, what's going on? The dollar exorbitant privilege is not
00:19:17.160 an immutable law of nature. The dollar dies from its strength, not its weakness. Um, and it becomes
00:19:22.080 unviable when, when debt cannot be controlled. That's the other thing I have to keep pulling people up on.
00:19:26.940 A lot of people think that it was in, uh, Trump's remit to do nothing whatsoever. No, it isn't. Um,
00:19:36.060 the, the, the dollar system is going to come to the end in, in the next 30 years. And I don't know
00:19:43.240 when in the next 30 years, it could be, it could be two years from now, it could be 30 years from now,
00:19:47.080 but they need what we've referred to before the Mar-a-Lago records. They need some sort of new, um,
00:19:53.560 resolution to get them out of it. Uh, what else do I say? Yeah. The U S has 10 trillion of COVID era debt
00:19:58.800 to roll over in the next year, getting lower nominal growth is the whole game or, or the U S gets
00:20:03.760 swallowed by its debt problem. Yeah. That's, that's still in play. Um, the key to the debt roller with
00:20:08.880 global liquidity dollar, uh, the dollar is the wrecking ball. It's simply far too strong because 50% of
00:20:13.800 global debt is in dollars and, you know, therefore they need to find the dollars of the dollars too
00:20:17.620 strong, too expensive. It's more difficult to find the dollars to roll over your debt. You've got a
00:20:22.100 problem. Um, this has, you know, there's a lot of focus on the, um, on the bond prices and, um,
00:20:28.900 you ever get back to that as well, but the DXY is down, um, and, and hopefully should continue to,
00:20:33.860 uh, to, to move in the right direction. Right. Um, uh, particularly China who is advancing the debt
00:20:39.300 refi. So I think we're going to be talking about China more. Um, I also say to be clear, it's all about
00:20:43.460 China. This is my whole thing throughout the last week. I keep on coming back to, look, don't worry
00:20:49.920 about all the other stuff. Don't worry about Nike's worry about China. This, this whole thing is
00:20:56.400 focused on China, um, as has been demonstrated. I also, um, you know, mentioned the, you know,
00:21:01.640 there's not only the manufacturing side, there's the, um, military side of the money side as well.
00:21:07.140 I point that the, uh, the share of global manufacturing of the U S has been going down.
00:21:11.660 And I've got a lovely map to show you in a minute about that. And I also point out that
00:21:15.040 the U S is not a superpower because of the dollar. Um, that's a benefit. It's, it's really
00:21:20.600 a superpower because of the military. And, and one of the things I've been pointing out
00:21:23.580 over the last week or so is that, um, uh, the, the U S military fails at hundreds of separate
00:21:29.040 points, uh, in its supply chain without China. So you are the world superpower who is trying
00:21:37.520 to maintain your position against an up and coming superpower. And yet your military cannot
00:21:43.520 function without the up and coming superpower supply chains. I mean, you, you, you really
00:21:50.960 don't need to be Sun Tzu to spot the, um, error in all of that, do you? Um, and then maybe, uh,
00:21:58.740 our, our editor can stick up the, uh, the handy chart that I put up, uh, on the podcast the
00:22:04.080 other day. I'll just, I'll just whiz through this. The other key thing to understand is
00:22:08.140 that, uh, you know, uh, some people want there to be a very simple reason. Um, okay. Why
00:22:14.940 tariffs? Give me, give me, give me, give me one sentence. They'd say, Dan, give me one
00:22:19.220 sentence. Why are we doing this? Well, I can't give you one sentence because there are different
00:22:22.760 camps who are looking at this, who have their own reasons for doing it. And as a highlight
00:22:29.700 in the chart that hopefully you can see, there's the trade money and military chaps, the trade
00:22:35.080 guys, you know, Trump, Trump is the key figure here. Peter Navarro, they're the figures here.
00:22:39.440 They want to bring us manufacturing back. Um, they, they, they, they want to stop the us being
00:22:44.560 hollowed out. Um, you know, they want jobs back deficit down. Um, and, um, their criterion for
00:22:51.020 losing is, is backing down. Um, Trump has partially backed down, but I, I, I, I see is he's
00:22:58.740 cashed out his winnings at the right point. Uh, this was always the bit for me that was
00:23:03.920 going to be the bit, um, which took, uh, which, which took a step back from the opening
00:23:10.600 negotiation bit. This is, this is the bit, um, where you apply the art of the deal to
00:23:15.480 this first bit, the second bit money. So there's also the guys who are worried about
00:23:20.540 that debt refi cycle. Um, they want to get the dollar down. This is exemplified by the
00:23:24.860 treasury secretary, um, Scott Besson, very smart chap, um, dollar down, uh, cheaper
00:23:30.360 debt rollover and Mar-a-Lago accords is, is his sense of winning. Um, and the, uh, dollar
00:23:36.640 is down, uh, cheaper debt rollover. So that, that was the limiting factor here, which is
00:23:41.000 why they pulled back on the trade side. Uh, and the Mar-a-Lago accords, um, which look
00:23:45.720 to me like they were, I mean, it's too early to tell. I mean, we've got 90 days to see where
00:23:49.300 this stuff goes. Um, that looks to me like the direction this is going in. What, what is losing
00:23:54.200 higher debt cost? Uh, again, the limiting factor, right? Military, uh, what do they want? Well,
00:23:59.580 you know, they, they don't want the U S military to be reliant on China sensibly. Um, you know,
00:24:08.040 it's very obvious what winning and losing looks like in that scenario. Um, and then I looked
00:24:12.820 at, you know, how the different parties respond to this. Basically everybody likes the money
00:24:16.940 stuff to an extent, um, because everybody needs a lower dollar and everybody needs a debt
00:24:21.960 refi cycle to happen because everybody's in debt. China's in debt, EU's in debt,
00:24:26.020 U S is in debt. So there's pretty much broad alignment on that. I suppose you could argue
00:24:30.000 that China doesn't probably wants its debt refi cycle to be successful and perhaps less
00:24:35.780 so the U S one, but because they're linked, you know, the, basically the whole world is
00:24:39.620 aligned on that money one. On the military one, um, obviously it's vital for the U S
00:24:45.340 that it happens. EU is probably going to be happy with it because, um,
00:24:49.400 they're a U S vassal. Uh, China is clearly not going to be happy with that. And the rest
00:24:54.800 of the world is probably happy with the situation that they're in because, you know, they, they,
00:24:58.360 they know where they are. Um, if, if, if you're broadly friendly to the U S, um, you get your
00:25:04.260 shipping protect. If you're a bit Brown and dusty, you're probably going to get bombed every
00:25:08.520 once in a while. But you mean, you come to accept that, you know, that's just how the
00:25:11.260 world is. Every so often a U S bomber flies overhead and, but, um, you know, you, you,
00:25:17.200 you kind of know where you are. If, if China were to become the, the global military, uh,
00:25:22.220 superpower and upend the U S then, you know, you're in a whole new ball game. Um, you know,
00:25:29.360 it might be worse, you know, might be better. Probably a lot of, um, you know, uh, indentured
00:25:34.220 servants would be created all around the world in unpredictable ways. So, so nobody really likes
00:25:39.460 that. Um, and on the trade stuff, um, the, the, the, the EU, well, the EU has been all
00:25:44.840 over the place over the past week. You know, they, they first came out, um, histronic like
00:25:50.340 everybody else did. Um, then they started talking about free, free trade deals and how
00:25:55.560 they're going to work with the U S and then they started going backwards and forwards on
00:25:58.580 that. So then they can't really figure out where they are. Uh, China obviously went, uh,
00:26:03.500 mental, um, with these tariffs and they retaliated strongly. So the U S retaliated. So China
00:26:09.220 retaliated and the U S has just retaliated again. And presumably that has to go on for
00:26:14.140 maybe a while yet. Um, I expect them to come to accords. I've always said, I expect them
00:26:19.580 ultimately to come to accords. So, um, you know, what, what's going to happen a year from
00:26:23.340 here? Are those tariffs still going to be 125%? Are they going to be high or low? Well, they
00:26:26.940 should be lower because it's in, it's, it's in China's interest to stop ratcheting and do
00:26:35.580 a deal with the U S. Um, if, if they think they couldn't, do they think they're just
00:26:42.240 going to just keep increasing the tariffs on backwards and forwards between the U S and
00:26:47.300 China and maybe, um, but that is, that is very much a bigger problem for the U S. Sorry,
00:26:55.020 the, the China, the bigger problem for China that is for U S because China is the net exporter
00:26:59.520 and U S is a net importer against the two. Um, we talked about this in the last episode,
00:27:05.880 didn't we? We talked about, uh, the, we, we went through a whole bunch of countries just
00:27:10.620 trying to remember what it was. It was something like, uh, China ships, what was it? 500 billions
00:27:17.580 worth to U S and U S ships 150 billion back the other way. That's a difference of 350 billion.
00:27:23.960 And I seem to remember that, you know, what, uh, you know, is electronics and all that sort
00:27:28.980 of stuff that went from China and, and, and various other bits of cheap plastic tat and
00:27:34.040 going back from U S the other way, was it, uh, it was soya beans, it was machinery and aircraft.
00:27:39.260 So, so Boeing's whole bunch of industrial machinery and other types of machinery and soya beans.
00:27:44.900 Um, okay. So that'll be interesting because the farmers are a big MAGA base for Trump.
00:27:53.960 Um, and so actually the, the real cost to him of a proper, well, it is a proper trade war now,
00:28:00.140 isn't it? We, we, we don't need to dance around that. It's a proper trade war between the U S and,
00:28:04.040 uh, and, uh, and, and China. Um, the effect of it is it will hurt farmers, especially those who
00:28:10.760 grow, grow soya beans and you know, whatever else it is that the, um, the Chinese import.
00:28:15.440 So Trump is going to need to find a way to help those guys out and come to think of it,
00:28:20.240 this has just popped into my head, but an easy way to do that would be to push us agricultural
00:28:28.160 stuff, soya beans and beef and all the rest of it, chlorinated chicken onto the EU and Britain,
00:28:34.760 because at the moment we don't take their, well, we do take some of their stuff. We don't,
00:28:39.840 we don't take much of it, uh, especially not the beef and the chlorinated chicken. Uh, we, you know,
00:28:44.240 we, we, we've decided we don't like that. Um, I have slightly mixed views on that. Uh,
00:28:48.320 first thing I'd point out is that RFK, um, and his make America healthy agenda going into the
00:28:53.920 department of health. I mean, he, he is doing that for a reason, you know, there, there is a reason
00:29:00.240 why, why RFK is there. So, you know, if, if I was, you know, if I was Starmer dread the thought,
00:29:07.080 uh, no, let's just say if, if I was the British prime minister, I would probably say to the,
00:29:11.080 to the U S trade envoy when it turns up or we go to them or whatever, we'd probably go to them,
00:29:15.080 wouldn't we? Um, I'd probably say, well, you know, I'm not, I'm not against taking more of your
00:29:19.800 beef and whatever else and your agricultural products, but we share RFK's concerns. Uh,
00:29:25.800 let's do it on the other side of the changes that our RFK is going to make. Um, and you know,
00:29:31.880 if, if, you know, just, just, just big up RFK and just say, look, yeah, we're going to do that.
00:29:36.120 So, you know, that, that would strike me as a sensible thing to do, but we, we,
00:29:39.480 we will see how they get around that. Um, oh yeah, bottom, bottom of this graphic here.
00:29:44.520 I also, you know, looked at how the generations looked at this. Um, basically that was the part
00:29:49.720 of the segment, well, it's kind of making fun of the boomers cause they went, cause they were going
00:29:53.000 absolutely apoplectic with their stock portfolio was down to levels not seen since late last year.
00:29:58.440 And the, basically the millennials and zoomers were, were taking enormous amounts of glee in this.
00:30:03.560 Uh, I, I, I, I, I was never that worried about the stock thing, you know, being a, being a,
00:30:09.240 uh, a stock holder myself, um, for the simple reason. I mean, what, what, what causes the stock
00:30:15.240 market, um, to, to stress most of all, well, it's uncertainty. Um, and you could just look at it
00:30:21.160 as simply as this, uh, is the uncertainty today. Well, not today, not your today either, but you know,
00:30:28.840 a couple of days ago when the market was really freaking out, I just thought to myself, okay, well,
00:30:33.720 is uncertainty today going to be higher or lower than it will be in three, six months?
00:30:40.120 And you know, obviously the, the uncertainty is going to be lower. Um, and therefore the freak
00:30:44.760 out in markets is going to, is going to dissipate, um, as well as the business cycle and the liquidity
00:30:50.200 cycle turning and all the rest of it. So, so it was always going to be temporary. Uh, but it will,
00:30:54.680 it was an interesting, uh, fun moment, uh, to see that, um, uh, yeah, that just the sheer
00:31:03.960 disconnect between the generations. We, we, we may have to come back to that at, uh, at some
00:31:09.880 point. Right. Um, what else have we got to talk about before I get into your questions?
00:31:14.200 Uh, let's, uh, Mr. Editor, can you, can you throw up that lovely map of, um, the, the blue world and
00:31:20.920 the red world? So, so, uh, what you're hopefully looking at now is, um, the, the world divided into
00:31:28.520 two trade partners, uh, one of which is the U S and one of which is China, one of which is the year
00:31:34.920 2000, the one of which is, is 2024. Now you see in 2000, uh, uh, the, the U S was the predominant
00:31:43.160 trade partner for basically everywhere, apart from China itself, a few bits of, um, Africa,
00:31:49.320 um, Turkey and Papua New Guinea, I think. Now, um, you know, this map is very binary between the,
00:31:59.480 between the, uh, U S and China because, uh, Turkey's biggest trade partner is Germany, for example,
00:32:06.600 uh, one of the ones that switches color on that. So, um, don't worry about that too much,
00:32:10.760 but if you look at the second image, 2024, basically most of the world is now just China.
00:32:16.360 South America has gone to China. All of Africa has gone to China. Um, all of Eurasia has gone
00:32:21.960 to China. Um, Europe is holding out as still being, um, a U S trade partner, except for Spain,
00:32:29.000 Spain's gone. Uh, and, and what about two key members of the five eyes, the, uh, Australia and
00:32:35.080 New Zealand? Well, they've gone to China as well. Greenland has gone to China. Uh, and so what,
00:32:41.000 what is, what is, what is, you know, U S left with, um, the, the top bit of, um, South America,
00:32:46.280 I mean, obviously Columbia, you know, that, that's, uh, that, that does a lot of trade
00:32:50.120 with the U S and, um, obviously president Lazenki himself, um, Central America, uh, North America,
00:32:57.560 Iceland, UK, most of Western Europe and the, the, the Nordinki places. So, uh,
00:33:04.920 clearly this is, this is an issue. This is something that you need to factor in, um, as,
00:33:11.800 as to why Trump feels the need to make moves against China. And, you know, as I keep saying,
00:33:17.320 it is all about China. Another point I've been making over the past week is, you know,
00:33:21.800 what's going on with us, uh, national debt. Uh, well, it's, it's, it's just ballooned,
00:33:26.600 isn't it? If you're, if you're seeing the chart, you can just look at where it was in 2000,
00:33:30.600 where it is now, you know, um, uh, 2000, the, um, dot com bubble, you know, started to go up 2008,
00:33:38.280 up. It really goes COVID just mental. Uh, and one of the points I've been trying to get across to
00:33:44.360 people, um, on, on all of this discussion is, you know, did you think that you were getting COVID for
00:33:50.680 free? Did you think there was going to be no comeback on this stuff? You know, the bill has become
00:33:56.680 due now in 2000 or after 2008 and for the COVID era, you know, interest inflation, interest rates
00:34:03.320 were pushed down to basically zero. So you could kind of get away with this debt, but we don't live
00:34:07.960 in that world anymore because inflation came and slapped us on the face when we did some really
00:34:12.120 stupid COVID, you know, you know, debt had been ramping up, but at a rate that the system could
00:34:18.520 just about afford with just about acceptable inflation. And then they, they decided to do the
00:34:24.920 absolute unbelievable stupidity of COVID and just ran through an enormous amount of debt.
00:34:31.560 Then they monetized it. Then inflation went berserk. So we can't have low interest rates
00:34:35.880 anymore. Uh, and so all this debt is, is, is, is continually now getting rolled over at a
00:34:41.160 substantially higher rate, you know, 5%, not 1%. Well, you know, what, what, what exactly did you
00:34:47.640 expect to happen, um, to the U S finances when you're in that sort of situation? So, you know,
00:34:53.480 this is the backdrop. It was not the case that Trump could just get away with, um,
00:34:58.840 basically ignoring this whole situation. There needed to be a new game plan and he gave us a new
00:35:03.960 game plan and he's cashed in his early winnings, but we are certainly not there yet.
00:35:08.280 Right. Um, Mr. Relator, can you show us the AI image that was doing the rounds on, on Twitter of
00:35:14.840 the, of the, of the Magtard sewing his, his, his Nikes? Um, loads of images like this were, were
00:35:22.360 bounding around on Twitter where basically people were saying, oh, you, um, stupid, fat,
00:35:28.520 retarded Magga people, you know, you're going to have to sew your own Nikes from now on because
00:35:32.440 they're not going to be made in, in Vietnam. Um, while I'm, while I'm dunking on the head of
00:35:39.960 silly commentary, I might as well comment on this. First of all, it's funny. So fair enough.
00:35:44.440 I'll give you that. Um, no, Americans are not going to be sewing their own trainers.
00:35:50.280 Um, something like that. I mean, okay. First of all, um,
00:35:55.320 not a huge amount of that stuff is actually done by hand anyway. Um, even in, you know,
00:36:00.440 even in these Vietnam factories and all the rest of it, there's still a good amount of automation
00:36:05.640 that goes on. Um, so, so don't worry about that. Um, secondly, even because the capex is already
00:36:12.440 there and because the ancillary workforce that is also there is so cheap, it probably works just to
00:36:19.000 still just, just pay the tariff, just do that. Um, I expect it to be the higher value goods are the
00:36:24.920 ones that are more likely to cycle back in. And there you have to remember it is a marginal thing.
00:36:29.160 Uh, the, the other issue that people have been having is they seem to think that unless
00:36:36.200 America goes fully isolationist the day after the tariffs come into effect,
00:36:41.000 it's an automatic loss. No, it just doesn't, it just doesn't bloody work. Just, just behave.
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