Sure, the title gives the game away. But let’s play connect the dots as if you don’t know what picture will emerge just yet…
The first dot is the trade war. In April, President Trump launched his tariffs. Their primary target was China.
The justification president Trump gave at the time is our second dot on the plot: fentanyl.
Synthetic opiates might seem like an odd reason to tariff China. And the media did a good job of keeping the topic quiet. But the new FBI director Kash Patel recently told podcaster Joe Rogan that China is waging a secret opium war on the USA. Their aim is to incapacitate as many people as possible by selling and smuggling fentanyl and fentanyl alternatives into the US to sell on the cheap.
“In my opinion, the CCP [has] used it as a directed approach because we are their adversary. And their long-term game is, ‘how do I,’ in my opinion, ‘kneecap the United States of America, our largest adversary?”
Their strategy is to get as many people addicted to synthetic opiates as possible. And it is working according to Patel. For Americans age 18-45, fentanyl overdose is the leading cause of death. The social chaos it’s causing is even more of a problem.
All this may seem a bit bizarre. But it’s a form of economic warfare with historical precedent. It’s exactly what the British Empire did to China almost 200 years ago. That’s how the Brits ended up with Hong Kong.
A fentanyl fuelled trade war is also something I predicted two years ago.
Our third dot for you to connect is recent trade news out of Canada. You might think Donald is the only one keen to impose trade barriers. But it turns out even Canadian Prime Minister Mark Carney is a protectionist under the right circumstances.
Canada has announced steel quotas to protect the country from Chinese dumping. Dumping, in this context anyway, means selling a lot of products below cost.
Whether it’s an act of economic warfare or just bad business is for you to decide. But that’s why we’re joining the dots. To figure out what’s really going on.
The fourth dot is this hilarious headline from Politico: “‘Donald is right’ and China is the problem, EU chief says.”
Apparently the EU has figured out that the world needs to combat China’s unfair trade practices. Instead of picking a fight with the US for doing just that.
The article explains, “Beijing’s subsidies should be a reason to work together, not tariff each other, Ursula von der Leyen argues.”
Lovely. Of course the EU is just as famous for its protectionism as China… But at least they’ve woken up.
Our fifth dot for you to line up was also mentioned by the EU boss:
The chief of the EU executive accused China of “weaponizing” its leading position in producing and refining critical raw materials, and of ignoring global trade rules to undercut competitors.
China’s recent limits to exports of certain materials undermines other countries’ defence industries…at a time when they seem to be using rather a lot of raw materials.
But it probably isn’t as blatant as installing remote off-switches into the energy infrastructure you sell to your geopolitical competitors. Those were recently discovered on Chinese made solar panels.
Where else might they be? That’s another dot to link up.
The list of countries weaning themselves off of China’s renewable energy products is now surging. Which means gas is back on the menu. Including in the unlikeliest of places, adding several more dot points for you to connect.
The UK government is considering permitting vast North Sea oil and gas projects. This after vilifying them in Thunberg-esque language not so long ago.
New Zealand has already approved fossil fuel projects.
Suddenly, saving the planet from global warming is less important than energy security.
Last but not least is the final dot to plot: the attack on Iran and Iran’s threat to close the Strait of Hormuz.
The important thing to note here is that most of the oil passing through the Strait is bound for China. Iran may be able to engineer a serious spike in the oil price by blocking the strait…but it would harm their ally first and foremost by threatening oil shortages.
What do you get when you connect all these dots?
It seems to me that the US government is trying to pivot the world to face off with China instead of Russia. And the West is agreeing.
This process began in Trump’s first term, when he highlighted human rights abuses in China and threatened a trade war. That’s something else I predicted too. And it began, only to be quashed by the pandemic.
Strangely enough, China singled out Australia for punishment when our government demanded to know what was going on in Xinjiang. But not much else came of it.
This year, Trump is back with a new justification in fentanyl. But the same policies, only on a bigger scale.
The Chinese economy is already responding badly to all these challenges from Western allies. Four consecutive months of consumer price deflation would be enough to make a Western central banker panic.
So, maybe the West’s unofficial war with China is not just underway but working. The attack on Iran and its disruption to energy markets is just the latest front in a much bigger war.
This is what Jim Rickards reckons is going on, anyway. He sees geopolitics as a three player card game where two allies take on one sucker. And anticipates Trump will try and align Russia with the US to make China the sucker.
In fact, in his latest editorial, Jim predicts China will “collapse”. To find out what he means, and how it’ll happen, click here.
I do have one question for you though. Oil analysts and US politicians are suggesting it would economic suicide for Iran to block the Strait of Hormuz. After all, Iran’s own oil sales pass through there.
What I don’t understand is why the hell Iran wouldn’t let its own ships pass while others do not…
Let me know: letters@dailyreckoning.com.au
Before you go, a quick reminder to join our upcoming event featuring the ASX listed stocks best positioned to deliver quadruple digit gains.
Best of all, the risk in these stocks is so high that the economic and geopolitical environment fades into comparable unimportance. So, a small holding in a few of these companies should be a part of every diversified portfolio.
All you need is a guide to help you navigate this corner of the market. And that’s what our event will be all about.
Until next time,
 |
Nick Hubble,
Editor, Strategic Intelligence Australia
Comments