President-elect Trump’s tariffs will come as a surprise to nobody. Except the stock market, apparently. The companies affected are having a heart attack.
Some of you believe the threat of tariffs is just a negotiating strategy. Trump is just giving the Europeans and Chinese a taste of their own protectionist medicine. And rightly so.
Trump’s real goal is to tear down Chinese and European trade barriers, not build American ones.
If that’s your take, the tariff triggered correction in stocks may be a buying opportunity.
It’s a bit like when Trump was threatening to leave NATO. It was really just a gambit to get the Europeans to up their defence spending. Which they dutifully did. Those of us who understood this in advance bought European defence stocks.
The only company to keep pace with Nvidia in those days was the local defence company where I was born – Rheinmetall AG [DE:RHM]. It’s up more than tenfold since Trump demanded the Germans stop using broomsticks as tank turrets in their training exercises. (The German defence minister from those days is now President of the European Commission…)
If Trump succeeds in knocking over trade barriers, trade could soar instead of plunge as currently expected. Australian investors’ angle on such a recovery is obvious. Certain commodity stocks could be set to soar. If Trump can get trade to a fairer and more sustainable path, sclerotic economies might start growing again.
We could be on the cusp of an entirely new commodity boom. It’d be similar to 2003, when I first arrived in Australia. That’s the claim our veteran mining analyst James Cooper is making. You can watch his presentation on the next ‘Big Four’ today.
No, he’s not talking about the Agatha Christie crime syndicate busted by Hercules Poirot. James has something far more important in mind.
To make sure you’re signed up to receive his presentation, click here now.
Back to Trump’s tariffs.
Is he high?
Trump’s justification for tariffs is causing utter confusion. Here’s what he posted on the social media site Truth Social:
‘I have had many talks with China about the massive amounts of drugs, in particular Fentanyl, being sent into the United States – But to no avail.
‘Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through, and drugs are pouring into our Country, mostly through Mexico, at levels never seen before.
‘Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America. Thank you for your attention to this matter.’
What? Tariffs because of fentanyl? Where did that come from?
Is this another one of those bizarre Trump comments that sends the media into a frenzy of ridicule…before he’s proven right? Trump warned about Germany’s reliance on Russian gas. And race riots in Sweden, for example.
Actually, the fentanyl crisis has been an ongoing problem. And Trump is just the one leveraging it against China.
A year ago we told our readers in the UK just how bad the fentanyl crisis was getting. It’s causing complete economic and social chaos in the US. But the problem is also spreading into the suburb surrounding every major train station in Europe too.
We explained how the fentanyl trade worked (Chinese manufacturers exporting via Mexico). And predicted what consequences it was about to trigger.
Here’s some of what we published last November:
‘My argument is that China’s economic and foreign policy includes mimicking the UK’s during the Opium Wars, with one added feature. China is not just aware of the socially destabilising effects of widespread opioid use, but is deliberately exploiting this feature.
‘Just as Britain’s opium fuelled mercantilism of the 1800s helped cause China’s internal political, economic and social chaos, so too are opioids today causing much the same trouble in the West.
‘The political, social and economic cost is large enough to prompt a response, especially if I am correct about opioid abuse spreading beyond the West.
‘As one expert witness told a Congressional hearing: “If a foreign country had infiltrated the United States with terrorist agents, released ricin or anthrax that killed over 100,000 Americans in a single year, what would our response be?”
‘Just as the issue of opium unexpectedly and nominally became the cause of two wars two hundred years ago, I suspect the issue of opioids, addiction and trade policies could escalate again today.’
Sure enough, the link between fentanyl and trade policies is precisely what Trump mentioned in his social media announcement of tariffs.
So the fentanyl crisis is real. But what’s the connection to tariffs?
I think that’s exposed by what happened during Trump’s last presidency.
Is a trade war justifiable for genocide?
Long-suffering subscribers might remember our articles about China’s human rights abuses in Xinjiang in 2020. Back then, Australia’s government, to its infinite credit, poked the Dragon in the eye by asking some awkward questions about the Uighurs. And found itself on the receiving end of China’s trade war weapons in response.
In January of 2020, we predicted the genocide taking place would trigger trade war policies too:
‘The reason many Western leaders bend over for Beijing is because disrupting Chinese trade would cause economic pain in their own countries, which would harm their re-election chances and scuttle their second career working for some pro-China institution.
‘But the horrors of Xinjiang can only be politely deflected by the political classes, media and Hollywood for so long.’
We described some of those horrors in sickening detail. But the point was to explain what happens next. Trade war policies against China would undermine markets there and cause a lot of economic disruption around the world.
Five months later, Trump used the threat of sanctions over China’s treatment of the Uighurs there to push through his trade deal with the country. He’s trying to repeat that success on the back of fentanyl today.
Just as things were hotting up over Xinjiang, the pandemic came along and overshadowed everything. But now Trump is back. With a new cause in Fentanyl, but the same trade war policies.
But what’s the connection between genocide and tariffs, and fentanyl and tariffs?
Part of the answer is claiming the moral high ground. Trump is setting up his trade war detractors to be framed as pro-fentanyl and pro-genocide. This matters especially in Canada and Europe, where the fentanyl crisis is rapidly worsening. At some point, there will be a political reckoning in those places. And Trump will be the one telling everyone, ‘I told you so’, once again.
But there’s a deeper and more awkward reason. Trump’s policy is akin to taking China’s President Xi to a Winnie the Pooh convention. To highlight why, I’ve got to take you back almost 200 years…
The first two Opium Wars
200 years ago, the Chinese refused to trade for British goods. They only accepted silver in exchange for Chinese tea and silk. Both of which were rather popular in the UK.
Why silver? Because, back then, silver was the monetary asset of choice, especially in China. It’s less valuable and more abundant than gold, making it more suitable as a circulating currency.
The British Empire didn’t appreciate being drained of its monetary metal. Allowing Chinese goods into the UK, but not British goods into China seemed unfair. (European and Chinese politicians take note.)
The solution was…innovative. The Brits got China addicted to Indian opium, bought for silver. This fixed the trade balance with the Empire and reversed the flow of silver.
To be clear, the UK smuggled absurd masses of Indian opium into China because of China’s protectionist trade policies and the outflow of precious metals.
When the Chinese objected to the opium “trade” because of the complete social chaos the drug caused in China, the Royal Navy’s cannons quickly changed their minds, twice. And the Empire took Hong Kong for good measure.
Today, China is using precisely the same weapon against the US – opioid addiction. They’re smuggling opium into the country to cause social and economic chaos. While hoovering up vast amounts of gold.
Nobody in the West is aware of the historical echoes. But the Chinese are. And Trump is either sticking his foot in it, or coming up with a stroke of tactical genius by exposing this.
Either way, history isn’t quite repeating. But the extent to which it is rhyming is really extraordinary. President-elect Trump just declared a third Opium War on China.
Regards,
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Nick Hubble,
Editor, Strategic Intelligence Australia
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