U.S. Threatens Japan’s Economy, USD Record Collapse Begins, Russia Doubles Down On China

U.S. Threatens Japan’s Economy, USD Record Collapse Begins, Russia Doubles Down On China

All right, guys. Late night video and once again I told you so. Yesterday we talked about a G7 giving to Trump and what happens when you embolden a bully. You get a bully walking on Cloud9 punishing the rest of their fan club. And now the crosshairs have fallen onto Japan. And it’s quite funny if you think about it. Maybe China really is the big winner of this trade war and the Western Alliance is the big loser. Now this is the start of Trump’s rise war. It it’s just so stupid at this point. I have great respect for Japan. They won’t take our rise and yet they have a massive rice shortage. In other words, we’ll just be sending them a letter. Now, I want to be frank. Making this video is making me lose IQ points, but still, this is a sacrifice I’m willing to make. Circling back to Japan, this puts yet another G7 ally in a daily bind. In addition to the 10% baseline tariff, Japan could be paying much more. Even a 24% ceiling could be broken and hit well above 30%. Now, the empire is moving to squeeze everything from their airlines. And I’m being real polite here. Japan is at a point where its dependence on the US is going to collapse their entire economy. Now, Japan has a big debt crisis while inflation is the highest of the entire G7. Now, imagine what happens if Trump slaps a 30% tariff on them. Almost a fifth of their total exports could grind to a halt. And if this happens, Japan’s GDP might collapse by 1.2%. Double that of 0.6%. Tokyo will be net deep in a recession, and there’s simply no way out. Printing money will spike the national debt higher above 230%. Plus, that will cause the yen to drop and make imports more expensive. Now, Ishiba has said quite a few times that Japan will either make a good deal or no deal at all. So, now the entire economy’s feet is on fire and this is the decision point. Will Japan fall? Do they have any other options left? Now, the situation is not looking good for them. Japan runs a huge trade surplus with the US at nearly $70 billion. A 30% tariff will nuke that amount to oblivion. But the big crisis revolves around the auto sector. Companies like Honda and Toyota. They hire a ton of Japan’s workforce. Now, the auto industry accounts for 10% of the country’s GDP and 8% of the entire workforce. And this is not a trivial amount. It has the potential to crash the entire economy. Now, Japan is facing a double squeeze from both the US and China. Trump is preparing to wall off the US consumer market from Japanese cars. Meanwhile, the competition from China is brutal. Chinese cars are caught in a price war even as central government has to step in to stabilize the situation, which means overseas buyers have cheaper EVs to buy versus Japanese vehicles. And we best believe that Trump also knows this. That’s why he’s so sure that Japan will fold. The way he even talks about a country lacks any basic respect.
You’re going to send the letters.
I’m going to send letters. That’s the end of the trade deal. I could send one to Japan. Dear Mr. Japan, here’s the story. You’re going to pay a 25% tariff on your cars, you know. So, we give Japan no cars. They won’t take our cars. Right.
But this brings to us the real agenda. What does Trump really want now? Now, is this really about Tokyo buying American rice? Because that’s the most ridiculous thing I’ve ever heard. Now, I’m not going to go into the economics of rice, but likely what Trump will demand from the Japanese government. All of his recent moves might just be to encircle China and cut away Chinese trading partners. One can assume that Trump might squeeze the Japanese to stop sending cheap makers to China. And in 2024, around 50% of Japan’s total cheapmaking exports went to Chinese importers. And these aren’t even the most advanced machines, but China still buys them to set up their semiconductor ecosystem. Now, disruption here would most definitely hurt the cheap industry to a certain extent. China still doesn’t have their own little graphy machines yet, at least not the ones on the cutting edge of four or two nanometers or better. So, the US can gang up with the G7 to inflict some pain here. It will cause delays to Chinese tech progress. It will be a big irritant. Now, would it be a surprise or stretch if Trump comes in with a grand bargain? Stop trading with China in a cheap industry, and we won’t punish you with a 35% tariff or so. It’s really obvious that the excuse of rice imports is a red herring, is an excuse for Trump to begin his pressure campaign on Japan. Now, Japan has said they won’t sacrifice their farm sector for TF deal after Trump’s ultimatum. Now, this is a good sign that there might be some backbone left, but I really wouldn’t hold my breath. You might say this is a win for Trump, but there will be global repercussions. You can’t be so heavy-handed because the world is watching. Maybe Japan might fold, but you best bet countries will start trading less with you. The tariffs themselves are hammering US industries. Manufacturing activity is still crashing in June for fourth straight months, and things are not looking good. US manufacturing activity still remains in the contraction zone. The purchasing index is under 50 while backlogs fell by nearly three points hitting just 44.3 and this is a contraction of a record 33 straight months. Employment is also in crisis mode. Now unless I’m blind, the employment index is in a clear downward trend. In other words, more jobs are being lost than positions being created. Now, how can this be? If industry is coming back to the United States is something we have been saying for the longest time. When you tariff the world, you drive up your own cost of production and you engender bad will against the globe. People are not happy with you. And now that half of the world hates you and your prices are higher, foreign orders are going to collapse. No one will buy your products because either they are pissed off or they can’t just can’t pay the higher price tag which eventually boomerangs back on your currency the dollar. Now as we speak the dollar has lost almost 11% of its value this year. Now yes I understand the S&P is up by over 5% but if you’re foreign investor you’re still down by 6% in real terms. This is a record slum. There’s a multitude of reasons why this is happening, but I believe the biggest reason is the tariff war that is dismantling global trust in the US. And the US economy isolates itself, keeps spending money non-stop while exports fall, then the dollar becomes even less useful. So the value starts to plunge. Now there are two sides to this coin. US imports will cost more, but US exports will be less expensive. And that is true. But as we have seen for the manufacturing index, it’s still not enough to offset the high input costs. And let’s not forget the big tax bill passed is going to add $3.3 trillion to the national debt. The increase in debt is guaranteed, but the boost to economic growth is not. And I want us to think carefully about this really carefully because it reveals that the dollar could have even more room to fall. And there’s no way Trump can allow $3.3 trillion to be financed by selling long-term bonds. It will implode the entire system. So chances are the debt will have to be raised on the short end. But T bills are still at 4% today. Well, there’s only one solution to that. Besson and Trump will attack Tim Powell and throw him out of the ring. The wrestling match between the Washington Washington and the Fed is about to come to an end. Powell’s position is on borrowed time, guys. And when interest rates plunge, we know what that means for the dollar. It’s almost destined to fall lower until something fundamentally changes. Now, the US M2 money supply is also sounding the alarm bells has jumped by a whopping 4.5% in May, hitting $22 trillion. And that’s the amount of money slloshing around the system. There’s a big problem with this picture because foreign investors are shutting dollars and trade with the US is dropping. A lot of those dollars will stay stuck in the US economy and this is why the value of the dollar is dropping and why asset prices are going up as well. People are converting their cash into something of value as quickly as possible. Just too much money slloshing around here. But I want to touch a bit on China and Russia bing together. And this is going way beyond what we have seen since 2022. Now, this partnership truly has no limits because they fundamentally don’t trust the West anymore. Trump wants a reset with Russia, but will it last? That’s the big question floating in Putin’s mind. Even if it does, the next administration might U-turn everything. The only true mutual lifeline China and Russia have is each other. Now, one will supply the finished goods while the other will supply the critical inputs and raw materials. Russia’s base metal sales to China is surging like never before. The reliance on China is deep but very necessary. On the flip side, it’s a big reason why Chinese manufacturing won’t fall. It will continue to stay strong and out compete the G7. Now, why do you think Chinese electronics chips and EVs are so much cheaper than Western brands? Now, sure, an integrated supply chain is one, but Chinese importers paying much lower prices is definitely another big reason. Russian aluminum sales to China jumped by 56% in May to nearly a million tons. Copper sales rose by 66%. Nickel more than doubled. And when you have such big volumes flooding the Chinese market, you know, Beijing is getting a very nice discount. And one can assume that behind the scenes the Russians and the Chinese give a commitment to each other. Russia, I mean China will help sanction proof Russia against any export embargo. Moscow will always have the end products that they need. Meanwhile, Russian markets and commodities will always be open to China and this brings the cost of production down and lets them out compete any other industrial power, any other industrial base out there. It’s a big reason why the US, Germany, Japan, and South Korea just can’t compete with Chinese pricing. The Chinese industrial machine is supplied by the Russian commodity machine. And on China’s side, they also realized that at any day, at any moment, they could get blindsided. The West could pull the rock and just sanction Chinese exports. Now, take China’s trade with Europe as an example. Their trade surplus has hit a record high through May. The first four months of the year recorded an impressive $90 billion. China was selling much more than what they were buying. But there’s a fundamental reason why. Because Chinese goods are more affordable for the same quality or better. And that’s why businesses are booming and the only way to protect their trade is to ensure prices are sharp. So if Europe breaks away from Chinese goods, they will have to face higher inflation, not just for consumers, but for their industrial production as well. And I don’t think they’re ready to face the music. And that’s why China’s partnership with Russia won’t end. I don’t believe anything can change it, at least in the foreseeable future. But let me know what you think. Will Japan fall to Trump? And how much further can the dollar fall? Can Russia and China survive the trade war? Let me know in the comments below. Stay safe. Be sure to smash the like button and subscribe as we navigate through this crazy times.

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As the trade war continues, the US is moving to punish Japan. However, this is going to trigger a bigger threat on the US dollar itself. Meanwhile, Russia and China are working together more closely like never before.

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