Why Trump’s US-Japan trade deal is a DISASTER

Why Trump’s US-Japan trade deal is a DISASTER

The United States just signed a trade deal with Japan and it’s a complete disaster. I wish I could say that it’s not as bad as you think. But when you look at the details of this deal, it’s actually a horrible deal. Without actually jumping into conclusions, let me explain why this deal is so bad. Well, according to the White House itself, there is going to be a 15% tariff on all the goods that will be coming from Japan. and a lot of electronics including cars come from Japan. The second part of this deal is that Japan will invest $550 billion into the United States. And it sounds great if Japan is investing so much money into the United States. How that is not a good deal? How is that a bad deal? It makes no economic sense or whatsoever. The third part of this deal is that Japan will open its market for the United States. And as Donald Trump called it, it is probably the biggest deal ever signed. Now, on paper, this looks like a really great deal. But the real question is that what does the $550 billion investment by Japan into the United States means? Oshiba says these are loan guarantees. Is it more than that? Of course, it’s more than that. It’s it’s equity, loans, and loan guarantees. America will choose the projects, and all that Japan has to do is to provide the financing. When you’re providing financing, there are two ways to do that. One, that’s going to be in the form of a loan. And if it’s a loan, then it carries interest. That means that if the US wants to build an AI data center, the Japanese bank is going to finance it at certain amount of interest rate and that data center will be built in the United States. It will provide jobs in the United States, but then the United States will simply have to pay back the loan plus interest. The second way to do that it’s going to be equity type of financing and that means that the Japanese will own a piece of that business. So if you are building an AI data center or a pharmaceutical business in the United States, it will be built in the United States maybe by a US company and the equity will be split between a Japanese company and a US company. And it sounds great, fantastic. What is bad about this company? First of all, they haven’t actually mentioned a deadline. Will the $550 billion be invested within a year or two or three? And I’ve listened to the entire interview and he made it clear that there isn’t a clear deadline. So, this money might be invested in the US within 2 years or 3 years or maybe within the next 5 to 10 years. Well, that is also great. What’s the problem with that? You see, that has already been happening in the United States for almost 30 years. And this is nothing new and they have already invested in the US trillions of dollars. I’ve explained this in a previous video, but let me give you a recap. So basically the interest rates in Japan are about.5%. And Japanese banks often borrow money from the Bank of Japan and then lend that money to the US government in form of a debt by buying US government bonds because the interest rates in the United States are much higher than the interest rates in Japan. So imagine you’re a Japanese bank and you borrow money at 0.5% interest rate from the Bank of Japan and then you loan it to the US government at 4% interest rate or 5% interest rate and then the US government will take that money and will spend it and the United States government will decide how to spend that money. Whether the US wants to build an AI data center, whether the US wants to build an educational facility or maybe simply they want to give it to Loheed Martin for another military project. It is up to the United States. The job of the Japanese banks is to provide the financing through a loan and they will get their money back plus interest. So how this system is going to be different from what is already happening and they have already invested $1.1 trillion. That is how much money the US government owes to the Bank of Japan or to the Japanese banks in general and Japanese corporations including the Bank of Japan. How this deal is going to be different from this, I have no idea. The second type of financing is equity. But this has already been happening all this time in Japan and the United States. So you have Japanese corporations who are making stuff such as Toyota. They build their sink and they bring them to the United States and they will sell their Toyotas across the US states. When they sell them, they make a profit. Now they have extra money in their pockets. Think of Toyota, Hyundai, LG. Now LG is probably a Korean company but think about the Japanese corporations. They made a profit in the US. What do you think they do with that profit? There are two things they do with that profit. Either they will loan it to the US government again the exact same thing at some kind of an interest rate and they will receive interest rate by loaning that money to the US government. The second thing they usually do is that they will either invest it in a business. They might buy a business or they will simply invest it in the stock market because they have all that extra dollars in the United States. Currently, Japanese companies own something between$ 1.5 to2 trillion of US stocks and it can vary depends on the stock market and the if the stock market is down that valuation will be lower. If the stock market is growing tremendously then that valuation could reach $2 trillion. So in total so far between the debts and equity Japan has invested in the US around $3 trillion in the exact same way. And if this continues and the United States will save to Japan that oh we need a loan for something well that has already been happening. The problem is that Japan or I would say that the US government hasn’t been managing that money properly. The US government hasn’t been spending that money on the US people by building data centers, but rather the US has been spending that money for example to pay its previous debts or the US government has been spending that money by increasing the defense budget. So the question is that how this is going to be different. They will continue providing the financing to the US government. No problem. It has been happening since 1996 or even prior to that because they’ve been selling so much in the United States. But as we can see that it hasn’t been working. So I don’t see how this could possibly be different from what has been happening over the last 30 years if it’s going to be a loan or equity type of a financing. The second thing they said that Japan will finally open their markets to the United States. And again let’s listen to what exactly the secretary of the commerce said about it. I’m not going to put words in their mouth. Just listen to what he said. So if they say to the president, we will open our market to you like and I mean really open it meaning we will take US cars like think of what the Japanese did. They said we will take US cars based on US standards. So you don’t have to make a different car. You can take the car you make in Detroit, put it on a boat and send it. So Japanese basically accepted the fact that if you make the car in Detroit or anywhere in the US based on the US standards just bring it and sell it in Japan without changing the requirements. You see every country has requirements especially for safety and emission. So Japan has much stricter safety requirements than the United States. And if Ford wants to sell their cars in Japan then they have to meet those standards before they can sell them. Now they have agreed that they will accept US safety standards. Now the question is that will the Japanese people buy that less safer car because the United States is simply selling it than the US? Well, I don’t think so. If they have a Toyota that is much safer than Ford, why would people even buy fort? Maybe there is going to be some demand, but that demand is going to be extremely minimal. So you can’t basically just build cars the way you build them in one country and ship them to another country expecting that it will be sold. It’s one thing to build a car, it’s another thing to sell it. And if people if in Japan are not going to buy it, what’s the point of removing that safety standard if Japanese people simply believe that this car is going to be less safer? The second problem is that you have to build a different car for every region. If you’re building a car for a desert type of a country, think of Saudi Arabia where it’s always sunny and it’s like literally always really really warm. And think of Canada where it’s extremely cold. And in a lot of places in Canada, you have very harsh cold conditions. Now, you can’t build one car for both of these countries because in one country, you have to put emphasis on the fact that it’s a very sunny country and you have to build really great air conditioning for them and maybe to build the car in such a way that it doesn’t melt down under that super sunny weather. But when you’re building a car for Canada, then you don’t have to care much about the air conditioning, but you have to care about that it’s going to withstand those very cold, harsh weathers. So you can’t be building one car in Detroit and ship it to the rest of the world and expecting that people on those in those countries are going to buy that car. It doesn’t work like that. You always have to keep in mind the differences in the regions. You might remove those requirements by the government and you can just bypass them. But by passing those requirements doesn’t mean that the final consumer will buy it. The government put these requirements in order to make it possible for people to kind of for the companies to build cars that are possible to drive in those weather conditions. Now you’re simply removing them. You’re just making it worse for the consumers and that’s it. The third thing that we have to consider is that there is going to be very low demand from Japan anyways. Now if you go back to 1990s, you see that the GDP per capita in Japan was much higher than the United States. So an average Japanese could buy more than the average American. But today the difference is huge. The GDP per capita in Japan is a third of what is in the United States. So Japanese people simply don’t have the means to buy those pickup trucks. And if you have ever been to Japan, you know that Japan is not a country to drive this huge American car. Let’s be honest, like nobody in Japan is going to drive this pickup trucks. And I when I say nobody, I don’t mean like not a single person. But most people would not buy those cars. In the US, when you’re moving between the cities, between the states, probably going to take a plane. Some people take, let’s say, cars. But in Japan, public transport is very, very advanced. People use trains. That’s not popular in the US, but literally if you just go to Japan, you’ll find that people take trains between the cities, for example. And that’s why the differences in the regions and the differences in the culture and the differences in the countries are not going to make that possible. The reason that US pickup trucks such as food drum are not popular in Japan, not because there are some kind of a requirements by the Japanese government for this Americanmade cause, but simply because this pickup trucks in Japan are not possible. Nobody going to buy them. There is no demand for them in Japan. Whereas if you take the United States, the US is a very huge diverse country where you have people who would want to buy a pickup truck and then you want a lot of people who would buy simply a Toyota Prius period. You know, they want an effective a car that doesn’t breaks, that drives safely and that’s it. So what is going to be the final outcome of this deal? This deal is nothing new with the investment. It has been already been happening by opening the market. It’s not going to change much. The only thing that’s going to happen is that there’s going to be a 15% tariff on Japanese cars. And that means that American car companies now don’t have to push and be more efficient and drive their prices down. American car companies will be able to raise their prices because they know that the Japanese cars now will be let’s say 15% more expensive than the US. So it will simply benefit the American car companies by making them lazier and the final consumer will pay the price for that. and the tariffs will go into the pockets of the government. Maybe the government will spend it again on things that doesn’t actually make any sense like they usually always do. Japan has been going through a deflation where prices are falling down. That’s why it’s very unlikely that those people, especially Japanese people, are very big savers. They save that money instead of just buying stuff that depreciate over time. And cars are one of these assets that depreciate all the time. If you want your money to grow, then you have to buy assets, things that will grow in value. Look at the Japanese corporations. They’re making money in the US and they’re investing it in in the stock market and they already own almost like $2 trillion of US stocks. And that’s why Japanese companies are making so much money in the US. Well, you don’t do that because you’re not investing in the stock market and you’re not making money out of the stock market. And I understand you. You don’t have a clear strategy in front of you that is going to get you to your first million dollars, for example. Well, if you want that strategy, then I have laid it down. You can find it out using the first link in the description of this video.

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