*Unexpected PROBLEM* Trump China Trade War.

Hey everyone, me Kevin here. China's

economy is really starting to suffer in

the face of the trade war that the

United States has imposed on China and

the rest of the world in a goal to

hopefully get to freer and fairer trade

across the board. We don't know if that

will be the ultimate outcome, but what

we do know is China's economy is

starting to reel, but potentially in a

way that has quite the ironic outcome

for the United States. See, China's

consumer price inflation is once again

collapsing. But it's not so much the

consumer price inflation that matters at

this point. Take a look on the left

side. 2020 consumer price is prices

turned negative again in 23 and again

just now. So we've been hitting not only

declining inflation, the trend is

clearly down, but also another third

bout now of deflation in China. Now,

again, this creates a really crazy

irony, which we're going to talk about

in just a moment. But it's not just

consumer prices. It's something worse.

It's factory deflation, which is now at

its worst level in over a year. It's

next worst decline here at a 2.7

percentage point decline for April,

compared to 2.5% of a decline in March.

Yeah, that's negative. not two and a

half percent CPI like what we have in

the United States, but negative

2.7%. And in the face of the trade war,

what you're finding is quote unquote

already fierce competition may lead

companies to lower prices even further.

Now, what's remarkable about this is

China's doing everything they can from

not only trying to find dutyfree islands

with special customs policies that allow

shops to maintain low prices amid

sky-high prices here from a Hong Kong

based paper. Uh, but what we're finding

is China might actually be trying to

weaponize this deflation against the

United States. Now this I thought was a

really interesting point of view because

initially we think okay wait a minute

China is experiencing significant

deflation because their factories are at

a standstill. Maybe not entirely at a

standstill but at a substantial uh

standstill with significantly fewer

orders coming from the United States is

in part heavily in part this trade war.

The irony though is because China has

low CPI and low producer prices, their

central bank just cut rates last week

and is likely to continue cutting rates

again and again and again and pumping

trillions of dollars into the economy on

top of the trillions of dollars that

they already have been. And see, the

benefit for China is as they face severe

deflation, their central bank can

literally run the money printer to try

to prop up the Chinese economy without

concerns that it's going to cause

inflation because they're literally just

trying to print themselves out of

deflation. Now, what does that do to the

United States? Well, puts the United

States into a little bit of a pickle.

See, we are also going to suffer

somewhat from this trade war. It's not

entirely clear what that suffering is

going to look like yet, mostly because

it takes somewhere around 30 to 60 days

for that pain to actually start showing

up at our ports and potentially another

30 to 90 days thereafter for businesses

to start running low on inventory for

items that we need. and we start seeing

new good stock shelves that are now

subject to anywhere between 60 to 145%

tariffs plus fentanyl tariffs plus

sectoral tariffs. You know, you know the

drill

here. So, the United States economy and

our central bank is worried about

stagflation, which means our central

bank is not stimulating our economy.

Well, not only is the central bank of

China stimulating their economy, their

fiscal arm is stimulating their economy,

which the legislative arm and the

central bank are probably almost the

same in China. So, it's kind of

redundant to say that it's all

controlled by the Communist Party of

China. When you combine it, they have a

very stimulative effect going on. We

have hopefully tax cuts and really just

an extension of the 2017 tax cuts along

with hopefully some other things like no

tax on tips, overtime, and social

security. We'll see.

But we don't have a Fed that's willing

to stimulate. And so this made me very

interested in this piece here where this

is the trade conflict Xiinping has been

waiting for. And in this article, we

actually hear the idea that starting in

2020, long before this new trade war,

China has basically tried to make

themselves the number one source of

manufacturing for everybody else in the

world. making everybody reliant on

China, minimizing the chance of a trade

war, trying to cut China off. Now,

obviously, that's exactly what Trump is

trying to do right now. But we make up

less than 14% of Chinese trade now, down

from over 20% what it used to be. And

so, that trade number is shrinking, and

this trade war is likely to shrink it

even further. So, the real question then

is where do we sit with negotiating

leverage? Well, we'll have to find out.

But what I think is really incredible is

so far we have not seen impacts yet. And

while this goal is quote unquote about

flipping the leverage so the world is

relying on China and China is reliant on

no one in China, China is going through

pain. The difference is they might not

care and they're running the money

printer at the same time fiscally and

monetarily. Whereas in the United

States, we're not running the money

printer. Our fiscal stimulus that is

from Congress is likely to be

significantly less than what we've seen

under a Democratic administration mostly

because the goal is to reduce the

federal budget rather than keep

expanding it which means our economies

are in two totally opposite positions

and it actually gives the strategic edge

to China. Now obviously we want to win

in America but from a Fed banker and

congressional point of view China has an

edge here and China has the

manufacturing to create trade deals with

other countries that the United States

does not have in a cheap way to supplant

US manufacturing let's say and keep this

in mind or you know for the US to

replace Chinese manufacturing but keep

this in mind the more deflation we see

in China, the more globally competitive

Chinese factories actually become. So

even though the Chinese are running the

money printer, if we keep seeing more

factory deflation, prices are just going

down and other countries get to import

deflation to their countries by tra

trading with China. If they trade with

the United States, they actually import

inflation. And we, as we trade less with

China, get less of the benefit of

importing that deflation because we're

buying fewer Chinese goods. So we're

actually then importing from other

countries or trying to make things

domestically increasing our inflation

again giving us that concern over

stagflation in America. Whereas China's

deflation helps them in negotiations. It

helps them with other countries and it

actually makes them more desirable to

trade with. So we're in kind of a weird

pickle of a place, but I found this

information and this latest data on

what's going on in China very

interesting to share and I thought I'd

bring it to y'all. Make sure to follow

me on X atrealmeke and follow me for

some flying content on Instagram today.

Meet Kevin. Thanks so much for watching.

We'll see you next one. Goodbye and good

luck. Why not advertise these things

that you told us here? I feel like

nobody else knows about this. We'll

we'll try a little advertising and see

how it goes. Congratulations, man. You

have done so much. People love you.

People look up to you. Kevin Pra there,

financial analyst and YouTuber. Meet

Kevin. Always great to get your take.