CRAP, Trump **JUST** Escalated the Trade War | China PISSED

Hey, so futures are in the red and a lot

of this has to do with escalated

tensions with China, especially with the

Nvidia news that we just heard. But this

goes way beyond the Nvidia news that

just came out. So, in this video, I'd

like to talk to you a little bit about

what's going on between Trump and China,

and how things aren't exactly going as

planned for Donald Trump. First, we'll

hit the Nvidia news, and then we'll get

into a little bit on what Besson said

yesterday, along with some other

information. First, and very

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tonight. So, futures are down on the

Nvidia news. Why? Because Nvidia is

required now to obtain a license with

unclear approval time frames to be able

to export their H20s to China. These

chips were estimated to make up 12 to 15

billion of Nvidia's $130 billion of

annual revenue. So, figure a little over

10%. Uh now currently they're taking a

$5.5 billion charge in the quarter to

mark down inventory and contracts mostly

because well I mean frankly they have no

idea when they're going to get these

licenses and what they're going to do is

they're going to write down their

existing inventory and say you know what

we're just going to take the L here and

if we get the license in the future

we'll recognize that as income again

which in some sense as a long-term

Nvidia investor is potentially a good

thing because the company's just taking

the bad news charge now and they'll add

it back in later when Chinese trade

tensions hopefully resolve and cool and

these licenses are a little bit easier

to acquire. Of course, we're getting

sort of tit fortat retaliation now with

uh Boeing uh deliveries being suspended

in China, which Kimble Musk actually

chimes in on, and he suggests, "Yeah, I

mean, I get it. Boeing planes are

manufactured in America, but they're

also made with a like a thousand to

10,000 different Chinese parts." So you

really have these integrated economies

where even things that are wholly

manufactured in the United States are

using Chinese parts uh and to some

extent things that are wholly

manufactured in China are using parts

from different parts of the world as

well. So we have this interconnected

economy that Donald Trump is really now

calling into question and that's what's

leading to uncertainty at least with

regards to the futures market today.

This could obviously change once Donald

Trump changes his mind. After all,

Donald Trump tells us that we want

countries to choose between the US or

China, which is interesting because

that's also coming that he just said

this on Fox News. That's coming at the

same time as he says, "We're open to

negotiating with China." So, very much

the art of the deal/caos is what we're

seeing here. We don't exactly have a

clear guide in terms of what's going to

happen, but the problem that we have to

pay attention to is China. Because see

JP Morgan has actually taken a flip of a

stance here and they see China as now

more investable than the United States.

In fact, they see Europe uh and China

selectively investable as a hedge for

international investors reluctant to

jump back in early to the US

exceptionalism trade with China more

likely to deliver hefty policy support.

Now, this is interesting because really

what you're finding is hedge funds and

institutions who have been big sellers

of US treasuries but also US stocks as

they've been moving money away from sort

of risk equity assets. What they've done

is they've said, "Hey, maybe there's

actually a safe haven in Europe and

China, which is interesting because if

we really believe that the Chinese

negotiations are going to come and this

trade war is going to fizzle away, then

you would expect a reversal back

basically from Europe and China and then

back to the United States as things are

on sale." I mean, look at Meta, for

example. It's trading for what, $518? It

was just trading for what, $718 not too

long ago, it seemed. Maybe not quite

that high, but anyway, it was over

certainly over seven. Uh, and so JP

Morgan leaves us at a 60% chance of uh a

US and global recession with a 40%

nonrecessionary call. And then of course

they have various different cases here

for the S&P 500 in terms of price

targets dependent really on whether or

not we come up with a deal with China so

we can essentially resolve the trade

tensions that we face right now. Uh the

problem with all of this is that lately

we've been stuck in this mindset of okay

maybe Trump isn't actually going to get

rid of any of the tariffs. See, the EU

news this morning taken in itself wasn't

actually that useful in that, okay, the

European Union expects that some

American tariffs are going to remain in

place even after negotiations. That was

the European news news this morning. We

kind of already suspected that with

Europe. The problem is what if that's

the case with China and if that leaves

China hardened against the United

States? And see, this is where things

get interesting because most people have

the mindset that China is so reliant on

us that they're dead without us. But

that might not actually be the case. And

I'm going to share a foreign affairs

piece that talks exactly about this in

just a moment. But first, I want to tell

you how China is branding this. China,

if you go to the uh, you know, Chinese

paper, the South China Morning Post, on

the front page, let's Google it. South

China Morning Post, it's a Chinese

paper. Okay? Okay. So, you can you can

even if you want call it Chinese

propaganda. I just want you to see how

they are branding it. Okay. Here's how

they're branding it. Uh this is their

exclusive piece. Exclusive. Trump

tariffs may make China's domestic

economy stronger in the long run. That

the Chinese economy is better prepared

this time around compared with the last

trade war with the US. Now, this is an

interesting point of view because Donald

Trump actually brings up the last trade

war all the time. In fact, he just had a

truth social post today where he's like,

"Oh, Biden abandoned the farmers and the

last Chinese trade war hurt the farmers,

but we ended up negotiating a big

bailout win of 29 billion for them."

What Donald Trump neglects to mention,

because sometimes truth just seems to

elude him when it's inconvenient, is

that what happened during the trade war

1.0 know is we actually lost a lot of

our export market for agricultural goods

and they ended up going to countries

like Brazil because my goodness, wow, we

have an international market. When the

US closes its door to its a products,

China goes, "All right, well, who else

has this a product?" Oh, Brazil. All

right, good enough for us. I mean, hey,

you want to do free trade? We're open to

free trade. Uh, and I understand there

are definitely problems, you know, in

the Chinese economy and in regards to

Chinese trade, whether it's the dumping

of goods or potentially IP theft, right?

These are problems that we have to

solve. But let's focus for a moment on

how Donald Trump is positioning them

himself versus how China is positioning

themselves. Because China is like, "Hey,

this trade war could actually be good

for us, and we're doubling and tripling

down on our partnerships, not only in

Europe, but they've got a giant piece

out on 40 trade deals being signed with

Malaysia today, which is honestly a

perfect slap in the face to Trump

because Trump keeps talking about doing

trade deals, but we're not actually

seeing signed trade deals. Meanwhile,

what is China

doing? We're actually signing 40 trade

deals right now." Now, obviously that's

what they're saying, but what you could

see is the little needling at Trump,

right? You could see the way they're

trying to brand what they're doing is as

a way to purposefully try to needle at

Trump. And Trump is waiting for the

phone to ring for the Chinese to call to

negotiate. But so far, we've still seen

nothing. So now, what's the problem

here? And what does foreign affairs say

is is a large problem when it comes to

China. Well, foreign affairs has a great

piece. I encourage you to to read

foreign affairs. Uh they they're they're

dense. I encourage you not to use AI to

read them. Actually read like read to

understand. Foreign Affairs is

fantastic. Anyway, they argue that Trump

believes he has what's called escalation

dominance. Escalation dominance is when

the more a war goes on, the more pain

your opponent feels. And foreign affairs

thinks that Trump believes he has that.

that Trump says, "Oh, well, 15% of

China's economy is relying on the United

States, so they need us, so uh the phone

will ring one of these days." But then

they question, well, what if he's wrong?

See, China might actually have

escalation dominance. Besson in his

interview with Bloomberg, he's like, ah,

China relies on us more for trade.

They're, you know, playing poker with a

pair of twos. They're making a really

big mistake. That might be true. But

they take a very interesting argument.

Foreign affairs. What foreign affairs

says is what happens when you lose some

of your trade? Well, your income goes

down. So your income goes down. You cut

some of your spending. All right. So you

contract a little bit. Yeah, it hurts.

You're not

unscathed. But what do you do without

Chinese manufacturing in America when

you can't replace vital goods that you

would otherwise have to wait decades for

to get? We can't build chips in the

United States tomorrow. It could take us

decades to do that. You know, even

larger chips, you know, the 27 uh

nanometer chips, basically actuator

chips for the windows, the window

switches on our cars, uh the uh water

flow pumps and the little circuits.

These are tiny like 5-cent circuit

boards that sit inside your washing

machine or your

dryer. These chips come from China.

Makes sense. Are we going to put a

factory together and make these 5-cent

chips? No. We're going to put together

uh significantly more advanced

manufacturing as we should, which Jamie

Diamond agrees is also important for

national security. Which comes at a

really interesting irony because Donald

Trump keeps bragging about how Nvidia is

now going to manufacture their Blackwell

chip at TSMC in in Phoenix. You know,

they're finally ramping up to get to

full production here in 2025 after they

opened after many delays. But what

people forget is that facility was

funded with $6.6 billion by the CHIPS

act. The CHIPS act was a Biden policy.

Yeah. The plant opened under uh Trump

essentially and actually well started

scaling under Trump uh you know it

opened just before uh but uh but it

really isn't getting to scale until this

year and hence Nvidia partnering with

the United States uh division of TSMC.

But this was a Biden act that actually

got this manufacturing to the United

States. And I'm not here to shill for

Biden. I'm just here to say, you know,

Trump, you might have to be careful

because you could actually be

overplaying your hand here because

you're taking credit for things that you

didn't do. And then you're assuming that

every other company is willing to do

that, but then you're forgetting about

the incentives that actually drove those

companies to be willing to do that here

in America. And this is where foreign

affairs argues that there's actually a

potential suicidal strategy that we're

using against China right now. See, I'm

just going to read this section out

because I think this is such an

interesting way they place this. Uh, and

take a look at it. It'll really, I

think, give you some respect for what

foreign affairs does. What's more, if

you focus solely on bilateral trade

balance, as the Trump administration

does, it bodess poorly for the United

States in a trade war with China. In

2024, US exports of goods and services

to China were almost $200 billion and

imports were about $462 billion,

resulting in a deficit of 263. To the

degree that bilateral trade balance

predicts which side will win a trade

war, the advantage lies with the one

with the surplus economy, not the

deficit. China has the surplus. In other

words, they have the edge, not us.

China, the surplus country, is giving up

sales, which is solely money. This is

what we were just talking about. The

United States gives up goods and

services that it cannot produce at home.

And then here's the suicidal part. When

it comes to a real war, you have to

reason. You have reason to be afraid of

being invaded. And it would be suicidal

to provoke your enemy before you've

armed yourself. In other words, why are

we provoking China before we've actually

homebased some of this manufacturing?

Maybe we should go about this

differently and start homebasing our

manufacturing more like what we did

under the Biden chips act and then

attack China rather than the other way

around where we're attacking China while

we're defenseless and then we're totally

taking credit for things that aren't our

doing which misleads us into thinking

we're actually doing something good when

what we're doing is completely

economically destructive.

In other words, Trump is being stupid in

this case. Now, people think that by me

saying that that I'm anti-Trump or I'm

picking political sides. My videos are

not about picking political sides.

They're about sharing that Donald Trump

has backed himself into a corner. And

from a finance or an investor point of

view, you have to be very careful with

this because if Trump backs himself into

a corner and he truly believes that we

are going to keep some lasting tariffs

and that China is going to fold, then

you must ask yourself what happens when

he finally realizes he's wrong. Does he

then flip-flop? Maybe. But how much

damage is done by then? This is not just

the cheap electronic chips or the

critical minerals that we need or the

pharma ingredients that go into our our

medicines. As Foreign Affairs says,

quote, "It is wildly reckless not to

ensure alternate suppliers were adequate

domestic production before cutting off

trade because on the terms of even if

Donald Trump is just using this as a

negotiating strategy, his strategy will

do more harm than good. And it when you

include consumer uncertainty and

business uncertainty with this, the

result is a US productive capacity that

declines rather than improves, which

only increases the leverage that China

has over the United States. This is not

good. So, uh, you know, when we really

consider this foreign affairs piece, we

have to put aside our politics for a

moment and think, huh, Donald Trump has

a four-year term.

China, you know, Xiinping, they're in

this for probably a much longer period

of time than our current set of

politicians because it's one party rule.

They are much slower and much more

methodical and they are willing to take

these calculated battlefield moves.

Whereas Donald Trump is acting a little

bit cowboy-ish right now and he's on a

time limit. You've got midterms coming

up. You know, midterm campaigning is

going to be well underway in a year from

now, which is crazy to think about, a

year from now, we will be well underway

with midterm

campaigning. So, Trump's clock is

ticking substantially. And given at

least China's branding and the

likelihood that they're able to just,

we're not going to call it Trump, let

him flip-flop first. It could mean that

Trump actually ends up escalating this

ch trade war with China substantially

more rather than reducing it. And I

think that's in part why we saw the

Nvidia news today and why we're seeing

futures down because you know people are

concerned by this. Now don't get me

wrong, China is still going to get hit.

The whole

world securities, they're based out of I

think Hong Kong it is. But anyway, they

believe the entire world needs to brace

for a slowdown in the second quarter

because that's not only when the tariffs

hit, but that's when all the inventory

pull forward that we had in Q1 goes

away. So we don't have inventory

building up anymore in Q2. are trying to

get rid of it at a lower margin and we

have the tariffs in effect. That's a

problem. So, expect a sharp decline in

shipment and trade flow across the

world. They also suggest that yes, there

will be a large decline in trade with

China as a first order shock, but then

you're going to get hit with the PMIs,

the confidence, the equity shock, and

more. So, again, this this video is not

to say that China is going to get out of

the scot-free. Everybody's going to be

affected with pain. But this is this is

a Chinese trade war on steroids compared

to what we had in 2018. And it's one of

the reasons why you're now getting

corporations and this was unexpected.

But corporations like United are now

putting out dual earnings forecasts.

People thought companies would just

remove guidance, but United is like,

"Hey, we actually beat on operating

income and EPS and we think we're going

to keep beating unless there's a

recession." So they're giving two

different version versions of EPS. Look,

fiscal year midpoint

$12.50. If there's a recession, eight

bucks. In other words, a quarter lower,

25% lower. Now, mind you, United

Airlines is already down 30% year to

date. It's like 29.6%. They're up 6% in

after hours, but they're still way beat

up because the airline industry is

probably at least in some level of

recession. On top of that, you're still

setting up for some form of a shock.

See, look at liquidity. Okay, liquidity

right now based on current data is way

down here. We have not seen this lack of

liquidity in the stock market since

2020. Uh and if you look at the bid ask

spreads we're seeing the bid ass spreads

on stocks right now which are is a

measure of liquidity or lack of

liquidity. So the higher this chart is

the less liquidity. We haven't seen

these numbers since co. So there is a

lack of capital right now. There's a

lack of cash. You know this is why I

mean knock on wood but we feel really

grateful at house hack because we're

just sitting on a pile of cash. We're

like, "Whatever happens, bring it on.

We're going to be getting some sick

deals and we're going to explode this

company uh in in uh you know, in

valuation." My hope and obviously bias

here could be wrong uh throughout

whatever happens over the next few

years, which obviously is why I'm so

grateful to those of you who are uh

investing in House Act, mind you, we

have the nonacredited round open and the

accredited round open. You can learn

more about what we do. You can see our

properties and everything else that

we've got. I think our cash on hand is

closer to 10 million now with the recent

fundraising that we've done since this

is an end of February number here. So,

we'll get some of these numbers updated.

Uh but uh feel free to explore our

website house.com and and get yourself

some exposure to real estate for this

third and fourth quarter where we think

they're going to be some sweet sick

deals especially in certain markets.

Certain markets are going to get hit

this year and we're going to take some

opportunities. So, check that out

house.com. But in terms of recession

models, you know, we've really been

triggering recession models for over a

year now. Uh Bloomberg was complaining

about this earlier today where they're

like, you know, if we just looked at a

market implied model of recession, we've

basically been at a certain recession

within the next 12 months for the last

like 18 months. So obviously they've

recently been misfiring unless we're

already in a recession. But Cameron Cruz

put together a really interesting

breakdown for us on the inverted yield

curve, which tells us like we're primed

for a shock. We're primed for a

recession. Combine that with low

liquidity, prime for a recession.

Combine that with Chinese uncertainty

and Donald Trump's

untruths, probably increasing the odds

of a really big problem. But anyway, if

you look at the twos 30s, I usually uh

like to use the twos 10s, but let's use

the twos 30s uh based on their analysis

for a moment. They say that when you see

the uninversion by 20 basis points or

more, 36% chance of recession. 35 basis

points or more, 46%. Where we sit now,

39 basis points, 50% chance of

recession. But what you got to see is as

that keeps going up. So as we go from,

you know, on the two 10ens, for example,

54 basis points of uninverted, if we get

up another 30 basis points and we're

like 80 to 85% suddenly uninverted,

we're closer to a 75% chance of

recession. So that's why it's so

important to watch that 2's 10 spread or

the 2's 30 spread, whichever you want to

watch. The other thing is, which is very

odd from previous 20% selldowns, the

latest selldown that we've had in the

stock market has pretty much only been

driven by hedge

funds. Inflows, new money coming from

retail has continued to happen or has

continued to flow into the market.

Whereas usually we only associate 20%

sellowns with net outflows, not inflows.

But we saw $31 billion of inflows which

is very

unusual for a draw down of 20%. But it's

also a warning because it says we have

not hit retail capitulation. And if we

haven't hit retail capitulation, then

that means this sellown we just had is

just an appetizer. On top of this, in

the spirit of sort of these talks about

military conflicts potentially evolving

uh you know uh over over the entire

global economy or environment like what

we talked about yesterday with Iran and

China and otherwise. Steve Woff was just

talking about how maybe Iran might be

open to some low-level nuclear

enrichment and the White House would be

willing to accept some of that. But now

it seems like there's a flip-flop going

on and the White House actually wants

complete abandonment, which is not good

because Iran's nuclear capabilities are

substantially greater today than they

were in 2016. Uh with their ability to

get to weaponization maybe only a few

months away rather than 1 to two years

away. Uh and so they have I mean they

have three times the centrifuges that to

enrich uranium that they had previously

in 2016. So they've really been

expanding their nuclear, you know,

infrastructure, which creates more

concern that we are going to end

up in an escalating military conflict

with not just Iran, but also potentially

China and Taiwan and Ukraine, Russia,

when we're supposed to be deescalating

and ending wars. So in other words, we

put all of this together. We're

obviously going to have a whole lot to

talk about on the course member

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Uh

so what I want you to think about when

we put all of this together is how do

you invest with confidence that the

bottom is in in the market? In the short

term, we might have, you know, a

short-term sort of consolidation. I

mean, today's stock market was really,

really boring. We just traded sideways

all day.

The idea that we're going to go escape

to like Netflix stock though or Door

Dash or whatever

uh really ignores the reality that all

of them get whacked in a recession. I

know a lot of people are like, "Oh,

we're safe from the trade war by

investing in Netflix and Netflix is

like, oh yeah, we're going to be a

trillion dollar company within 3 years."

Okay. Well, going into recession, I

don't buy it. 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 Praath

there, financial analyst and YouTuber.

Meet Kevin. Always great to get your

take.