Big Trump Trade Deal Coming | First Deficit Nation Deal?!?!

News just out potentially on Donald

Trump's next trade deal. Remember we we

have not had a single trade deal with a

deficit country other than just sort of

frameworks of continuations of talks

like what we've had with China and sort

of miscellaneous walkbacks. But a

broader deal with a deficit country has

not been reached yet since liberation

day. However, now there is talk that the

US and Vietnam are closing in also on a

framework trade agreement. Uh now what's

interesting about this is currently

reciprocal tariffs against Vietnam which

is really big for furniture

manufacturing

uh and restoration hardware I'm pretty

sure does quite a bit of their

manufacturing out of uh out of Vietnam.

Apparently there is talk of uh a

framework for a deal with Vietnam.

Vietnam is seeking to secure tariffs in

the range of 20 to 25% said people

interviewed by Bloomberg but asking not

to be identified because the discussions

are still private. The agreement would

include a series of US demands such as

stricter enforcement against a Chinese

trans shipping basically the non-tariff

barriers. Vietnam had earlier offered to

remove all tariffs as well as step up

trade enforcement and boost purchases of

American goods. However, right now it

still looks like they're going to end up

with some tariff level around 20 to 25%.

And this is actually interesting

because, you know, you're at 10% now,

which means we would end up with, yes,

more tariffs and more tariff revenue for

the United States, but actually a higher

level of tariffs that could potentially

create more dead weight loss in the

economy than we had previously

anticipated. Uh, a lot of the Federal

Reserve right now is hoping that tariffs

end up somewhere around an average of

18% averaging China into that on a trade

weighted basis. Uh, anything more than

that is something that that could

potentially crimp the economy more so

than the Federal Reserve expects. This

would be above that average at 20 to

25%.

However, quote unquote, the final

contours of the framework are still

being fleshed out in ways that need to

secure President Trump's sign off.

Vietnam's foreign ministry has not

responded, neither has the White House.

Trump so far has struggled to reach

trade deals for his July 9th deadline.

We still have about three weeks there.

Donald Trump has also suggested that he

intends to send letters that for

basically like take it or leave it

offers for trade. It's like we will just

peg your you know uh tariff amount at X

and go from there. Uh however, even talk

about deals like this around this 20 to

25% level for Vietnam probably good for

setting up the potential for making

deals with other countries. So I'd say

this is broadly optimistic even though

the tariff levels are higher than than

you know would would ordinarily be

desirable. Vietnam did offer the promise

of a quick solution.

Uh however we we still need to ink the

deal. Yes, some officials want to

calibrate tariffs for Vietnam uh and

other Southeast Asians to ensure they

are sufficiently lower than what's being

imposed on China. Yet, if they're too

low, the rates may only exacerbate

Vietnam's high trade surplus with the US

and encourage further shipment of

Chinese goods through the country. So in

other words, if you keep like 55% on

China, you want tariffs to be high

enough on Vietnam that people aren't

incentivized to funnel stuff to Vietnam

and then to America, but you want them

to be, you know, high enough to still

collect revenue also from Vietnam

because that that is part of Donald

Trump's big goal is Donald Trump loves

this idea of revenue from tariffs and

that's obviously the broader risk for

the US economy is that Donald Trump

becomes addicted with the idea of

tariffs. tariffs to the point where it

it actually ends up crimping parts of

the US economy. Now, right now, optimism

is very very high. But if we look at the

Empire manufacturing survey, I think you

could see that, you know, there are

underlying cracks that we want to pay

attention to. If you look at the full

report here from this morning's Empire

Manufacturing Survey, which took uh you

know, this survey took place between

June 2nd and June 9th. So broadly in in

sort of the current state of where we

are with uh with with the economy,

manufacturing activity actually fell for

a fourth consecutive month in New York

State. The Empire manufacturing is just

related to New York State. So it's not

sort of a full US picture, but it gives

you a very interesting POV. It says

manufacturing's down. Unfilled orders

decline. So they're able to catch up on

on orders. Uh they're also pointing to a

decline in orders and shipments, which

isn't good, right? So business

conditions are actually getting worse.

However,

firms are becoming more positive, which

is this interesting duality. You're in

an environment right now where capital

spending plans are soft, but people are

optimistic for future business

conditions. They're optimistic about

taco or whatever. You know, Trump always

chickens out or trade frameworks coming

or American exceptionalism or whatever.

and we actually ended up getting an

increase in employees, the first

positive reading since January, even

though the average work week declined

1.5 hours. So, you're really in this

sort of weird place where pricing power

is weak. The economy uh isn't exactly

booming in terms of companies abilities

to raise prices and consumer spending

again with new orders and shipments

declining. But there's so much optimism

around hey as we get deals as we get uh

you know uh a resumption of the norm

maybe these new order declines will

prove to be temporary uh and we can get

back to optimism. So these are all

current conditions here. If we go to

forward-looking indicators you can see

here here's that optimism which is

basically V-shaped recovering.

Interestingly, uh the looking forward

there's the belief that we are going to

see more new orders uh and more

shipments, but we're not seeing that in

the current conditions. So, hope uh with

new orders and shipments expected to

increase, but again, not being met by

present data. However, I would argue

that if we ended up getting a deal with

the deficit country like Vietnam, uh it

would broadly be optimistic. It's

possible. That's why we're starting to

see some rise on Restoration Hardware

here. I do think that Restoration

Hardware was able to kick the can of

tariffs down the road until at least the

third quarter because they built up

inventory to really get through all of

Q2 uh without having to pay tariffs on

their wares. However, uh come Q3, Q4,

they're going to start taking a hit. And

honestly, at 20 25%. That's quite a

chunky number. But I will say broadly

good news that it looks like there might

be some progress finally coming uh on

tariffs uh and uh deals with other

countries though surprisingly higher

than the 10% where these Vietnamese

tariffs are presently set. 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.