To The Moon

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The US has really done it this time. When you see the Tariff Flag here, it means things are really going downhill. So sit back, pour yourself a stiff drink, and get ready for a new segment where I just talk and ramble on. You can leave this on play while you do your stuff—vacuum the floor, exercise, drive your car—let's get into it.

Nothing is going to stop the February tariffs from coming. We need to understand what's coming for the world economy. We never thought Trump would do it; we speculated he might, but he has really pulled the trigger this time. He's not going after traditional adversaries like China or Russia; he's targeting their own G7 allies. We've literally hit the iceberg with this one, showing how reliant G7 countries are on trade with the US.

US VS Canada

What did you think would happen when Trump realized that 60-80% of your trade relies on the US consumer market? He's going to weaponize it. Canada should have known better. They faced Trump's tariffs from 2016 to 2020, with a lot of volatility and trade threats. Canada should have diversified their supply chains and customer base away from the US back then. Now, they're hit with a 25% tariff, damaging the entire economy. A lot of trade, cars, materials, and oil flow from Canada to the US, and a 25% tariff could stop the flow of goods. US consumers might move away from buying Canadian products, and Canadian exporters might have to lower their prices, damaging jobs and industries.

Most of Canada's oil exports go to the US, and the infrastructure is set up for this purpose. Canada isn't getting the most revenue they could because the system isn't geared to export to other countries that need oil and gas more. Europe needs energy due to the lack of Russian gas, and China's growing economy needs oil exports. But Canada is trapped with the US. If Canada cuts off oil and gas to the US, the effects would be horrible for both sides. Around 90-98% of Canadian oil goes to the US, and 20-30% of US refining capacity depends on Canadian oil. US consumers would see higher costs at the pump.

Even if Trump wants to go after cheap shale oil, it will take 6 months to a few years to happen. Big oil companies will be drilling under high interest rates and inflation. This tariff war between the US and Canada will destroy both economies.

Canada Counter Attack

Prime Minister Justin Trudeau announced on Saturday that Canada will retaliate against President Donald Trump's new tariffs by imposing 25% levies on a wide range of U.S. imports. Trudeau warned that Trump's actions would have real consequences for Americans.

As tensions between the two neighboring countries, who share the world’s longest land border, hit a new low, Trudeau stated in a press conference that Canada would place tariffs on C$155 billion (about $107 billion) worth of U.S. goods. Tariffs on C$30 billion worth of goods will take effect on Tuesday, the same day as Trump’s tariffs, while duties on the remaining C$125 billion will be applied in 21 days.

Trudeau's announcement came shortly after Trump imposed 25% tariffs on Canadian and Mexican imports and 10% on goods from China, escalating the possibility of a trade war that economists warn could slow global growth and drive inflation. Trump also stated he would apply a 10% tariff on all energy imports from Canada.

US VS Mexico

The Canadian tariffs will target a range of American products, including beer, wine, and bourbon, as well as fruits and fruit juices such as orange juice from Florida, Trump’s home state. Other items affected will include clothing, sports equipment, and household appliances.

For Mexico, it's nuanced. Mexico manufactures a lot for the US, like tractors for John Deere. Trump is unhappy with this deal and has threatened tariffs. With a 25% tariff, Trump is signaling that he wants to restore US industries and doesn't care about other economies. If Trump continues the tariff for four years, it will increase the cost of cars and manufactured goods in the US. He might use it as a bargaining chip with Mexico, telling them to reject Chinese trade and factories.

Mexico might consolidate with China, which could be a smarter move. Chinese companies could build factories in Mexico and export to Latin America. Countries like Brazil and Argentina are growing fast, and Chinese goods are being pushed there. Mexico could join hands with China to push back against the US, but it's a big question.

US VS China

China exports a lot to the US, over half a trillion dollars, and a 10% tariff could eliminate the incentive to ship goods to the US. US consumers will pay more for everyday items. Trump understands the repercussions, which is why he didn't impose a higher tariff on China. The worst effect for the US is China boosting their domestic consumption. China will use their trade surplus to stimulate their economy, giving out vouchers and subsidies.

If China uses their US dollars to boost domestic consumption, it will affect the US bond market. China won't fund their own containment and will use their money for their own projects and consumption. The US will debase their currency, and China will lose purchasing power by holding US bonds. China will use their money for Belt and Road projects and to raise living standards.

The US has confirmed China's rise as a bigger consumption power. If China controls global supply chains and grows their consumer market, they become a bigger economic power. For people around the world, this could lead to a global currency crisis. The value of currencies will drop, and there will be a US dollar shortage due to the tariffs.

US VS The World

Countries conduct bilateral trade, but the US dollar is still dominant. If the US imposes high tariffs, they will spend less dollars, affecting global economies. Exporters will get less dollar revenue, impoverishing countries. This could lead to a currency crisis like in 2022, with local inflation soaring.

Countries owe a lot of debt in USD, and they will need to buy US dollars, weakening their own currencies. This doom loop has been triggered by Trump. The long-term consequences are horrible for the US. They might win the tariff war in the short term, but there will be diversification with BRICS countries banding together with China. China is less affected by tariffs and will lead to more de-dollarization.

China has been ditch dollars and trade in local currencies since Trump 1.0. China had also warn the world about the risk and US treat to World Economy, Trump's actions confirm China's warnings. Going forward, there will be less incentive to buy US assets. In the short term, people might pile into US markets, but in the long term, countries will decouple from the US and build their own consumer bases and stock markets, especially China.

Conclusion

Trump's actions have crippled the future of the US economy, leadership and portrait as the New Imperialism colonial expansion in Earth. It sounds strong with slogans like "Make America Great Again," but it's not a good idea for Humanity. I wish everyone a happy end to the Lunar New Year season, and as February starts, don't be surprised if things get worse. It could last much longer than four years of the Trump administration.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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