To The Moon

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Alright Tiger, it's day three of Trump's trade war, and we're diving into it now. The U.S. has just sparked massive retaliation, and U.S. consumers are being misled. Trump himself has admitted it, and the G7 nations are already facing the threat of recession. We've hit the iceberg, and the global community is now calculating the damage.

Think about it: if you're a president or prime minister in any country right now, you’re probably sitting back and wondering, "Am I next?" The U.S. could target your country with tariffs to extract revenue from its own citizens or even push to reshoring production in your country. It's a strategic play.

But let’s break it down: The U.S. is focused on re-shoring, not offshoring, which is a fundamentally different approach. And they’re willing to do this because the world is hooked on the U.S. consumer market and the dollar system. Right now, everyone is ransom by US.

In Trump's mind, he believes he has the leverage, at least in the short term. He may be able to pressure the world into making concessions, but this strategy won’t be sustainable long term.

The 51st State Canada Biting the Master

Now, just in the last 24 hours, Canada has announced counter-tariffs that will target $15 billion worth of U.S. goods. U.S. products are already being pulled from stores in Canada. It may start with liquor, but expect this to expand to other goods, including groceries. U.S. products are being blocked, especially those heading to grocery chains where profit margins are razor-thin. Canada's 25% tariff is going to have a significant impact.

For regular Canadians, this feels like a betrayal. What’s the point of following U.S. orders when, in the end, they’re the ones getting punished? Sure, you may follow the U.S. on certain policies, but now it’s all coming back to bite them.

If you're in Europe, you might see Russia's assets frozen and increase exports to the U.S., but what do you get in return? Not much. Instead, you're getting punished. Take Canada, for example. They're already selling oil to the U.S. at a 15-20% discount. Cheaper oil means it’s easier for them to manufacture and produce goods, making their exports more competitive. Canada is also hosting a ton of U.S. factories—GM, Ford, and others.

But with this trade war, the second-order effects are just as bad. The Canadian dollar has fallen more than 2%, hitting its lowest point since 2003. This has pushed up the cost of imports—not just from the U.S., but globally. For Canadians, this means paying 25% more, plus the 2% drop in the currency value, making everything, from China to the EU, more expensive. This is pushing Canadian consumers to the edge.

Economists are forecasting a recession in Canada, with GDP potentially shrinking by 2-4%. Keep in mind, Canada was only expecting to grow by 1.8% this year. So if you subtract 4% contraction from that, you get a -2% GDP growth. This could be the first time in years, possibly decades, that Canada enters a recession.

The U.S. plan seems pretty straightforward: reshoring manufacturing at all costs. Trump can’t directly target China without triggering major retaliation, especially since a huge portion of products in stores like Walmart and Dollar Tree are made in China. Instead, his strategy is to punish his allies, like Canada and Europe, and bring production back to the U.S. to emulate China’s success in manufacturing.

There’s a reason so many global companies, from Japan to South Korea and Europe, base their production in China. China offers cheap energy, robust supply chains, and incentives for manufacturers. Trump, on the other hand, is using punitive measures—if you don’t manufacture in the U.S., you’ll face massive tariffs. So, not only will your exports become more expensive, but you’ll be slapped with a 25% tariff if you don’t comply.

It’s an insane approach, and at some point, the world has to stand up to this kind of Tyranny. We’re already seeing countries like Canada pushing back with their own tariffs. The result will be higher prices for U.S. consumers. The reality of these tariffs is that the ones truly bearing the cost are not China, Canada, or Mexico—they’re U.S. consumers.

Trump has finally admitted something that even a child could see coming: U.S. consumers are going to feel the pain. The issue is that many intermediate goods from the U.S. will soon cost more. Take oil, for example—Trump has slapped a 10% tariff on energy imports. So, if the U.S. was getting Canadian oil at $50 a barrel, it’s now going to cost $55. This increase impacts the entire supply chain. When you fill up your car, expect prices to rise by 10%, but petrol stations will likely hike prices by 15-20%. Other goods that rely on oil, like plastics, will see price increases too. The risk of all this is huge.

Looking at the numbers, U.S. GDP could drop by 1.2%, and inflation could rise by 70 basis points. These aren’t great figures by any measure. Trump has essentially backtracked, telling American voters that they might feel some pain from the tariff war, but it’ll be worth it to "make America great again." Now, I’ll leave it to Americans to decide if it’s worth it, but what’s undeniable is that the cost of living will be squeezed. Everything from chicken, beef, and beer to vegetables and fruits—stuff coming from Canada, Mexico, and China—will get more expensive. Economists estimate that the average household could end up spending an additional $830 a year for the same items. So, either you pay more, or you lower your standard of living—maybe swapping beef for chicken, or chicken for something else. It’s a tough situation.

Mexico Collapse?

We’ve already talked about how a lot of cars coming into the U.S. are made in Mexico and Canada. Those are about to face tariffs too, meaning U.S. consumers could be looking at a $3,000 increase on car prices. While this situation is bad for Canada and Mexico, it’s even worse for them economically. About 80% of Mexico’s exports go to the U.S., meaning up to 16% of Mexico's GDP is at risk, and a third of their goods and services could collapse.

This could ultimately be a win for China. As U.S. companies pull out, Chinese companies will flood in, and China can use Mexico as a manufacturing hub to strengthen ties with Latin America. It’s a classic example of the U.S. pushing countries closer to China, just like what’s happening with Russia. While the U.S. is turning inward and becoming more protectionist, China is globalizing.

Big Orange Doesn’t Understand How Global Trade Work

Trump’s biggest problem is that he doesn’t fully understand how everything is interconnected, especially when it comes to the U.S. dollar system. The U.S. needs a weaker dollar, not a stronger one. Tariffs cut off the flow of dollars around the world, which ends up strengthening the dollar. But a stronger dollar doesn’t help if the U.S. wants to import less—it actually complicates things. As global trade shifts away from the U.S., countries are being forced to decide whether they want to keep engaging with the U.S. But the U.S. government still needs to borrow money, and the world may become unwilling to lend. Who wants to fund their own containment?

Conclusion

We’re at a crossroads—either a sovereign debt crisis or the U.S. printing massive amounts of money, which could collapse the dollar’s value. It’s worth noting that China hasn’t retaliated yet—they’re just sitting back, taking their time, enjoying Moutai and playing the long game. They’re consulting with the World Trade Organization and preparing their plans, but you can bet that The World and China are coordinating something that could shock the US. When it comes, it’s going to be groundbreaking.

To wrap this up, I believe the U.S. has made a critical economic mistake that could turn out to be even worse than seizing Russian assets.

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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