Transcription
Hello and welcome everyone to this very important video where we dive deeper into the actual impact of the new tariff regiment that will unfold, and the actual impact on US companies and stocks, as well as the economy. And we ask the question: Is it justified that the stocks are selling off like this, like what we saw over the last three days, or is it stupid and will reverse because it's actually good for companies and stocks and the United States economy?
So, first of all, let's take a quick look into what happened and what these tariffs are. And I will make this very quick because you probably saw my other videos on it. So, I will make it very, very quick. First of all, we see these new tariffs being implemented here, um, on this famous, famous table. Now, China gets hit with 34 plus 20% punitive fentinel tariffs, which makes it 54%—absolutely untenable for the Chinese economy. China will bail on fentinel quickly. That's my prediction. So they get actually the 34%. Um, that will happen, I don't know, over the next couple of weeks in my opinion, because China cannot survive like this. And then all the other folks get tariffs all over the place to close loopholes visa v China, but also for many other reasons.
So what does that mean? It means that these new tariffs we know are in place. And in my previous video, I also covered my exact predictions what will happen to this initial table and how it will be adapted through deal negotiations. The outcome will be: China will cave on the 20% fentinel murder tariff, where uh, China has to stop subsidizing and actively guiding the, the export of illegal fentinel into the United States that kills tens of thousands of Americans every year. This is just bad stuff. And I think they will now because they won't have a choice. I think China will even out at roughly 30% tariffs, between 25% and 30% over the midterm, after they given in to some, some demands from the United States, gets this 34% down to something between 25 and 30% in my opinion.
Why? Because this is a sustainable level of tariffs for China under 30%. Over 30, it's probably not sustainable. It will destroy and implode the Chinese economy. Uh, a lot of these Chinese exporters have very slim margins. They cannot afford another 10% on top of the 20%. So they have to get down. Um, and I think Trump knows that. So, but they, he has the leverage. 34% is exactly where you want to start if you want to end up at 27 or something. And at 25 to 30%, China will be under sustained and strategic pressure, and the rise of China is over. That will be a takeaway from this whole thing.
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Most other countries will be forced to reduce Chinese imports and put pressure also on China and close the loopholes. They will fall in line with what is asked by them. The European Union is a special story that is actually not that complicated. There will just be some negotiations, and I think over time Elon's vision of a giant free trade zone between America and Europe is actually what Trump also would be okay with. But that requires the European Union to restructure a lot of things, to remove asymmetric trade barriers. This all creates massive pressure on the Chinese economy. That is the point—national security, but also to fix certain imbalances.
Now, this video is about the impact of this new regiment. I'm just going into that so we understand what the midterm, long-term future will be. Tariffs will stay in place. It will stay in place at a lower rate than discussed right now, but significant, and this will be the new reality of the world for a long time to come.
So, is that good or bad for markets? Because we see that the market even today, on Monday, third day in, is still very nervous about it, and Tesla is selling off. Everyone is selling off like crazy. I want to go into a specific example and want to use Tesla as a purely American company that is actually one of the most, you know, purely American manufactured and sourced companies in the auto industry, to see if that's actually bad or good, instead of talking macroeconomics here that are basically always wrong because they don't, they're not based on first principles but on stupid analogies that macroeconomists always come up with without understanding what's actually happening. So I want to go into microeconomics of a company to actually ask what's going on.
So let's look at Tesla and what's happening. So Tesla has uh, three major regions it manufactures locally in the United States with Austin, Nevada and San Francisco—the gigafactories—uh, or Bay Area, and uh, that's not a Gigafactory, it's the old Toyota factory, but Austin are new gigafactories. Berlin in Germany, as you know, in the European Union, and in Shanghai. So European Union, China and the US, because Elon is smart. So he, you know, he actually made sure that these locally produced cars are very purely locally sourced, very different from GM, for example. You know, other automakers basically don't do it this way. They don't use their Korean plants to produce for Korea and their US plants to produce for the United States, but they, you know, split it by models, which is kind of stupid to produce one model here in this plant and one model there, but then you have to export that model all across the world from that plant. That's not smart thinking, right? It seems smart because I can focus the production and scale on one place, but you know, from a global supply chain and import export and tariff perspective, it's very stupid. You want to basically replicate the same Model 3 production line in Shanghai or Model Y production line in Shanghai and in Berlin and in Austin and replicate it. So you have locally sourced Model Y's, biggest selling car in the world.
So what does it all mean? Let's go through the details. So in Austin, let's look at Model Y as the top selling car in the world and the top selling product of uh, Tesla. So the Model Y is roughly 85% locally sourced, local content in Austin, including Canada because Canada has special, you know, trade relationships with the US. So effectively 85% roughly is locally sourced. 85% is also locally sourced in Berlin roughly from the European Union, and 90% to 95% is locally sourced in Shanghai. Right? So what does it mean with the new tariffs? Let's just assume China is the main exporter of the content in the Model Y in Berlin and in Austin that we need. So that's easy math. 14%. Right? That's the tariff. So the additional tariff, let's assume China gets to 34% very quickly, which it will, uh, 20% previously. So we have a differential of 14% of new tariffs. That is the price cost increase for Tesla times 15% share of the content. So we are looking at a cost increase of roughly 2%. That is not true for Shanghai. Shanghai is even less, right? Shanghai is probably 1%. But uh, Austin and Berlin will have a cost increase for the Model Y because of these Trump tariffs of 2% roughly. The cost of a Model Y roughly average, you know, COGS is 40,000 bucks, and the average selling price is 48,000 bucks, and the margin logically is $8,000.
So what does it all mean? Pre-tariffs you make $8,000 per Model Y in margin. It's a nice margin. Maybe a little less, but what I make it easy here. 8,000 bucks margin. $48,000 average selling price ASP and $40,000 COGS manufacturing cost for the Model Y. Let's assume it's the same in Berlin and Austin. Roughly the same. And now you have this 2% increase in cost. So 40,000 bucks goes up to 48, uh, $40,000 and $800 new cost. $800 more, 2% cost increase due to tariff war that gets split. We just assume there is a split. We take 400 bucks and put it on top of the price. The consumer has to eat it, and 400 bucks goes down margin. Investors have to eat it.
So what does it mean? One-time price inflation. So we are talking about the price impact uh, of 400 bucks. So we have a 0.8% increase in the price of a Model Y that is getting passed on to consumers. We can assume that is a true pass-on of price because the consumer won't have a choice but to pay up for these 0.8%. Because Tesla is one of the most locally sourced, so every other automaker will be either massively more expensive than that because they have to import the entire car, or is similar to Tesla, and so there is not a choice to find a car that is not at least 8% more expensive. So that is a true inflation or let's say price increasing effect that the consumer has to digest. Now that's of course much smaller than people think, because when they hear 34% or 50% or 25% on orders, I think, oh my god, massive inflation. The fact is, in the Tesla example, we're talking about inflationary effects of 0.8% one time. When I did the math, by the way, I did not consider anything else. I just did it, I promise you I did it bottom up. I did exactly this calculation, and I was very surprised when I arrived at 0.8%. Because Bessent, you know, the secretary of commerce of the Trump administration, in this interview on Meet the Press, you know, he said something very interesting to uh, welcome the journalist. He basically said empirically, wait, is this empirically uh, a 20% tariff on China led to a 0.7% price level increase over four years. So one of 0.7% increase, which isn't that funny. So we arrive at nearly the exact same randomly, you know, specific number, 0.8% is what I say the price increase would be, and Besson said empirically it was 0.7% on the 20% initial tariffs. Very interesting. So that tells you, okay, we are roughly in the right ballpark here. 0.8%, 8%—is this going to end the economy after inflation nearly hit 10% and is now down to 2, whatever, 3, 4%? So we are talking about a one-off effect of 8%. No, that's not going to make a difference, and I understand this is just one company, other companies might be more affected, but other companies might be less affected. Maybe there are, there are lots of companies in the United States who are 100% locally sourced; they have zero effect. But now besides, we talked about price increase and hit on margin. Margin goes down from 8,000 to basically that, which is ridiculous. That doesn't make any difference. But there is a different thing that is very important to see, and that is it's not just about more expensive production and higher prices for US consumers. It's also a massive, massive demand increase for Tesla specifically.
Now, let me show you this. Why this is so, so important? Where do we have this? Here. Look at this. I want you to pay attention to this. Here is a list of all the cars that are imported to the United States. All the EVs, the electric cars. And this list, let's make it a little bigger here. This list shows you some very interesting stats. It shows you that these cars that are all Tesla competitors, uh, it's not all electric cars, but it's the ones, you know, that we want to take a look. The Ford Mustang is produced in Mexico. They are being hit by 25% tariffs. They're already losing for a lot of money per car. These are 40,000 of these Mustangs that are now basically toast because they cannot do this anymore. Hyundai Yoni 5 mostly in Korea and then basically imported 45,000 of them. The Hyundai ionic 6, we have 12,999 of them imported to the United States. They are all being fully hit by either 25% automotive tariffs or worse, the new tariffs. We can check out South Korea here. Well, 25, so they have exactly the auto tariffs, same thing. And so they're being hit by these tariffs, which if you know anything about cars, it's the end. These cars are finished. They will have zero sales. It's very brutal actually for these guys. But we look at the big picture for the consumer. What does it mean? So these people here all have a lot of problems, and it goes down here to the more expensive German cars. So Mercedes EQS, you know, this is also significant. Volkswagen actually has 38,000 EVs it sells in the United States. So this is all very serious. Here is the number: eight cars. 235,288 EVs are toast. They are dead. They are not competitive anymore. No one will buy them. 235,000 loss in sales of all these cars in this list. They will not be sold in the United States anymore now. And starting immediately on April 10th.
But what does that mean for American car companies? Well, it means that Tesla and its peers that are in a similar situation, Rivian, some other locally produced cars, right? What happens to them? What happens to them is that they will see a massive, massive demand increase, massive demand increase. These 235,000 cars, Tesla roughly sells 650,000 EVs in the United States. So Tesla will look at a 30 to 40% new market of EV buyers who want an EV, who suddenly don't have an EV anymore because what they wanted to buy doesn't exist anymore. Where do they go? Well, they go to what still exists, which is Tesla, or if they're Elon haters, they go to Rivian. Rivian will benefit from this. So maybe some GMs are produced locally, some EVs. So all of these are now confronted in a positive way with a huge new 30% sudden demand increase. So you can be guaranteed that Tesla will grow much more than expected in 2025.
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And similar things might then become true in Europe and also in China with retaliatory tariffs. Of course, China, the impact, the positive impact on Tesla will be very minimum because most of the EVs are produced in China, and there's a massive competitive market, so it won't benefit that much. But in the US, these tariffs are a massive demand booster for Tesla and for its peers that are similar positioned.
Now, I don't want to just talk about Tesla. This is just an example, but think about a t-shirt company in the United States. Think about an electronics manufacturer. Think about all these guys who are currently in the United States who have a huge problem, you know, white goods, like all kinds of stuff that is being manufactured in the United States. And suddenly with these tariffs, you see a demand or competitive implosion. Every competitor who is heavily reliant or fully imported from China or some other country is now gone. They're dead in the water.
Now, why is this so important? And why is this not inflationary? Because what is inflation? Inflation means you give everyone too much money. You're printing money like a Democrat, right? Oh, what can go wrong? We just print money and give it to everyone. That is real inflation. You give everyone too much money, you increase, you know, the, the amount of money, the money volume in the market, and then everyone can spend, you know, twice as much on everything, which is stupid because then everything goes up in price. Why? Because if you're a seller of that good and you increase the price, you still sell the same amount. So, you're busy increasing the price. With the tariffs, it's very different because you're not giving consumers more money. The consumer has the same amount of money. And if you have the same amount of money and you increase the price, you're not going to just pay that price. You're going to reduce consumption or you're going to shift consumption. If I make a Mustang Mach E, you know, if I raise the price from 40,000 to 50,000, you're going to say, well, maybe I only renew my Mustang Mach E. If I'm fanatic and want this Mustang, I'm only renewing it now 20% less. I wait 20% longer with my old Maki before I buy a new one. Or more realistically, you're going to say I'm buying a Model Y from Tesla, which is now 10,000 bucks relatively cheaper than that. So, that does not mean inflation. It means a shift of consumption preferences or a delay. Let's take the Apple iPhone, which will be hit very hard with 30% price increases. It's inevitable the Apple iPhone will become probably 30% more expensive. It's not easy to shift consumption, right? Because you want an iPhone, you don't want an Android, and the Android also gets 30% more expensive. So in this category of phones, let's take this category. What happens? Do we see inflation? Do we see the price increase? Not really. Of course, the price will increase, but the consumption will not increase accordingly because there is a limited budget of the consumer. So, what are you going to do with the iPhone? Well, let me tell you one thing. My little iPhone here, I don't know how old it is. It's probably four years old. I never renew this thing. I find it stupid. I don't need this stupid phone. I mean, I need the phone, but I don't need to renew it all the time. Most people I know always buy their latest iPhone. Well, if they want to, let them do it and, you know, pay more money. But you don't need that crap. Just wait. You know, imagine you're buying a new iPhone every year because you're crazy. Don't do it. Buy Tesla shares instead or something. So, if you buy a new iPhone every year and it's getting 30% more expensive, you know what you have to do? Just wait four more months. Instead of buying it in April, you buy it in whatever, in in September or July. I mean, is this going to kill you? No. That's the same amount of money spent as before. You delay consumption. Now, will this destroy Apple stock? Of course. That's why Apple is dropping much more than Tesla, for example. No one gets hurt with this kind of stuff. No one needs a freaking new iPhone all the time. So, you just delay consumption. There's no effect, no bad effect on the economy here. Maybe on Apple, but then, you know, you just shift to more US goods in other ways, and the US is going to benefit from it. So that's what I mean, like the sell-off of Apple is justified. Absolutely. Apple has a huge problem. Everyone who didn't fix their supply chain and is locally produced has a huge problem. Nike has a huge problem because Vietnam will have high tariffs. Not the crazy tariffs right now, but even if it's half, it's not great for Nike.
So why are stocks selling off if that's so obviously good for the US economy? Because you know what we see here is not just the demand increase for US goods, a crazy demand increase. We also see commitments of up to 5 trillion dollars to build new manufacturing onshore over the next 5 years, which is another trillion dollars a year in manufacturing in, in construction in the United States. So there's a hu, all this stuff is just hugely positive for the United States. There's just no way around it. By the way, Europe could do similar things visa v China if they would be a little smarter. But for now, let's talk about the United States. Everything about this new tariff regiment is hugely positive for the economy and all domestic stocks that are truly domestic, not fake domestic like Apple.
So why is the market still selling off? Why don't they understand this? Well, there's one thing that's being debated that scares the market. That's why Netflix is even selling off, and you know, people who clearly are not affected by tariffs, and that these are recession fears. So what about that? Why are we even talking about a recession if all of what I just explained clearly leads to a boom of the US economy? Well, because there's one fear that this confusion in the tariffs leads just to a delay in investment decisions by the companies, which actually would be very bad because once investors, company leadership gets scared and stops being, you know, investors in growth, then you have a lot of problems, and then maybe, maybe there's a recession. So what, what about that? Well, the big question is, will uncertainty truly inhibit investment and stop growth? And the answer is, of course, if we see turmoil and confusion, if all companies now don't know anymore what's going on and pull back from all investments and pull back from everything, of course, we have a recession. Of course, it's horrible. Turmoil and chaos and unpredictability are very bad. But how is any of this unpredictable? It's unpredictable for an ant brain that just sees this on Thursday or Friday and doesn't know what to do and panics. But if you have any more evolved brains, you will understand. Sure, it is okay to be confused on Thursday or on liberation day. It is okay to be confused on Friday. Maybe it's even okay to be still confused on Saturday. And maybe you watch some Bloomberg and get even more confused on Sunday. But today is Monday. Tomorrow is Tuesday. Then there's Wednesday and probably Thursday after that and probably Friday after that. If you're still confused by this week, Friday, of what the plan is, you should not be CEO of a company. You should not be confused, or you should retire because you're not capable of leading a company. This is not that confusing. I understand it was confusing 48 hours ago when it was still fresh, but just watch my channel, then it's not confusing anymore. Other people on X are also smart and saying smart things. So the confusion right now, in the middle of the confusion, it's part of confusion to be also confused about when the confusion stops. I get it. But I tell you, I'm not confused anymore. I know that it will stop. I know this will spread this knowledge, and by Friday this week, no one should be confused anymore. That doesn't mean it's crystal clear the exact percentage point of each tariff to each country by then. But it's clear that we will end up somewhere between where we are now and where we were before, and it's more in the middle of these two points, and everyone is going to understand this, and then the confusion is gone. And once the confusion is gone, people will start thinking what it means, and they will understand the US is going to win big. China is going to lose big. Everyone else, if they're well positioned, is also going to win. Maybe not as big, but they're not going to lose on it. So, you know, maybe South Korea, I wouldn't be too bullish on South Korea. Everyone who's heavily, heavily dependent on export to the United States will have problems, but the European Union, they don't need any problem here, they can easily navigate that, they can do similar things, they can win too, you know, countries even like Thailand, for example, they can win, Australia can win, like there's no reason others cannot win, but no one can win as much as America with this new framework, so people will understand this, and my prediction is that by end of the week this should all clarify a lot.
Now, before we end this video, I also want to point out something very important. The real problem the world is facing that has to do with the strategy of the Trump administration. I think uh, Bessent said it or maybe Latnik said it. I don't even know, maybe both said it, or they hinted at it when they were asked like, "Is it really realistic that you go to a Vietnamese sweat shop or something and onshore that in the United States, you know, with, with wages of a $130 per hour or something?" And one of them or both of them said, "Well, the robots are coming." That is very interesting because these changes in manufacturing, they will take a couple of years even if you had the cheap labor. And what we are really witnessing right now is not the Trump tariff thing. There's just a tiny little stress test for the future. The real stress test here will be that our economy will cease to exist the way it does today, and it will cease to exist within the next four years because we live through a transformation that is so enormous that people don't even understand what's going on. It's called the age of AGI. We will achieve artificial general intelligence end of this year. We will have humanoid robots roaming around end of next year. We will have these humanoid robots achieve humanlike skills across all kinds of physical labor end of the year after, in 2027 or 2028. At that point, the entire balance of economic, trade, supply chains, and everything in the world is going to massively transform. I'm not going to talk about jobs too much, but there won't be any jobs left in 2030 anywhere in the Western world. That's the biggest disruption. But let's talk about trade for a second. There will also be a massive, massive rebalancing of power in the world. And this rebalancing of power will be in favor of the most developed economies, of the most high-wage economies. Because if
There are no jobs anymore; then wages don't play a role anymore. Then no one will have a wage advantage anymore. That will be true for white-collar work, including call centers and other things. They will be gone, probably in 24 months, absolutely latest. I would say in 12 months they're gone.
All the outsourcing industries will be completely wiped out by AGI by the end of this year. You see it with CLA and some other things already. So India, the Philippines, all these countries where there's a lot of outsourcing going on—at scale outsourcing, right?—I'm not talking about executive assistants. I'm talking about specifically call centers and these things. They will be gone. Custom support will be gone because AI is going to take it over as we speak.
And what does that mean? That all that money and that margin and that revenue goes back to the European Union and the United States—mostly to the tech companies. And once the robots are here, this will just be the same thing on steroids. Imagine there wouldn't be a wage advantage in India or in Bangladesh or in Vietnam or in China. Imagine that is gone because every German, every South Korean, every Swede, every company in Idaho, in California, wherever, can now employ humanoid robots like Tesla Optimus at basically a tenth of the costs of a US worker, but also half the cost of a Vietnamese worker, or maybe whatever—even if it's 80% of the cost, doesn't matter. It's game over. It's a massive unnerving situation, and this is all going to happen much faster than most people think. It's going to happen in the next 3 to 4 years, even on the humanoid robot level. So all the planning that is going on right now already has to take that into consideration if you're talking about bigger manufacturing plants.
So we are entering a completely new phase of human history and the human economy. That's why I use the Tesla example, by the way, because companies like Tesla, who are at the forefront of the AI transformation of robotics, of humanoid robots, of intelligent AI and things like that—autonomous driving—they will be the absolute winners, but they will also change the rules of the game globally because they are new infrastructures also. Nvidia, maybe Google, you know, they will provide—maybe Amazon—they will provide these massive new infrastructures that unlock a totally new economy that is not relying on human labor anymore, which allows the countries with the highest IP, the highest innovation rates like Northern Europe, like the United States, to actually change the game dramatically.
So all of that coincides, surprisingly, coincides with what Trump is doing here, and that is all extremely bullish. And this level of transformation—we're talking about a completely different league of transformation here. All of that is going to happen very, very soon. So it's going to be one of the most exciting things to follow this whole thing—and exciting not always in a good way because it will lead to a massive global destabilization of all sorts. We live in a new world, and it's very important to stay on top of it. So I hope you like this. Like and subscribe. Join us in pioneerlands.net—that link in the description—where we track all these things to stay ahead of these complex developments.