Transcription
China is urging the United States to stop the tariffs against China. The US made exemptions on smartphones and laptops and a lot of electronics, but they're also working on a new tariff that will be applied on smartphones and all other electronics. China is truly one of the countries that can really stand up to the United States. But if Trump's plan is going to work, it can have devastating consequences on the entire Chinese economy.
There are three goals that Trump wants to achieve with this trade war. Number one, slow down the Chinese economy. Secondly, close the deficit with China. And thirdly, open the entire Chinese market to the US companies. And when that happens, the entire stock market is going to shoot to the roof. And those stocks cannot simply just double, but maybe even triple, making people who are investing in the stock market two or three times much wealthier.
So let me explain here in this video how exactly Trump is going to achieve that goal. And if Trump is actually going to achieve that goal, it is going to literally wipe out the entire Chinese economy. So if you're ready, give this video a thumbs up and let's get right into it.
To understand what's happening with the Chinese economy, we simply have to understand the fundamental problem with China's economy. And in order to do that, all you have to do is to understand how the GDP is basically calculated. GDP stands for gross domestic products, and this is one of the main fundamental ways of how we measure the economy of any country, whether it's China, the United States, Germany, Japan. And GDP mainly consists of consumption. Consumption is people in your country spending money, and that contributes to GDP. So if you go to the shop right now and you buy an iPhone or a laptop, or even when you do your groceries, that contributes to the GDP of that country; and if you're in the US, then it contributes to the GDP of the United States.
With tech consumption plus investment. Investment are any kind of investments that are made by private institutions, by private companies, or even by foreign countries or foreign companies. When Apple makes an investment in China, that is called an investment. Plus government spending. Every time the government prints money or borrows money, or any shape or way does it spends money on anything in the economy, that contributes to the entire GDP. So in 2020, one of the reasons that the economy did not collapse is because the government spent so much money in the United States. In China, the government spends billions, hundreds of billions of dollars on infrastructure projects that leads to GDP growth. And finally, net exports. Any country imports a certain amount of goods every year, and then it exports. So if you're exporting more than you're importing, then that contributes positively to your GDP.
And investment plus net exports were the main reason why the Chinese economy mainly grew over the last 30 to 40 years. First of all, the investments mostly came from other countries, especially the United States. Every single American company that you can think of, especially if it's an international business, then they have invested in China by opening up factories, moving their manufacturings, or doing any kind of business. So that contributed to the GDP of China. Secondly, China has been exporting to the rest of the world for the past 40 to 50 years, and that led to the growth of the Chinese economy. I mean, since China opened up to the rest of the world, and if you look at the data for example for 2024, you can clearly see that China has sold to the rest of the world a trillion dollars worth of goods more than it imported, and clearly it was one of the main reasons that led to the growth of the GDP in China, and that's why when you look at the GDP growth for example in the US, you see 1.5%, 2%, or maybe 2.4%, 4%, because the US does not export as much as China does, for example. But then you look at the GDP growth of China, and suddenly you see like five, six, 7%. Again, that's because China exports to the rest of the world much more than it imports.
And you can see that any country in Southeast Asia that is export-driven, and the main country that they export their products is obviously the United States. Yes, they have diversified their exports to the rest of the world over the last couple of years, but still the United States remains their main trading partner, and they export mostly to the United States. That is followed by the European Union, then ASEAN countries. ASEAN countries are mostly southeastern countries such as Indonesia, Malaysia, Philippines, Vietnam.
So if you literally go back to the entire history of China, you see that US companies made a lot of investments into China, and China exported mainly to the United States, and that's what led to the growth of the Chinese economy. And Trump is going to hit China where it hurts the most, because if Trump is going to stop the net exports of China to the US, and Trump is going to stop the US investments in China, then suddenly the Chinese economy is not going to grow as much as it did in the past; that will mainly close the trade deficit between the two countries. But secondly, it would lead to a much slower GDP growth. And that's exactly what Trump is trying to do.
It might seem impossible to do that right now because a lot of manufacturing is still in China, and moving it to the United States is going to double or triple, for example, iPhone prices. But I will get to that a bit later. But if we actually achieve the goal of slowing down the Chinese economy, and from now onwards the Chinese economy is no longer going to grow by 5%, because if you actually do the simple math, let's just assume that the US economy grows by 2%, China's economy grows by 5%. What's going to happen 20 years from now or 30 years from now? Those extra percentages that China is growing over the United States is going to compound over time, and the Chinese economy is going to overtake the United States, and China will become the world's largest economy. Well, the United States will become second or maybe even the third largest economy. So how do we prevent that? If we can actually hit China so hard that their economy grows as much as our economy right now in the US, then China is never going to overtake the United States.
Let's do the math. The US GDP right now is around $29 trillion. And you can see the trajectory; the US has been growing much faster than China, but China has caught up with the United States. And right now, if we take the data for 2024, which is the last year, the GDP of the US is $29 trillion, well the Chinese GDP is around $18.5 trillion. And if we assume that both GDPs are going to grow at around 2%, which I have the formula over here right now, and we are going to take the next 50 years. Of course, we can take another 100 years, but let's be a bit realistic and let's take the next 50 years. By the year 2075, the US GDP is going to be 78.5 trillion, or to be more precise, a bit more than $78 trillion. That's a lot of money. But China's GDP is going to be 49.88 trillion. Is it a lot? Well, absolutely. But is it as much as the United States? Well, it's not. Is it more than the United States? It is not. So by launching this trade war and slowing down the Chinese economy, we are guaranteeing the security, or the future security, of the United States as the world's most powerful economy for the next 50 to 70 years. And there isn't a single power that will ever threaten the United States. Because if you have the world's largest economy, and you have the world's largest, most powerful economy, your currency is obviously, over time, is going to become the global currency reserve. Like, just go back to the 1920s and 30s. In the 1930s and 40s, the US economy already overtook the British economy. And when World War II happened, after World War II, the British pound stopped being the global currency reserve, and the dollar overtook it. And the United States perfectly understands that. So we want to prevent that kind of a circumstance. So we want to make sure that even 50 years from now, China will not overtake the United States as the world's largest economy.
But how do we do that? That's a good question, right? Because if you look at what Trump is doing, it looks like a chaos. It looks like a mess, and it doesn't seem like he has a plan. So let's just deep dive into his strategy, and you will see that it actually makes sense, even if you don't like it.
This is trade between the United States and China. In 2024, the United States imported $440 billion dollar worth of goods from China, but it exported to China $143 billion. So there is a trade deficit for $300 billion, or to be more precise, $295 billion. What a lot of people don't understand in this strategy is that it's not that China is producing something in order to import to the United States. You have to make this very clear in your head that it is the US companies who are who have moved their manufacturing to China, and now they are building US products in China and then bringing them to the United States and selling them to the US consumers. And that's why there is this trade deficit. It's not because China is somehow technologically more advanced than the United States. And if we can force US companies to move out of China, suddenly that GDP growth is going to slow down. If we can actually force US companies to get out of China, then suddenly we can close the trade deficit. So how do we do that? And that's exactly where the Trump strategy is coming.
So Trump first imposed tariffs on everything that comes from China. And that includes smartphones, laptops, and all electronics. Then a few days later, when everybody panicked and Apple panicked, like the shares of Apple literally dropped by about 10% or something close to that, then Trump comes out and he understands that you cannot overnight build all of these factories in the United States or even move them out of China to any other country. So he created this exemptions that you can still bring your iPhones to the United States, you can still bring your laptops to the United States, but we are working on a new tariff. So the first tariff that we have announced was like a signal to the US companies, and the second tariff is going to be serious. So you have some time to actually move away your manufacturing from China.
So if we look at the products that the United States brings from China, it is mainly electrical machinery and equipment, and those are the laptops, the iPhones, and so on and so forth, and that's at around $126 billion. Then we have machinery, mechanical appliances at around $85 billion. So if we bring laptops and smartphones and electronics back to the United States or outside China, that will close the trade deficit by almost $212 billion. So the trade deficit right now is around $295 billion. So by simply moving away manufacturing of electronics outside China, we're closing that down by around $212 billion. And that will leave the US with a trade deficit with China of around $83 billion. Maybe we can actually cut something out such as furniture or maybe vehicles or maybe even medical equipment, and that will bring it down to around $50 billion. And now we can ask China to buy from the United States a bit more than they are buying. Let's say they will increase their spending of the United States products to $200 billion, and the US is going to buy $200 billion, because we have actually decreased the deficit by around $240 billion or close to that, and we moved it away either to the United States or to a different country, and suddenly we have a trade balance between China. That's basically the plan, because if you look at what the United States exports to China, it's not the exact same way as China exports to the United States. It's not that Chinese companies are coming to the United States and building their plants in the United States and then bringing those products back to China. Look at the numbers. Most of the exports of the United States to China are agricultural products such as soybeans. And then there are aircrafts and engines. And these aircrafts and engines, such as Boeing and complicated technology, are being manufactured by the US companies such as Boeing and other aerospace companies in the United States. Then you have some kind of pharmaceutical companies, and a small portion of that are petroleum. So maybe China can start buying more petroleum from the United States instead of Russia or so.
The key in this strategy by imposing those tariffs isn't to threaten China, but rather to threaten US companies who can actually move away their manufacturing from China, as they've been doing over the last 7 to 8 years. And some companies, for example, such as Tesla are building complicated technologies in the United States. So if you can build Tesla in the US, why can't you build an iPhone in the US? If you think about it, the way they're building those iPhones right now, yes, it is impossible to do that. But if you kind of integrate the exact same way everything within your entire system, just like Tesla does, because Tesla builds every single component within their gigafactories, so maybe you can set up similar gigafactories in the United States and you can produce a portion of your products in the United States. Now it's impossible to think about that, but there is a very beautiful wisdom that you probably heard about, and it says that necessity is the mother of invention. So if you're forced to do something like that, and I guess Apple is going to figure it out. Yes, you might not be able to get everything out of China to the United States, but you might be able to do some of it.
So the second part of this plan is to move a portion of that manufacturing not just to the United States, but to a neighboring country such as Vietnam. So over the next 10 to 20 years, the Vietnamese economy is going to grow, well the Chinese economy is not going to grow by five or 6%. And you might say, well, we just replace China with Vietnam. Yes, that is true, but Vietnam is not a geopolitical threat to the United States, unlike China. China is the world's largest country by population, and it is a direct threat to the United States, and it has a potential to replace the United States. But Vietnam does not have that kind of a potential. Vietnam is far poorer than China, and Vietnam geographically, or by its the size of its populations, has no chance to actually compete with the United States. So if Vietnam is going to grow over the next 20 to 30 years just like China did over the last 30 years, it is only going to be to the advantage of the United States, and it's going to be against the interest of China. In fact, it is going to be simply a neighboring country that can counter the threat of China in Southeast Asia, and again it is going to be a geopolitical win for the United States.
So with the current tariffs, we are forcing US companies to move away investment out of China, which means that slower GDP growth in China, and secondly, there are going to be less exports from China to the United States, and China will be buying more from the United States. So the two main components that are driving the GDP of China are going to be slowed down. That doesn't mean that the Chinese economy is going to collapse and will be wiped out, but it certainly means that the Chinese economy is not going to grow as fast as it did over the last 30 years. And that means that it will never overtake the United States as the world's largest economy. And the three main goals that Trump has in front of him will be achieved. Goal number one, slow down the Chinese GDP. Goal number two, close the deficit. Right now there is a deficit of $300 billion, and if Trump did not start the deficit, it would have grown much bigger than that. And final, and the most important goal that he's going to achieve is that the Chinese market will be fully open to the American companies. That is one of the negotiation tools that he's using. That's one of the costs that Trump is holding. If you want to keep trading with us, if you want American companies to stay in China, if you want Apple to keep producing stuff in China, then you have to make it in such a way that your economy works just like our economy. And that means that you will open your market. No more extra subsidies for your companies. In fact, if the Chinese economy stops actually being export-driven, and it will have to rely on its consumers in order to grow its GDP, then it must have a price competitive economy. And that means that companies within the entire Chinese economy have to compete within themselves, and that takes out the government out of the economy, and companies start competing between themselves.
But the great thing about it is that if Trump can actually have full access to the Chinese market, what does that mean? You have Starbucks, you have Apple, you have Coca-Cola, you have GM, you have Tesla, you have every single American company that will have full access to the US cons to the Chinese consumer market, including Boeing and every other company that you can think of. And that means that the revenues are not simply going to double, they're going to triple; their profits are going to soar dramatically. And the stock market in the US is going to soar. It is probably going to be like one of the greatest opportunities for investors. Yes, the vast majority of Americans will not profit out of it. Unfortunately, that is basically the truth. But it's not the fault of Trump. That's simply the fact that most Americans do not invest in the stock market, and they don't know how do you make money from the stock market. They don't know a good investing strategy that fits them. They're not confident in that. And that's why the top 10% of Americans is most likely about to get significantly wealthier after this turmoil is over. And the vast majority of Americans will not benefit from this. And if you want to be one of those will benefit out of it, make sure that you know how to pick good stocks, you know how to invest like a pro. If you learn that, then you will actually profit from it. And if you need help with that, make sure to check the first link in the description. That's it for today. Thanks for watching, and I will see you in the next.