Trump’s $179 Billion Trade War Explained

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Columbia, Mexico, Canada, China, Germany, France, Italy…

What do all these countries have in common?

They’ve been identified by Trump as targets for his sweeping introduction of tariffs designed to protect American industry and in Trump’s own words “put America first”.

As expected this has truly shaken markets, causing massive drops across stock markets all over the world, worrying importers and exporters alike who are desperate to hedge their bets and accelerate as many transfers of goods as they can before these tariffs go live and the costs of trade sky-rocket.

The let is calling it a disaster, the right is calling it the greatest defence of American business in a century, but what’s really going on? Who are these tariffs going to hurt? And what is Trump’s endgame here?

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China Is In BIG TROUBLE

Whilst the relationship with Canada and the US might be a little rocky, at the end of the day the two countries are still incredibly close. Geography, culture and language tends to do that. And so there is a very reasonable expectation that agreements will be made and Canada will be able to deescalate this situation and drive towards free trade once more.

China on the other hand? They have no such luxury. Tensions have been high and building further for long before Trump came into power in 2016, and they didn’t improve at all over Biden’s tenure as President either.

The headlines here are simple. Chinese companies (or rather any company) manufactoring something in China for dirt cheap to then export it all off to the US are getting hit hard.

China has been pursuing protectionist trade policies to protect their own industry for almost a century at this point, and Trump is the only western leader willing to take them on at their own game, so frankly, I think this is fair game.

Every wondered why no Fords, Chryslers or Corvettes are sold in China? Ever wondered why there is no Facebook, WhatsApp, Instagram or Amazon in China? Because the Chinese Communist Party refuses to let foreign companies sell to Chinese consumers in the vast majority of cases.

What the headlines aren’t taking note of however, is that Trump isn’t just raising tariffs on Chinese imports, he’s identifying and closing loopholes that have allowed Chinese companies to grow at extraordinary rates as well.

Shein, Temu, Ali-Express… I’ll forgive you if you’ve never heard of these companies before. But in essence they are retailers. They sell mostly small and cheap consumer goods. Clothes, trinkets, gadgets, anything that can be strapped into a small parcel and shipped to the US to be sold for less than $800.

And that $800 is a very specific number, because up until Trump’s new rules, Chinese companies would pay a 0% tariff on any goods exported to the US that are worth less than $800.

This is not by design from American law-makers. When these rules were written, 99% of exports into the US were done in bulk. A clothing manufacturer would make $10,000 worth of clothes, ship it all over into a warehouse in the US together, pay their tariffs and then distribute each individual product to customers in the US.

What Shein, Temu, Ali-Express and others have done is switch that process round. Thanks to the incredible efficiency of internet shopping and global logistics, they send each package into the US individually, with average order values of around $50 and so never paid a single penny in tax.

Those 3 companies alone are now worth more than $2 Trillion built largely off the back of this loophole that previous American law-makers had been to slow to close.

This single sweep is likely to decimate this entire market sector, and that’s not even considering the impact to the rest of Chinese exports.

Trump’s Plans Are Not A Simplistic “Trade War”

Trump is very specifically using tariffs not only as an economic tool, but as a political one, with Columbia as a brilliant example I talked about on a Stoic Finance video a few days ago.

And now Mexico and Canada have been established as another brilliant example of tariffs with a political aim, not an economic one. The open border has been a disaster for the US, and some of Trump’s strongest campaigning points has been based around resolving this massive problem.

So when the legacy media published panicked articles decrying the impact to the American economy when Mexican and Canadian tariffs were announced, they were swiftly embarrassed within only a couple of days.

That’s because Trump has pulled back his threat of tariffs against Mexico and Canada after negotiations swiftly advanced and Mexico and Canada both agreed to station 10,000 soldiers each on the border to actively target the flow of fentanyl, illegal immigrants and other goods across the border.

Once again Trump has proven that the previous administration and the vast majority of western nations in general allow our countries to fall into despair purely out of weakness.

Biden’s (or rather Kamala’s) reluctance to place any pressure on other countries when they’re acting to the detriment of America has once again been exposed as nothing short of a lack of back-bone.

Tariffs on China, the EU and Canada

We’re yet to see fully what the result of Trump’s strong-arm tactics will be regarding his other targets, but so far Trump has had 2 swings and 2 home runs.

Thankfully, and purely out of self-interest Trump has indicated the UK may well escape all threats of tariffs as we aren’t a part of the EU, and we aren’t importing fentanyl or illegal migrants into the US.

From my point of view? I can breath a sign of relief. The business I’ve dedicated the last 4 years of my life to growing Stoic Growth is essentially an exporter of services to the United States.

I work with experts and online coaches to help them build 6-figure education businesses, and I work with a large amount of Americans directly.

If you’re interested in building or growing an online education business? If you feel you have information, knowledge or expertise to share? Or if you’ve simply spent a large amount of time and effort on a particular industry or hobby throughout your life and you’d like to generate an online income?

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Stay stoic,

Max