On "What's Moving Your Money with Spencer Hakimian," Spencer explained why he thinks that China holds all the cards in the U.S.-China trade war.
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00:00It has never been more clear than today that China holds all the cards in the trade war with the United States.
00:10And if you don't believe me, just stick around for the next 7-8 minutes and I'll explain it in depth to you.
00:21Hey everybody, I'm Spencer Akeemian and welcome back to another episode of What's Moving Your Money on Forbes.
00:27And on today's episode, we're going to in depth cover the leverage that China now clearly holds over the United States in this trade war that does not appear to be going away anytime soon.
00:40And the demands that China may eventually make to the United States in order to take its pressure off the American economy, particularly on American soybean farmers.
00:53So stay right ahead. Thank you.
00:55We are now in a situation here in the United States where we have a crisis in the Midwest on farms all across this country.
01:04Soybean farms, corn farms, wheat farms, many other different types of farms here in the United States are having their worst harvests in 50 plus years.
01:16I'm not exaggerating. This is worse than COVID. This is worse than droughts we've had.
01:21This is as bad of a crisis that the Midwestern states, the farm states have faced really in almost American history.
01:30It's unprecedented. Think about what happened.
01:32China is the number one buyer of farming exports from the United States.
01:37And they have decided to boycott the United States, all of these products.
01:43They have not bought a single soybean from the United States this entire harvest season.
01:49All of that income that farmers were getting is now being lost.
01:54And guess what? Soybeans is not like a pair of jeans.
01:58You cannot warehouse it.
01:59It will go rotten.
02:01You will lose the money.
02:02It's a perishable, expiring product.
02:05That is really why this situation is so drastic and severe and honestly why we don't have much of an answer here.
02:13Yes, we can bail out our farmers, but to what avail?
02:16Are we going to do that every single year because we lost our biggest market?
02:20Is that capitalism?
02:22Is that the United States that we want to live in and represent?
02:26That we have to bail out our own farmers?
02:28That we're doing perfectly fine prior.
02:31It was not like this is a man-made crisis.
02:34Keep in mind, this didn't arise out of nowhere.
02:36This arose out of poor policymaking in the United States.
02:40And we have to consider that, yes, we can bail them out indefinitely, but to what end?
02:46Inflation, moral hazard, permanent bailouts of corporations, you name it.
02:50Is this what we want to do?
02:52Or do we want to come to the table with China and make some sort of deal
02:56so we can go back to some semblance of normality like we had just a year ago
03:01and get back to doing trading and business?
03:03Now, there's one point that I believe China may bring up in the coming months
03:10as America inevitably goes to the negotiation table.
03:14You've already seen Trump soften his stance quite a lot on the Chinese.
03:18He already said tariffs at these levels are not sustainable.
03:22He already said that he wants to meet with Xi in November.
03:26And he already backtracked on his escalation a few weeks ago.
03:30And he said, oh, don't worry about China.
03:32It's all going to be fine with China.
03:34I think what China will ask for from the United States is explicit recognition
03:40that China has sovereignty over Taiwan.
03:43They want the United States to explicitly say that the United States,
03:49and by proxy, therefore, the rest of the Western world,
03:52recognizes that Taiwan is the property of China.
03:57That is their crown jewel.
03:59That is what they've been working 100 years for.
04:02This is the ultimate goal of the Chinese Communist Party.
04:06And I believe they will use their leverage over the American soybean farmers
04:10in order to try and get that concession.
04:14Now, will the United States do it?
04:16I don't know.
04:17To be honest, my personal opinion is that Trump himself, he would say yes.
04:22But the diplomats and the career employees in Washington, they might not say yes.
04:28Because the United States, as a continuity, realizes how critical it is that Taiwan remains
04:35an independent country that is free of Chinese rule, not just for the semiconductors and for
04:42the chips, which is the obvious economic concern, but also to project freedom and democracy and
04:48Western values in an otherwise hostile region for American way of life in this world.
04:54So it is very interesting to see what will happen.
04:57In my opinion, it's inevitable that China is going to ask for it, whether they ask for it
05:01explicitly and publicly or whether they ask for it overtly and privately, I guess is yet
05:08to be seen.
05:09Nonetheless, it is definitely coming up in my opinion.
05:11Now, one final thing on the China topic is that China's economy is still growing at 5%.
05:18Keep in mind, yes, for all the troubles that China's economy is having as it relates to
05:24over indebtedness and its real estate bubble popping, which I've covered in extensive detail
05:29on this podcast many times before.
05:32China has an economy that is still growing at 5%.
05:34Sure, maybe it could be growing at 6% or 7%, but nonetheless, a 5% growing economy is not
05:40a disaster by any means.
05:42And on the other hand, you have the American economy, which in real terms, if you look at
05:47the consumption underlying trend of the American economy, and you take out all the mishmash from
05:52the tariffs, one month, one quarter is bad, one quarter is great because of import-export
05:57volatility, the American economy is bottom line growing at about 1% in real terms.
06:02So China has 400 basis points more of more growth to deal with in terms of leverage than
06:08the United States has.
06:09And you best believe they will use it to their advantage.
06:12So we have to be careful with China as we negotiate with them.
06:18China is not the European Union.
06:19China is not Japan, China is not Russia, China is not Ukraine, China isn't Israel or Gaza.
06:26China is an economic powerhouse that is growing and will very soon be the world's largest economy.
06:33In PPP terms, China already is the world's largest economy.
06:37But in outright dollar terms, it's only a short while away before China becomes the preeminent
06:43economic power of this world.
06:45And we have to be very careful as we negotiate it with them.
06:48By the way, same kind of thing you're seeing with India.
06:52Because India's growth rate is so high and so significant, Trump really isn't able to
06:56push them around.
06:57Have you noticed that?
06:58He can't bully them because they won't take it.
07:01They're growing so fast.
07:02You know, it's very easy to bully someone that's smaller than you.
07:05It's a lot harder to bully someone that's equal to you or even possibly better than you.
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