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If you only read the headlines, it’s easy to believe a trade war could be looming with China and Asia.
In fact, if you believe the rhetoric, you’d take a second look before investing a dime of your hard-earned money in anything related to the region.
But it’s just rhetoric – and misleading rhetoric to boot. Here’s what is really happening …
The Trans-Pacific Partnership (TPP) was set to be the largest regional trade accord in history.
The TPP would have set new terms for trade and business investment among the United States and 11 other Pacific Rim nations: A wide-ranging group with an annual gross domestic product of nearly $28 trillion, representing roughly 40 percent of global GDP and one-third of world trade.
President Trump didn’t like the deal and thinks a more U.S. friendly deal can be made. So his administration is pushing for bilateral trade agreements between these each of these nations in the future.
In other words, getting rid of TPP wasn’t the end of trade negotiations, it was the beginning. There’s going to be a ton of deals coming down the pike.
And a lot of trade talk in China and Asia is going to go that way: Rhetoric and Trump posturing to begin with, deal making in the end.
Then, there’s tax reform and the possibility of President Trump’s administration implementing a border-adjustment tax.
If passed, it could cause companies to pay 20% more for imports than for domestic goods. Meanwhile exporters would pay no income tax on revenue from goods they sell to foreign customers.
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At face value, a tax move like this could have China and Asian companies shaking in their boots. But there is still a lot to negotiate surrounding a border-adjustment tax, and too much is still up in the air. There will be winners and some losers, but it’s just too early to tell.
And finally, the political tension in the region – specifically surrounding the South China Sea – could be a hot bed of conflict in the years to come.
China continues to occupy the South China Sea region, and it’s acting very aggressive toward the region’s huge oil and gas reserves, not to mention its strategic shipping lanes.
This is definitely something to keep an eye on – as my war cycles are ramping higher – war in the region is always a possibility.
I’m not downplaying these factors – including trade, tax, and potential conflicts – but I’m not one bit worried about the long-term prospects for China and the rest of Asia.
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| The Asian economy continues to grow. |
The fact is the economies of China and the rest of Asia, particularly Southeast Asia are doing just fine. The major underlying factors – including an expanding population, rising incomes and dynamic monetary policy – are more bullish than ever.
And that’s going to keep the Chinese and Asian growth story alive. Consider …
To cope with the challenges of a growing population, infrastructure spending in the region is ramping up once again. About $5.3 trillion is expected to be invested into Asian infrastructure between 2015 and 2025.
In countries like Thailand, the Philippines, Indonesia, and Malaysia, plans for massive infrastructure projects are going to ramp up modernization efforts, improving everything from roads to telecommunication networks. In fact, in the Philippines, $160 billion is projected to be spent on building infrastructure over the next six years.
President Trump won’t implement trade policies that adversely impact the U.S economy. And a massive trade war would do just that – big time.
Asia is still the rising star in the global economy and it’s going to stay that way for years to come.
That’s exactly why I am looking to gain more exposure in the region. But I still don’t recommend going all in – not just yet.
It’s tricky: You have to know when to get in and when to get out. And that’s just the kind of advice I give the members of my services, Real Wealth Report and Supercyle Trader.
Best,
Larry
P.S. Trump’s Worst Nightmare: Why cutting taxes, eliminating regulations and fighting for U.S. jobs won’t be nearly enough to save us from the next great crash. Read more here …
Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader.
Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.
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Hi Larry,
Russia and China are much more interested in their military superiority than in their economies. Their economies are just a lucrative way to finance military expenditures.
As their military might progresses they will become much more demanding and aggressive. They both have delusions of world dominance.
After the coming depression, we are looking at a future three-pole global scenario – each with their own spheres of influence. For the USA it will be North and South America. For Russia it will be Europe and the Muslim Middle East. For China it will be east Asia, including India. Africa will be up for grabs for anyone wanting it. The poles will not really do much trading in total with each other, but Russia and China will be colluding together to nullify the USA. Politics and geopolitics do make for strange bedfellows.
Expect Japan to join China’s “co-prosperity” sphere, the one that Japan tried to create but failed. In fact, China may be called the new and improved Japan of 80+ years ago.
Cordially,
Kenneth Heck
I mostly agree, there are many forces trying to quickly position themselves in the Trump administration. We clearly see he did not drain the swamp. Trade agreements that supersede Federal, State and Local authority are not in America’s best interest. (Read 23 Things They Don;t Tell You About Capitalism). The Globalists already control most of the wealth and it seems inevitable they will win out, at least for awhile. Trump appeared to be pushing back and putting the USA first, time will tell. It seems obvious that foreign policy is not going Trump’s way especially with all the false rhetoric about Russia. I find it ironic there are so many protests about extreme vetting from those countries Obama named as terrorist inhabited, but virtually No Protests about the US bombing those same countries which obviously produces refugees. Finally we know the FED has pushed the can down the road, creating even bigger bubbles, the BiG 6 Banks are bigger and have more derivative exposure than they did in 2008. I sometimes feel like we are on a runaway train.
uh, Larry, any idea when we should actually “back up the truck?”
we’ve been waiting a long, long time . . .
Trump had better do something about taxes and regulation in this country. Personal bankruptcies were up 4.5% in 2015 and 5.4% in 2016. Business bankruptcies were up 26% last year. Much of that was due to low interest rates which promote unwise borrowing, of course.
Larry,
You send mixed signals. You have been saying WAR, WAR is on the horizon…….now you say blue skies and sunshine for the Asian countries….confused??
Trump’s import trade tax plan only levels the playing field from Odumbo’s TTP to screw Americans even more!!
You may have noticed that the Anti-Trump Billionaires got FILTY STINKEN rich from moving US jobs to Asia’s cheap SLAVE labor and Odumbo got paid well to screw Americans.
So, what’s Odumbo doing now?? Yesterdays news says he is organizing nationwide GANGS of RIOTERS to disrupt anything Trump says or does to destroy the Republican Party so his EVIL COMMUNIST DEMOCRATIC PARTY will rule for over 100 years!!!
Sorry, but this is TRUE info.
Yea but surely America is the opposite of most other countries in the world. Its a large closed economy whereas all the other countries around the world are small open economies. Could this lead to the dollarization of the world economy and possibly even a gold tranche? Could we see a return to a gold bullion standard? Who’s gonna pay for all the electricity? Especially Football that’s being televised by satellites way above planet earth?
Dow now at 20,600. Last year at this time it was 30% lower with downside risk to 13,700 I believe you stated. The AI models are not working as you suggested for a correction. We missed a big move up. I personally invest in the etf DIA. Please discuss.
bull markets are “born on pessimism, grow on skepticism, mature on optimism, die on euphoria.†–sir john templeton. i’d say we’ve exited the skepticism phase and are entering the optimism phase. the euphoria phase looks to be down the road at least a couple years.