La GUERRA COMERCIAL explicada en 15 minutos | ¿Puede provocar una CRISIS?

What is a Trade War?

Overview of the Trade War

• The trade war has erupted, causing widespread fear due to potential repercussions. Tariffs have become a common topic, with no country seemingly safe from U.S. tariffs under President Trump.

• A trade war occurs when two countries impose tariffs and other trade barriers on each other's products to protect their domestic industries or harm their rival's industry.

Pros and Cons of Tariffs

• Tariffs can be beneficial as they protect local industries from foreign competition, especially for developing industries not ready for global market competition.

• They generate revenue for governments, which can fund public services like education and infrastructure.

• However, tariffs can increase prices for consumers on imported goods, leading to higher costs (e.g., electronics).

• Retaliation from affected countries can escalate into a full-blown trade war, negatively impacting exports and businesses reliant on international trade.

• Economic inefficiencies may arise as protected domestic industries lack incentives to innovate or improve quality.

The Rise of the Trade War: Trump's Presidency

Shift in Focus Towards China

• The intensification of the trade war began during Donald Trump's presidency in 2018 when he identified China as America's main geopolitical rival.

• The U.S. had a significant trade deficit with China; it was importing far more than it exported due to China's competitive pricing and manufacturing practices.

Factors Behind the Trade Deficit

• Chinese companies faced fewer environmental regulations and lower labor costs compared to U.S. firms, allowing them to sell cheaper products in America.

• Allegations arose that China engaged in unfair practices such as intellectual property theft and currency manipulation, making imports more attractive than domestic products.

Escalation of Tariffs and Consequences

Imposition of Tariffs

• Trump announced substantial tariffs on hundreds of billions worth of Chinese goods across various sectors including technology and clothing.

• In retaliation, China imposed its own tariffs on American products, escalating tensions between the two nations.

Impact on Global Markets

• As tensions rose, global markets reacted with uncertainty; companies sought alternative supply chains outside the U.S.-China dynamic (e.g., relocating production to Thailand or Vietnam).

Negotiations and Outcomes

Attempts at Resolution

• Multiple rounds of negotiations occurred but yielded slow progress due to conflicting demands from both sides; neither was willing to make significant concessions.

Assessment of Winners and Losers

Impact of the Trade War on China and the U.S. Economy

Economic Consequences of the Trade War

• An estimated 5% of the Chinese population lost jobs or faced salary reductions due to the trade war, significantly impacting their economy.

• U.S. agricultural exports to China saw a substantial decline, prompting government intervention to support affected sectors, including liquefied natural gas exports.

Biden's Administration and Escalation of Tariffs

• Upon taking office, President Joe Biden increased tariffs on certain Chinese products, marking the beginning of a second phase in the trade war. This led to renewed challenges for various American industries.

• The geopolitical landscape shifted as China emerged as a formidable rival, compelling the U.S. to reconsider its economic strategies post-COVID-19 pandemic.

Reindustrialization Efforts in the U.S.

• The fragility of global supply chains highlighted by COVID-19 prompted the U.S. to initiate reindustrialization efforts aimed at producing strategic components domestically or with allied nations instead of relying on China.

• China's manufacturing capabilities evolved beyond low-cost goods; it began producing high-tech products that competed directly with leading European industries.

Semiconductor Restrictions and China's Economic Strategy

• In response to China's advancements, Biden imposed restrictions on semiconductor exports and collaborated with Japan and the Netherlands to limit China's access to essential manufacturing equipment for microchips.

• Despite these restrictions, China was actively investing in its economy through construction projects but faced risks from an emerging economic bubble linked to excessive investment in real estate.

Transitioning Towards Renewable Energy

• Recognizing its lack of oil and gas resources, China focused on renewable energy as a cornerstone for future economic growth, subsidizing domestic manufacturers in solar panels and electric vehicle batteries among other sectors.

• By flooding international markets with competitively priced products backed by government funding, Chinese companies gained significant market share over Western competitors in key industries like electric vehicles and solar technology.

New Tariff Strategies Under Trump’s Second Term

• As Trump returned to presidency in early 2024, he escalated tariff measures not only against China but also globally as part of his negotiation strategy aimed at securing favorable trade agreements for the U.S., leveraging tariffs as pressure tools against dependent economies like Mexico and Canada.

Trade Tactics and Economic Implications

U.S. Tariffs and Trade Strategy

• The U.S. tariffs aimed to pressure Canada into accepting changes in energy and agricultural trade, highlighting a strategic approach rather than mere economic policy.

• Trump's threat of a 30% tariff on European cars, particularly from Germany and France, was intended to compel the EU to lower agricultural tariffs and increase imports of U.S. liquefied natural gas.

• Although not yet implemented, the EU's willingness to negotiate on gas purchases suggests that Trump's tariff threats may be effective in achieving his trade objectives.

Linking Trade Policy with Defense Spending

• Trump linked trade policies with defense spending by threatening tariffs on Japanese and South Korean goods unless they increased military expenditures for U.S. protection.

• Following these threats, Japan committed to increasing its defense budget while South Korea signed a more favorable agricultural trade agreement with the U.S.

Consequences of Tariff Policies

• Experts warn that ongoing tariff strategies could lead trading partners to seek independence from U.S. markets, potentially destabilizing international relations.

• The EU is diversifying its gas suppliers amid rising tensions, indicating a shift away from reliance on American energy sources.

Economic Impact of Tariffs

• Analysts predict significant economic repercussions for the U.S., including potential inflation due to increased production costs in key industries like automotive and construction.

• Tariffs could raise vehicle prices by up to $3,500 and housing costs due to higher lumber prices from Canada, exacerbating affordability issues for American households.

Investment Opportunities Amidst Trade Wars

• Despite claims that tariffs will strengthen the economy, they are likely to result in prolonged high-interest rates due to inflationary pressures affecting the dollar's value.

• Investors are encouraged to consider companies poised for growth under current conditions; platforms like Freedon 24 offer accessible investment opportunities.

Beneficial Sectors Under Current Policies

• Companies providing machinery for domestic manufacturing (e.g., Caterpillar, Rockwell Automation) may thrive as production shifts back within the U.S.

• Firms involved in rare earth materials extraction (like MP Materials), crucial for technology manufacturing, stand to benefit if China restricts exports amidst trade tensions.

Agricultural Sector Gains

• Restrictions on Chinese agricultural products could favor American agro-industrial firms such as Archer Daniels Midland Company as they adapt to changing market dynamics.

Renewable Energy Sector Growth

• Companies focused on renewable energy technologies (e.g., solar panels and batteries), such as F Solar or Canadian Solar, may see increased demand driven by government incentives aimed at reducing dependency on Chinese imports.