Wolf Money(portfolio update end April 2025)part 1
The return of Tariffs, Trade Wars and The Misguided Trumpism
Under the backdrop of the US-China trade war. The stock market might have difficulty making headway. The rise in 10-year bond yields is uncomfortably high, given the US government has a lot of debts to roll over in 2025/26. Some experts put it at 9T for the next two years. Comparing to the 2.7% average interest cost previously. The high 10-year rates will cost refinancing to be much more expensive. Again I cited some experts giving a figure of around USD 330b more in interest cost for every 1 percent increase in interest rate. If the US government refinances those debts at a much higher rate, the economy will suffer greatly. What the government pays on their interests will deprive money that could be spent on juicing up their economy. The implications on debts-laden balance sheet of US companies will be devastating too. It is a phenomenon that some US companies like Berkshire Hathaway will have borrowing costs lower than the US government due to its AAA-rated profile.
How will ASEAN economies react to the Trump trade wars? I suspect Trump realised the US can’t fight a trade war with China alone. The US has to gather as many friends and ex-foes to take the fight to China. ASEAN countries will be “forced” to accept an agreement with the US which involves doing less trade with China and perhaps to also increase their purchase of US debts at a “special” discount rate in order to pursuit any business relationship with them. One of the scenarios is for the US to issue special 100-year bonds at a low 1% for the coalition of willing to buy and fund Uncle Sam for his spending. How does it sound with your second or your third biggest customer telling you to stop doing business with your top customers? Most Asia countries have China as their top trading partners.
Some ASEAN economies relying on US multinational companies will have no choice, but to accept the unfairness. It forces ASEAN countries to choose sides. Brunei, Myanmar and Cambodia are likely less affected by the trade wars, given their economy is less dependent on the US.
All is not doom and gloom for ASEAN, given goods manufactured in China have become a sensitive political issue. I can see more US MNC setting up low-end manufacturing in this part of the world due to the cost advantage. I don’t believe Nike will uproot their production in Vietnam just to placate Trump. There are simply no alternatives to Vietnam. The country accounts for 50% of Nike’s production.
China will also double down their investment in ASEAN due to factors which I mentioned earlier. I am predicting ASEAN and India to be the biggest winners of the trade war.
Finally, anyone cheer leading for China to win the trade war should rethink their stance. America downfall is not what the world wants to see. It is always true, a falling power is more destructive than a rising one. For those China hawks, be careful of what you wish for. A failure of America to manage the relationship with China will cause a war. In my opinion, a negotiated deal should be in 49.9% vs 50.1% in favour of the America. It might not make good reading for my followers who are pro-China. In all fairness, China progress over the last few decades, in no small part, has America’s investment to thank for. China breakneck speed growth wouldn’t be possible without the help from American companies pouring money into China to build up manufacturing facilities. It is right for China to show mercy to its current adversary who is also an ex-teacher in world trade.
I gave the current trade war a simple analogy as some kids trying to tip toes each other to gain an inch over the other. In the end, both get sore toes. Both economies will get affected with many citizens from both countries devastated by the economic hardship. Is the game worth playing at all?
A negotiated deal should be one that makes sense to both parties, feeling they had taken something out of the deal. I will end my comments with a quote from Confucius: “He who seeks revenge, digs two graves”. A fall of America or China is not an ideal situation for the world.
Please consider following us on telegram for the latest update on Lone Wolf investor by clicking on the link below. No form filling, no payment required, no collection of data, no data mining, no hard selling, no obligation.
https://t.me/joinchat/oCgkD3sQFRMzMWM1
Disclaimers
All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for education only. Buyer beware,do you own due diligence
Comments
Post a Comment