The Trade War Is About To Become An Economic World War III
From Brandon Smith
For many years I have examined how wars of all types have been used by the money elite to distract the masses and maintain a certain level of influence over social and political systems. But war is not only a useful tool for keeping the status quo. Some wars, particularly world wars, are often catalyzed and exploited by those with a globalized agenda as a way to change the way civilizations function and think. The goal? To influence the masses to abandon their attachments to concepts like individualism, nationalism, free markets and sovereignty, and to embrace collectivism and total globalization.
That is to say, the ideals that globalization idealist hate get blamed for the wars they help start, then they introduce their centralized systems as a “solution” to the problems they created. The trade war situation will be no different.
The public enthusiasm for the trade war by elites within the Trump Administration cabinet, including Rothschild banking agent Wilber Ross, Council On Foreign Relations member Robert E. Lighthizer, Goldman Sachs member Steve Mnuchin, and Bilderberg attendee Mike Pompeo showcases a desire based on globalization to perpetuate an escalation in tensions.
Whether or not you agree with the rationalizations behind the trade war, the point is, the only people who will ultimately benefit from it are those striving for globalization.
To institute centralization on a global scale, the elites need an all-encompassing crisis that can be blamed on nationalism, protectionism, and the free market dynamic. They need a threat that will affect and terrify billions of people into demanding intervention by international organizations such as the IMF and the BIS, as well as a rationale to introduce monetary umbrella actions such as the induction of the SDR (Special Drawing Rights) basket system as a replacement for the U.S. dollar as the world reserve currency. They need something very similar to a world war. In this case, however, it will be more economic than kinetic.
An economic world war has the distinct potential to cause all the elements of a collapse situation without the damage to vital infrastructure that inevitably comes with a shooting war. Because of the advantages the strategy provides for globalization idealist, I predicted this exact outcome would develop out of the trade war in my article ‘World War III Will Be An Economic War’, published in April 2018. Here are the trade war developments so far that support this theory…
Collapse Of Trade Talks: Recent plans for high level trade talks between the U.S. and China have fallen apart (likely by design), and so far there are no announced plans to reengage negotiations. So, all the assumptions in investment circles the last few months that a trade deal would be quickly finalized and vault the Dow Jones to 30,000 points were obviously a result of wishful thinking in unicorn land.
Abrupt Spike In China Tariffs: The Trump Administration announcement of a sudden and swift increase in tariffs was not all that surprising to me, but it sure seemed to shock the mainstream economic world. Probably because of the endless talk since January of an imminent deal being brokered. The word on one side was that China would fold because they “can’t survive” without exports to U.S. markets. Of course, the U.S. only accounts for 18% of Chinese exports, which is a sizable piece of the pie, but hardly a crippling blow to China should the trade war continue for the long term.
The word on the other side was that Trump would fold because he had attached the success of his administration to the success of the stock market, and a prolonged trade war would invariably crash stocks. This is partially true – Trump rightly insisted during his presidential campaign that the Federal Reserve had used quantitative easing (QE) measures to artificially inflate the stock market bubble for the past several years; then, after entering the White House, he pulled a 180 and began Tweeting relentlessly about how stock market highs were due to his administration, not the Fed. Now, this might seem like insanity until you look at those residing in Trump’s cabinet who appear to have a globalized agenda, and then everything starts to make sense.
China’s Retaliation: China has raised its tariffs on U.S. exports to 25% and has all but ended its purchases of U.S. agricultural goods, which is devastating profit margins for American farmers right after massive flooding in the Midwest had already hurt planting prospects. However, China has not yet released a full statement on how it intends to retaliate. Options on the table include banning exports of rare earth metals to the U.S., targeting U.S. companies like Google, Qualcomm or Apple with restrictions or bans of their operation in China altogether as the U.S. has done with Huawei, dump their extensive holdings of U.S. treasuries, or the most damaging tactic of all – drop the U.S. dollar as the world reserve currency for purchases of Chinese goods, a prospect I will examine shortly.
Surprise Tariffs On Mexico: Another surprise out of left field as Trump targeted Mexico with 5% tariffs starting next week, rising to 25% in the next few months if Mexico does not stem the flow of illegal immigrants into the U.S. This announcement essentially erases the “North American Trade Deal” set to be finalized this month if the situation is not resolved. As we witnessed with the China trade talks, any discussion of a “deal” being made should be taken with a grain of salt.
Mexico is the largest U.S. trading partner under China and Canada, and the third biggest buyer of U.S. goods. A trade war with Mexico should be taken as seriously as the trade war with China.
Tariffs Against India: The U.S. is ending preferential trade status with India as part of the tariff salvo, which effectively places tariffs on over 3,000 different export items once considered duty free. India is now considering possible retaliatory measures, and has been edging towards closer economic ties with China for a few years. This move may push them all the way into China’s camp. As a side note, India and China together make up around one third of the world population.
Tariffs Against Australia: A key ally in the Pacific region, Australia was given exemption from tariffs on steel and aluminum exports to the US. However, the Trump Administration is considering removing that exemption which would mean 10% tariffs on Australia’s aluminum and 25% tariffs on its steel. Australia only makes up around 6% of the U.S. aluminum market, but the tariffs could be treated as an attack against a long time partner and opposed as a matter of principle.
Trump Offers UK A Deal If They Brexit: I predicted the outcome of the Brexit vote back in 2016 based on a theory – that those who desired globalization were pulling back on real interference (as opposed to theatrical interference) and were allowing “populist movements” to gain an apparent foothold in the political arena. Why? So that they could then collapse the “Everything Bubble” the central banks had created on the heads of those same movements and blame them for the disaster.
I also predicted based on the same theory that the Brexit would eventually result in a “no deal” scenario, otherwise known as a hard Brexit, in which the UK would leave the EU without a finalized agreement on future trade. So far the theory is holding strong, with Trump in the UK this week seeking a U.S./UK trade deal if the UK walks away from the EU. This places the two biggest “populist” movements in the world in direct alliance, and should they both fall together economically, the history books will surely blame their trade protectionism and “overt” nationalism rather than the central banks that caused the financial instability in the first place.
Potential Tariffs On EU Auto Industry: This event has been hanging over markets like a dark cloud for months, and with the latest accelerated tariff moves in May, the expectation in June is that Trump will pull the trigger on EU auto exports. Trump’s recent courting of the UK as an extended trading partner is also signaling a coming trade war with the EU. For now, such actions remain uncertain, but the timing for those with a globalization agenda would be perfect if the EU was to enter conflict with the U.S.
The Outcome Of Trade Escalation Will Be World Economic War
If the U.S. was negotiating from a position of economic strength, then tariffs might make perfect sense. But, as most alternative economists are well aware of, U.S. economic strength is nothing more than a facade hanging by a thin thread.
The U.S. needs an extensive manufacturing base that can supply goods as well as jobs directly to the American people in order to properly conduct a trade war. We are far too dependent on foreign imports. However, corporations outsourcing overseas have been given no incentive to bring these jobs and factories back. If Trump had offered corporate tax cuts in exchange for companies moving manufacturing to U.S. shores, this might have secured America’s position in terms of tariffs, but the trade war is being conducted in a backwards manner.
We often hear that the U.S. consumer is the greatest economic resource we have and the thing that makes U.S. markets so enticing to foreign export nations. It is the reason we were told a year ago that China would fold to U.S. demands, which, of course, did not happen. The fact is, the U.S. consumer market is a fraud. The real resource that drives our retail sector is debt; massive debt.
U.S. household debt is at all-time highs, and a quarter of Americans rely on credit cards for purchases of necessities. A large portion of U.S. retail relies on debt expansion, not true wealth, and once debt grows beyond the consumers’ ability to keep up, retail starts to decline.
This is probably why, despite increased credit spending, overall retail sales in the U.S. are dwindling in 2019. If U.S. consumers aren’t buying more goods with more credit, then where are they spending the money? The likely answer is they are taking on new debt to pay off old debts. This credit death cycle is exactly what happened just before the crash of 2008 and it is happening again today.
If the U.S. consumer market is breaking down, then there is no incentive for foreign exporters to capitulate to U.S. trade demands.
This means that the trade war will continue unabated. Possible deals will be announced to keep the public absorbed in the chaos and to keep stock markets from falling too quickly. However, as we saw with China, a trade deal announced almost every month for a year does not ensure that a trade deal will be made real. As this situation drags on into winter I expect that the U.S./China conflict will mutate into a global conflict. Meaning, countries are going to start taking sides.
Already, the U.S. is drawing battle lines by seeking trade war alliances with Japan and South Korea. Whether or not this bears fruit is yet to be determined. Japan’s long time blood feud with China almost guarantees they will side with the U.S. in an economic war, but China is one of their largest export markets, and the conflict would hurt them badly. South Korea’s dependence on U.S. protection against North Korea also makes their participation a good bet. But most other nations have been drifting away from the U.S. for some time.
Russia and China have already secured a pact through bilateral trade agreements. Parts of Europe including Germany have been building close economic ties with China for the past decade. I wrote about this relationship extensively in 2017 and predicted that in the event of a global economic crisis, Germany and China would form an alliance.
Most of southern Asia will undoubtedly side with China as these nations are so interdependent with the Chinese economy it would be unthinkable to separate. Australia is also heavily reliant on China as an export market, and with U.S. tariffs poisoning the well, I believe the Australians are much more likely to side with China than the U.S. in a trade war. India is uncertain, but again, with the threat of U.S. tariffs along with the factor of border proximity, India is probably going to join with the Chinese.
The nuclear option, the weapon that will inevitably end the trade war and the U.S. economy, is the abandonment of the U.S. dollar by multiple nations as the world reserve currency. The loss of reserve status would crush our ability to create debt without consequences. This is the one pillar left holding up U.S. economic power, and make no mistake, globalization idealist are perfectly positioned to benefit from this event. The introduction of a new global currency system tied to the IMF Special Drawing Rights (SDR) basket has been hinted at time and again by various elites, including most recently Mohamed El-Erian in 2017, who suggested the SDR could be used as a reserve currency system to “combat the dangers of populist nationalism.”
The IMF has also been very vocal about its excitement over blockchain and cryptocurrency technology, which they hope to use to create their own digital currency system in the near future. A global trade war is a dream scenario for those who want globalization, who can now institute unprecedented centralization as a “solution” while blaming all the negative consequences on war, chance events and populist zealotry.
Brandon Smith has been an alternative economic and geopolitical analyst since 2006 and is the founder of Alt-Market.com.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Birch Gold Group.brandon smith, china, Featured, india, tariffs, trade war, united kingdom, us economy