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@StephenSpratt

@StephenSpratt

@StephenSpratt

@StephenSpratt

@StephenSpratt

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Trinh

@Trinhnomics

Mar 6

Hello, I want to point one thing out. Vietnam is not just a rerouting place for China. How do we know that? Because Vietnam's biggest exports are not even Chinese investment - it's South Korean, yes Samsung Electronics.

People don't just invest in Vietnam because China is targeted. The shift happened before Trump trade war. See Samsung Electronics.

They do it because Vietnam WANTS that investment. It wants manufacturing. It puts it as a priority above all else.

And because Vietnam's cheap. It got cheap labor. It got supportive policy, both hard and soft infra.

Example, Samsung Electronics started moving out of China into Vietnam way before Trump trade war of 2018.

Why did they move to Vietnam? Well, the Vietnamese wanted it & provided tons of incentives.

And why did the Koreans move there? China was GETTING EXPENSIVE. And the Chinese are starting to compete with them.

And then there's the geopolitical issue between China and South Korea.

So South Korea started to move to Vietnam and once that became a success, it INCREASED INVESTMENT and then other South Korean firms came.

As the Koreans came, other firms followed, not just to export but if you go to Vietnam today, there are a lot of Korean brands/companies to target Vietnam domestic demand.

Same with the Japanese. Similar story. And it's not just to EXPORT and tapping into Vietnamese cheapness (this is not just labor but also ELECTRICITY & other inputs), but also to tape into Vietnam domestic demand.

A lot of Japanese brands in Vietnam, from supermarkets to malls etc.

Read 7 tweets

Trinh

@Trinhnomics

Mar 6

Trump is exempting autos from Canada and Mexico 25% and my guess is more exemption is coming (energy is an easy one I guess even with 10% it seems ill-advised).

There is a ceiling to Trump tariffs and that's economic reality of higher prices (domestic production can't suddenly increase at the same pace as tariffs). If he paces his tariffs, targeting only certain sectors/country, then he can mitigate inflation fallout and shift supply chains. If too fast and furious, it leads to demand destruction.

And so here we are. He is backtracking but w/ looming threats of auto and reciprocal for 2 April. But markets sense that something has got to give.

And so US growth slowdown in the short-term as imports blow up with front-loading (even gold is getting front-loaded), and any surge of industrial production will take time, esp with capex intensive sectors like auto.

This leads to rate cut odds & stagflation risks. And so the dollar falls.

But it's falling from great heights so definitely due Trump tariffs or not.

Meanwhile, Trump Ukraine strategy, which is a US retreat from the Euro security scene, is making Europe Great Again, well at least for now DEFENSE.

The Germans are spending an exceptional EUR500bn & changing the constitution & everyone else is using this as a source of growth.

Short welfare, long industrials, especially defense. Yields rising as growth hopes rise! The FISCAL BOMB. Yes, it's happening and shall I say I say I saw this coming (said this to clients in Milan at a seminar).

And the winner of all of this? Yes, Poland!!! EPOL is off the chart! My children are Polish (a quarter & citizen of as well as the US) so I am happy about it.

Read 4 tweets

Trinh

@Trinhnomics

Feb 27

Okay, I'm going to talk about what Trump has done & what I think he will do & then I'll talk about Vietnam. It's a long-winded way to get to that answer but necessary.

To understand what he will do, we must know his end game. Some people say, "Well, dude doesn't know himself. Look at his rambling."

Let's take a look.

Trump has been President for a month and 1 week. So far, in chronological order, what he has done:

4 February, slapped an additional 10% tariffs on China. This time, this is the first time that it includes Hong Kong. So while the amount is smaller than 60% mentioned, it widens in territory. This hasn't been rescinded and is ON. This covers roughly 14% of total US imports.

26 Jan he threatened Columbia 25% tariffs, mostly because they didn't want to take his deportees (remember he wanted to deport but to do that need origin countries to accept) - that was then solved immediately.

At the same time (Feb), threatened Canada & Mexico w/ 25% tariffs, also basically want them to take deportees and hold the borders so to speak, and that is delayed until 4th March but last night he rambled something like April. Irrespective, this is not yet implemented.

So basically, by the end of Feb, we only have tariffs on China (+HK) that is higher by 10%, effective 4th Feb.

Now, he has threatened to do more on China. What has he done? Well, this time, targeting its DOMINANCE in strategic sectors like shipbuilding & steel & aluminum.

Lets first talk about steel & aluminum before we go into shipbuilding.

As you know, this is not a new tariff. In fact, this is is a continuation of Trump 1.0 in 2018.

Read 11 tweets

Trinh

@Trinhnomics

Feb 26

Good morning,

Everyone wants me to have an opinion on that FT article why Vietnam is going to be targeted by Trump just because China has invested in Vietnam. First, before we talk about the article I want to talk about what I think Trump would do.

And no, he's not going just put tariffs on everyone. Why? Let's talk about the US.

1st, everyone cares about what the US does because it is the largest importer of goods or 4.1trn of it.

So what it does regarding domestic policy or trade policy (import tariffs are basically tax on importers so one can argue that it is a measure to help domestic sectors or if it doesn't help w/ domestic production then it will raise costs). Either way, the tariffs themselves just add to costs of goods imported so that should theoretically help relative costs of domestic vs foreign.

Now before you say, okay, well then. Voila, no more imports if we just erect a wall of tariffs.

But no, the US has one of the most expensive labor market. Not only that, environmental laws. Yes, if you think the news says China is green just because it makes a lot of EV, then I got something to tell you. The US, especially certain states like California, got a lot of regulations that make it very expensive to produce.

Input costs like labor, land & regulations are key.

Electricity is not that expensive in the US and cheaper than Europe but frankly the US is not a cheapo place. It's an expensive place to produce something.

Read 9 tweets

Trinh

@Trinhnomics

Feb 10

I'm listening to Jonas Kaufmann thinking about tariffs and Asia. His voice is beautiful (we got tickets to see him 22 Feb - highly recommended). I'll do thread later on regarding tariffs etc but my bandwidth is limited lately given the admins.

Remember that US tariffs only matter for the 4.1trn that it imported from the world in 2024 - making it the biggest importer in the world or #1 customer.

Despite higher tariffs, the US has one of the lowest trade-weighted average tariffs in the world. What does that mean? If Trump wants & gets reciprocal tariffs, others will have to fall to US levels or the wall of protectionism rises to reciprocate others' wall of protectionism.

An example is the EU 10% tariff on auto for the US while the US has 2.5% on the EU auto.

So either the EU drops tariffs to 2.5% or the US can raise to 10% or pick at other items.

Meaning, it's the EU choice & rightly so to have 10% on the US, just like it's the US choice to do whatever it wants with goods coming from the EU.

The issue here of course is that the US is the largest importer of goods globally. There lies the headlines.

If you import almost nothing from the world and u raise tariffs, no one actually says you are protectionist because they gain nothing and lose nothing.

Who is good at dealing w/ the US? Look to Japan. They are the pros. They have an FTA & has been deploying tons of FDI to the US. Hence I think Japan will be unscathed.

Are tariffs the only trade barriers you can pose? Absolutely not. Non-tariff barriers are also huge barriers to global trade.

Anyway, talk soon! Don't get depressed by the headlines - they tend to make you think something is bigger than it is.

The news' job is to shock and awe. The reality is global markets are taking everything w/ stride because, well, much worse news was priced in.

And btw, Trump has higher approval ratings than his first term for the same honeymoon phase.

What does that tell you? Well, he's gonna keep going.

cbsnews.com/news/trump-app…

Read 8 tweets

Trinh

@Trinhnomics

Jan 22

President Trump was inaugurated and the big question is to whom tariffs will be applied, not whether. Markets priced 8-9% tariffs on world before inauguration & so the dollar softened as he did not do this on Day 1.

But rest assure, it's coming. Let's talk about consequences through answering 3 key questions.

Ready?

https://x.com/Trinhnomics/status/1859475504132390955

First, I talked about tariffs here on this thread if you didn't read before () & this is a follow-up.

Question #1: Who is most vulnerable to Trump 10% tariff to the world in Asia?

https://x.com/Trinhnomics/status/1859475504132390955

First, I want to talk about a few ideas that was talked about in the previous thread on impact of tariffs.

One is of course tariff level. He says 10% higher so that's our assumption here. Second, elasticity of demand assumption, which I took as 4, which is basically from the literature and also from the Fed paper.

Anyway, to think about impact on GDP, you have to think how big of a trader they are anyway in terms of exports to the US.

Chart 3 shows you that exports to the US is the highest for Vietnam & lowest for Australia, Indonesia and India.

Chart 2 shows you that what is the manufacturing share of GDP an the highest is Taiwan, China, Thailand, Vietnam & Malaysia. Lowest is Australia and India.

Okay, let's talk about what that means.

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