Tariffs Are Affecting the CCP’s Ability to Rule
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Let's talk about how these tariffs are affecting China and in particular the CCP and its ability to rule. Are they having more of an impact than the first trade war? You know, I think it's even before, even, you know, yesterday morning, I was getting text messages from a couple of people of how Chinese traders were already setting up processes to get around this.

And I'll give you just one example. Basically, what was told to me was there was basically brokers in China that were setting up what they would call asset swaps and export swaps. And I'll try and describe it so everyone can understand. So basically, what you would have is...

You would have a US exporter that wants to export something to China of, say, $1 million. The value is $1 million. And you have a Chinese exporter that wants to export something to the United States for $1 million. So what do you do?

Each side exports. So each exporter, first of all, they don't export to their customer. They export to the other side's exporter. So the Chinese exporter exports to the U.S. exporter and the U.S. exporter exports to the Chinese exporter. But they export for officially something like $100,000. So instead of a million dollars worth of goods, each side exports to the other exporter $100,000.

They pay $100,000 in tariffs. Those exporters now then have-- so the Chinese exporter has the UX exported product, and they're $200,000 in. They then sell it to the end Chinese customer for probably like $900,000.

Okay. So that the end customer only sees something like a 10% price increase rather than a doubling of prices. Okay. Does that make sense? So like the total cost is now 1.1 million. So the total cost is now something like 1.1 million. Exactly.

It doesn't go to the end customer. It goes to an exporter in the other country, and that exporter sells it on to-- the tariff price goes from, let's say, $1 million to $100,000 or some number like that. I think one of the things that I know the Trump administration-- and they've said this over and over again publicly--

Is that they're very aware of is that issue that we talked about with like vietnam and transshipment? Um where these types of games are going to be played so i'm sure that customs and border patrol i'm sure that the trump administration Is very aware of this it's going to be very interesting to see you know, what? Uh games tried to be played

and how hard they're able to crack down. And I'm sure that the Trump administration is saying, and since to Vietnam or Mexico, one of the things that you have to do is you have to actively work with us so that if we're buying product from Mexico, it is a Mexican-made product made in Mexico by Mexicans from Mexican firms.

Not a Chinese firm a Chinese product made in China shipped to Mexico relabeled made in Mexico and shipped to the United States It's not a Chinese made product made in Mexico by Chinese firms And so I'm sure that this is something that they are emphasizing to Mexico and countries like Mexico and Vietnam and to be honest, this is one of those issues and I I'll be honest. I don't entirely understand the Mexican

resistance on this issue, and they have been resistant. This seems to be a win-win for Mexico that, hey, we want to buy Mexican products made by Mexicans from Mexican firms in Mexico, not Chinese products made by Chinese and made in China or made in Mexico. I guess then I would wonder about other leverage that China might have over Mexico in terms of, oh, well...

Have they promised some good BRI type deals? Do you know what I mean? Like there could be other reasons that Mexico would feel like they want to, you know, keep China in. Well, I mean, I can tell you, I can tell you that, you know, there is basically an underground money laundering operation.

for that is set up between the cartels and uh and and china Um to move money out of china to help launder Uh to help launder, uh ill-gotten gains Uh from drug proceeds and things like that many times using um chinese front men um, so this is uh, you know, and the cartels do hold, you know, even the mexican government will admit they absolutely hold uh hold sway, uh

in Mexico. I'm not about to attribute all of what the Mexican government does to that. I don't want my words misconstrued. A lot of those types of activities in China absolutely are linked back to, let's say, at least quasi-official sources, firms that are linked

either, you know, in multiple ways to the PLA or MSS or even just Chinese pharmaceutical companies applying their pharmaceutical expertise in nefarious ways. I mean, China's economy is very much dependent on exports. So do tariffs...

If the Trump administration can cut off things like trans shipment or any other workarounds, is that really going to affect their economy? Well, and here's one of the biggest issues of cooperation that the president is trying to get, and very understandably so. And this is also part of the reason why he applied tariffs more broadly. I'm assuming. I have not talked to the president. I don't speak for the Trump administration, all the standard caveat.

But one of the things that happened after the 2018 tariffs is very similar to a balloon. As the US imported a lot less from China, the US trade deficit really didn't change. But it got distributed to other countries.

China's trade surplus, again, really didn't change, actually continued to go up. But where it got its trade surplus went to other countries as well. So let's apply that logic to today. Let's assume-- simple scenario-- let's assume that today, the US trade deficit with China-- and again, I'm just using a simple scenario. So if any of your viewers say, hey, that's not what it is today,

That's not the point. Let's assume that the Chinese trade surplus today goes to zero. What you're going to see by China is not that their trade surplus drops by a corresponding amount. What's going to happen with China is they're going to be pushing to sell those goods that they would have sold to the United States to

They're going to be pushing to sell those products and generate that same trade surplus at the end of the day from other countries. This is going to put a lot of pressure on other countries, whether they're in other parts of Asia, whether they're in Europe, whether they're in Africa, whether they're in Latin America. This is the question at the end of the day. Are those other countries...

going to passively accept China running an increasingly large trade surplus with them, or are they going to accept it? So when we talk about President Trump trying to negotiate things with other countries, one of the things that I'm sure is going to be on the table is President Trump saying to countries like Vietnam, look, you don't want to bear the brunt of China trying to export everything that they can't export to us, to Vietnam.

Work with us so that we can have a trade block. Okay, that's probably gonna apply to countries like Mexico Canada Japan South Korea countries in Europe So that you're not inundated and China just doesn't trip shift its trade surplus its predatory trade practices away from the United States and Directed at other countries

I mean, there's some arguments. I think Brad Setzer wrote a few weeks ago in the New York Times the idea that there may not be enough capacity in the rest of the world to absorb the amount that the U.S. consumes because it's like a third of world trade or something like that. So if really... I mean, I don't think the trade between the U.S. and China is going to go down to zero, but, you know...

There just may not be enough capacity to absorb everything. Right. I mean, they'll push it to like, I know a couple of years ago, Iran was having problems because the people in Iran were really upset with all of the Chinese goods being sent to Iran and Iranian manufacturing was taking a big hit as a result. But China also has a tight relationship with Iran because, you know, Iran's not going to have a lot of friends.

And so like they might be under a lot of pressure politically to take that stuff. But that also then threatens the stability ultimately of the Iranian government. And it could probably be the same said with other countries that are in China's closest sphere like Russia, that they're going to get a lot of political pressure from the Chinese Communist Party to like buy all these goods.

to make up for what the US is not taking. But then those countries can't really handle that because there's political fallout from having your market flooded with Chinese crap. So I think one of the things is, as we talk about Chinese manufacturing capacity, one of the things that I think is so important is,

The biggest loser from Chinese trade practices, and I emphasize this time and time again, for everything that we talk about with the United States, the biggest loser from Chinese trade practices is not the United States. Thank you for watching this clip. I know you want to learn more, so now it's time to watch our full hour-long podcast. It's available only for subscribers on our website, chiensensor.tv. So check it out, learn more, and you'll be supporting what we do at the same time. Link is below.