Full transcript of “US Dollar CRASHES, Trump CAVES as China CUTS US Debt | Richard Wolff & Sean Foo”. Click a timestamp to open the video at that moment. Need another video? Use the YouTube transcript generator.
0:00 We may remember that Donald Trump in the leadup to and directly following the brick summit that happened in Rio. This is the kind of rhetoric that he's been talking about when referencing the dollar. And if we lost the uh the world standard dollar, that would be like losing a war, a major world war. We would not be the same country any longer. He has been saying this over and over and over. And yet the very policies that his administration are pursuing have been backfiring on the dollar quite dramatically. Reuters recently reported that dollar losses have held against the Japanese yen and other currencies even amid this trade deal with Japan. This underscores a report uh from the New
0:46 York Times talking about the longer term picture here that the dollar has had its worst start in 2025 since 1973. And in this it gets right to the point. The United States's currency has weakened more than 10% over the last 6 months when compared to a basket of currencies uh compared to major trading partners. So Sean, what exactly is happening to the US dollar? You know, there's been a lot of talk of dalization of course among BIRCIRs countries, but there's obviously huge internal problems that move beyond even the external shifts we're seeing worldwide. I think we need to understand that Trump is trying to square a circle. He's trying to accomplish the impossible. Now, there's a lot of talk about Trump trying to defend the world reserve currency and he's absolutely right when
1:31 he says that losing the dollar as the reserve currency in the world will be losing a major war. I mean it would be even worse than all the wars combined loss because what underpins the entire US economy is the strength and might I add the stability of the dollar. So the entire US economy is predicated on the world loaning the US a lot of money to develop their industries or what's left of their industries develop Wall Street uh fund the military industrial complex and to build up the US as a whole to fund all the liabilities social security medic you name it. But if the world suddenly wakes up and decides, hey, we are not
2:17 going to fund the US anymore, it drives the entire US economy to the tail spin. Now, what do I mean by Trump trying to square a circle? Well, basically, he wants to drive the US dollar lower. He has said it quite a few times in order to make US exports more competitive. And on paper, that absolutely works. It sounds nice. It's uh it but in reality it's a fantasy. Well, firstly because if you drive the dollar so low on paper, you'll be able to export more US goods to the world. But the big problem is that Trump is basically tariffing all the imports that's needed to drive US manufacturing growth. It's insane. It's
3:03 crazy. Now, we just need to look at steel, aluminum, copper. Now these are three of the most undisputed base metals that is needed to build anything from cars, semiconductors, construction, uh you know furniture, no not furniture I mean more of the electronics these kind of products and when you increase your cost of production by 20 30% suddenly prices will all go up and let's not even talk about the US domestic market for a moment. Now if suddenly all your prices goes up by uh 20 to 30% plus you have a dollar falling by 8 to 10%.
3:48 What's going to happen? Suddenly your input cost go ups by 40 or even 50%. Now do you think that makes it even physible even possible for the US to become an exportbased economy? Chances are it will not be because who in the world will want to buy something from the US just because he has a made in America label when it costs 40 to 50% more. Most of the stuff that's made in the US can be sourced elsewhere. Especially in China when they have very robust robust supply chain, a very good manufacturing ecosystem, they can bring the cost of production down. So as the dollar continues to go down, this actually
4:34 makes it less likely for the US to export more to the world primarily because the US did not solve the supply chain problem from the onset. Now before they started on this economic war, this trade war, perhaps the smarter thing to do would be to spend you know a year a decade to go around the world and start building up mines, feed all the supply to the US and then you embark on this war. But they they put a cut before the horse. They had the whole situation wrapped around the wrong way. So right now we are seeing the consequence of that and I think it's going to be very impossible for them to maintain the dollar's reserve status in the long run the
5:21 longer this tariff war continues. It's even worse because had he done it had he raised the tariffs in either uniformly or if he wanted to vary them differently and then stuck with it. It would be one thing, but to do what he did and then to bounce around to delay them, to make them temporary, to to change them may up down uh with Canada, with Mexico, on and on, the creation of a layer of enormous uncertainty. And and let me explain why that's so crucial. business person after business person that I've spoken to says to me and it's
6:09 by the way well known in the literature that uncertainty is the biggest enemy of an investment program. The problem is not it's profitable. The problem is really what's the probability that it will be profitable and you can't normally calculate that very well. But when you have oscillating policy, it makes it only worse. So let me say in simple English, if you're a businessman or woman and you're contemplating moving production, say from Shanghai to Cincinnati, you know, it's going to take time. It's going to take a lot of money. It's going to disrupt everything that you do and
6:56 relationships that you have. If the profit difference of staying versus moving is large and the probability that that will endure is large and won't change a lot if that probability is also large then you might do it but they aren't large enough otherwe if you're the pre vice president who makes a decision and then you arrive in the United states to set up your company to move your business from Shanghai to Cincinnati. You don't know how long Mr. Trump will keep the tariffs in. Will he raise them? Will he lower them? Will that happen under him? Will
7:43 it happen under his successor? Moving a factory or anything like that is a multi-year operation at enormous cost. They're not going to make those decisions, those costly decisions, when Mr. Trump has not only shown them, as Sean has just listed, all the reasons why not to do it, but he's also added the layer of uncertainty, which makes it even more unlikely that you're going to see meaningful uh movement. You may see promises that we will invest half a trillion dollars in the next decade, but that can work out and that cannot work out and everybody who's involved in this
8:30 knows that story only too well. Yeah, let me add one point to the tariff uh madness, right? To add on to uh uh Richard Wolf's uh statements, I think it's very important to understand that the tariffs is actually much more impactful than the Russian confiscation, the confiscation of Russian assets. Because if you are G7 ally or if you're neutral country, you can always close your eyes and say that's just Russia, that's just Iran, enemies of the state, enemies of Washington. Well, the tariffs is affecting every single country out there, even Penguin Island. And this is the big problem with the tariffs. And when we look at the formula that was revealed by Lutnik or Trump, it's
9:17 absolutely ridiculous. Now, it's supposed to be reciprocal tariffs, right? So, by right, you need to go through the list of each itemized product countries are tariffing you on. But when we found the formula, it was just a ridiculous formula that was slapped onto the trade deficit and countries that the US actually enjoys the trade surplus with is getting clobbered with a 10% baseline. So a lot of trust has been lost in this grand tariff exercise. the economic foundations here. I I in a recent video you talked about the differences between the US and China for example almost at the economic base how they are approaching uh economic development at this time because you know oftentimes this is not what people like Scott
10:04 Bessant they're not talking about uh and the consequences the difference between the consequences of the policies and the stated intent are so wide for example when it comes to tariffs. So what exactly are the foundations right now of the US's almost like economic trajectory as it maneuvers through what you just said these uh uh geopolitical contradictions? Now it's quite funny to think back to the you know the 1960s the 1970s where the US actually were doing things right. You know we can all remember the great projects of the Hoover Dam. The US were also building a lot of power plants. they were uh building a lot of roads to improve their infrastructure. But now we are not really seeing it. We are seeing
10:49 a lot of Wall Street shenanigans, a lot of tariff wars, trying to use paper products, uh printing money to paper over the entire system. It's a short-term fix. And I guess a part of it is due to the you know how the entire Washington machine is being structured. every four years you have an election and you know it's always goes from red to blue, blue to red. However, if we look at what China is doing now, they're actually doing what the Americans have been adopting during the golden ages of the 60s and the 70s. Now, a great example is the 170 billion dam in Tibet hydroelectric dam that's going to, you know, it's going to generate more power than the entire country of Poland. One
11:35 dam, more power than the entire of Poland. And that's going to increase China's uh you know the competitiveness when it comes to industries when it comes to manufacturing. It's going to position China in a very good uh spot to be very competitive against the US when it comes to future industries. Right? For example, let's just talk a bit about the chip war and semiconductors. Now we all know that the future at least when it comes to productivity is going to be revolving around AI and chips. Now when you want to go against the US that has a very maybe 3 to 5 years uh lead time when it comes to all this technology AI
12:21 chips semiconductors you need a lot of energy to catch up. You need to bring your cost of production coming to go down. So we can see what China is doing right now is embarking a lot of public works not just to benefit one particular company like Boeing like what Trump is trying to do their public works is trying to benefit the economy as a whole. So for example when this dam comes up it will lower the cost of China China's uh energy production cost of electricity a cost of power so that various industries from EVs all the way to semiconductors they'll be able to be more competitive to fight against the US. So what the US is doing is trying to paper over uh their problems making the
13:07 economy even more financialized while China they are adopting what they've been doing over the last 10 to 20 years to basically excel in the real physical world. I want to take another example and that is uh electric vehicles. Uh it is now pretty well known, although not here in the United States, that uh the best and the cheapest electric car and truck uh on the market at least now is the BYD uh car and truck uh coming from China. And it had a tariff. I think Mr. Mr. Trump put it on around 27% and then Mr. Biden raised it to 100%.
13:55 And so currently, if you want to get a BYD electric vehicle, you have to pay, for example, $30,000 that goes to China to pay for the vehicle and then another 30,000 100% uh tariff tax goes to Uncle Sam. So that if you want to buy it here, it would cost you $60,000. uh and that you're not going to do that in most cases. You're going to settle for an inferior car, electric car or truck. You're gonna pay 45 to 50 to $55,000 to General Motors or Tesla, Ford or someone Toyota and you're going to end up with having spent more than the
14:41 30,000 it costs to get the vehicle and getting a poorer quality vehicle. Now keep this in mind as I explain what you know which is every American company that competes in the world economy and buys as an input either electric vehicle uh cars or electric trucks. Every one of those competitors around the world is going to have an advantage over the American because of the tariff. The Americans cannot access $30,000 BYD trucks. The tariff precludes them. They have to pay 60 or do without the
15:27 truck. And that means their competitor, whether that competitor is in China or Europe or Asia or Africa, is going to be able to out compete the American. And the more goods are tariffed and that fall into that situation, the more you're going to lose jobs here. When he says, "I'm going to protect the workers here by not letting BYD in." That's correct. He's going to protect some workers, but he's going to be doing it at the price of the jobs of other workers in the competitive story I've just told. This is not rocket science.
16:13 And it means that the danger here is not only that he won't succeed, but he'll do damage that will take a long time to correct. A German journal, the International Political Studies Journal, uh wrote uh a reaction to the brick summit, which uh has not been covered uh very much by Western mainstream media media. Harder, better, faster, stronger. The Brick Summit shows the group is more economically significant and politically present than ever before. And I just want to scroll down to a particular quote here. One issue on which all BRICS members in partner countries are largely in agreement is the development of new payment methods to reduce dependence on the US dollar. In practice, India already pays for Russian oil and alternative currencies such as the rupee
16:59 UN and the Arab Durham. Two years ago, Brazil and China announced the establishment of a clearing arrangement to facilitate bilateral trade and lending in UN and Russia and Ethiopia are considered trade considering trading in the national their national currencies. The strategy for bricks over the next four years uh the n the new development bank the bricks bank aims to provide around 30% of its financing in local currencies. Uh Sean, uh to Professor Wolf's point as well and and you brought up the dam uh that is going to be built in Tibet. Uh there's this the Wall Street Journal reports China's curbed its oil addiction and blunted a US pressure point. So it's not just the dollar, it's also something like oil trade. The government has
17:46 boosted econ uh domestic production in the EV industry in the name of national security. 14 million chargers, charging stations. Uh Sean, talk about how the rise of China and bricks kind of centers uh is at the center of uh this kind of desperate bid by the Trump administration via tariffs and trade war. I think as you pointed out in the first article, right, deorization is something that's not going to stop. It's only going to get worse especially uh especially when a tariff war continues and other countries around the world gets threatened especially when China continues to grow and bricks as a whole continues to rise. Now I think a lot of the damage started in 2022 2023
18:33 when the west decided to sanction Russia. Now that forced Russia to really join hands with China and now we have a very um complimentary system where China actually gets cheap commodities very affordable commodities everything from metals to oil and gas LNG and it feeds back all the way to the Chinese economy and in some cases they're enjoying discounts of like 20 to 30% in certain instances. So this allows China's entire ecosystem to pump out very cheap affordable goods and these goods gets flooded to the rest of the world. And because of Trump's tariff war, every country right now they're scrambling to lower the cost of production or in most
19:19 cases they just want to survive. They want to allow their citizens to enjoy a lower rate of inflation. And like what uh Dr. Wolf just said, you know, countries they need all this very very cheap machinery, all these cheap cars in China to really run their economies, uh run their livelihoods and just to make life more livable. Now, as this trade continues to go on, as the article pointed out, now China is not going to fancy using the US dollar as a medium of trade. They're going to push for their own local currency settlement. And it doesn't really matter what kind of currency is being used as long as it's not the dollar, right? It could be the rupee, it could be the ruble, of course, it could be the Chinese R&B, but all of
20:05 these are still considered the dollarization. And as a consequence when China gets all these big trade surplus we can see them going around the bricks investing into uh aluminum nickel mines in Indonesia spreading the wealth amongst the rest of their members when China develops uh you know a lot of solar panels and in the future when it comes to chips they're going to flood the entire bricks block with all these cheap commodities just cheap technologies as well. So as bricks continues to grow and I believe right now they're going to be 30 to 40% of global GDP very soon in maybe just a three to five years a lot of these transactions when it
20:51 comes to currencies will naturally just bypass the US dollar and this creates a very dangerous feedback loop where a lot of the surplus a lot of this savings from all these countries because the US their uh trading status will continue to drop lower and lower every single year, especially when it comes to them exporting stuff and even importing stuff as well. You know, more money will leave US assets, whether that be stocks, whether that be bonds, and it will flood into other uh stores of value. And I don't think that's going to be great uh for Trump.
