China Just Issued A Severe Global Ultimatum As Bessent Rejects Beijing’s U.S. Treasury Sell-Off

0:00 So the trade war is getting nastier and this week we are getting further clarity from both the US as well as China. Now Trump is still calling this a victory that many countries and leaders they all running to him. He wants them to write the wrongs of decades of abuse and the only way is to build in America basically de-industrialize their countries and shift industries to the US. And with this latest update, the picture gets much clearer. What the US deems as cheating in global trade. Now, the list is wild and it goes beyond just tariffs. Trump just shared his list of eight things that are considered non-tariff cheating, which means he will go after countries during the trade negotiations. Of course, we have currency manipulation and VAT, dumping

0:46 below cost and government subsidies. Now what's funny is Trump hammering protective standards of both the EU and Japan. But I want us to focus on point eight which is trans shipping to evade tariffs and that is obviously a point he emphasized to target China. This reinforces what we have said about the end goal of the entire US trade war. These are just justifications for Besson to tell countries to stop trade with China to save their own economies. And the US is getting very desperate because the 90 deals in 90 days fantasy is starting to break down in real time. Even America's biggest fan Japan has decided enough is enough. And that's shocking considering how heavily reliant they are on the US consumer market. But

1:32 they are starting to think long term and realize that Trump is lowballing them with a horrible deal. The prime minister is starting to refuse to concede in the tariff talks and they gave the US three big push backs which is actually quite surprising. Japan doesn't want to give up the agriculture tariffs to protect their farmers. The US wants to export more American rice but Japan doesn't want the rise. Secondly, Japan also places consumer safety as a priority for imports. Obviously, if they want to take in US cars, they have to pass Japan's strict standards. But more importantly, Ishiba also won't pay the US more protection money for nothing. Tokyo won't simply raise their cost burden for the US military. You told the whole world, everyone that people, they were

2:19 all lining up to kiss the ring and dying to make a deal. But if Japan says no, that just destroys the narrative of the US winning the trade war. And I think that we've got more than 10 deals where there's very very good amazing offers made to the US uh that USR trade representative Jameson Greer and Howard Lutnik and and the rest of our trade team and the president are stewing over whether those deals are good enough. And so I think that the one question that that I have open in my mind is should we go one at a time or should we announce a bundle all at once because we have so much progress made so quickly. Do they have the deals locked in or not? But even if there were some deals done, I have a feeling that some will get rescended after what China just did. They have had enough and they issued a

3:06 global ultimatum for countries in trade negotiations with the US. Now, China's warning nations not to cut US trade deals that will hurt the Chinese economy. Obviously, the central government is not blind to Besson's ultimate agenda to set up a global trade fortress to block Chinese exports. basically formed a coalition for a global embargo on Chinese goods. And throughout history, embargos never worked for long. It didn't work for Napoleon's continental system against the British. It didn't work against the Russians in 2022. And the G7 lost the sanctions war in that one. And it won't work against China. But Beijing still issued a green reminder of what is at stake here is the carrot and stick method. And if countries join the US

3:52 coalition, China won't accept it and they will take reciprocal counter measures. Now what that means is currently quite unclear, but we can assume this will either be tariffs of their own or critical export cuts. However, on the other side is a carrot. China is willing to coordinate with all parties to resist the US trade war. Now that is a very broad statement but it will likely mean more bilateral trade more investments and guarantee of sorts. Now this move by Beijing is clear that China is willing to start playing confrontational geopolitics with the US. Now sure the US has the power of the dollar and their consumer market. But the Chinese are far from helpless. Their big industrial power plus their pivot to stimulate domestic demand has not gone

4:38 unnoticed. The Chinese consumer class is starting to rise. In 2000, the US dominated global trade. An embargo then would have driven China into a deep recession. But things are vastly different in 2024. China today is now the world's biggest trading partner to over 120 countries. Beijing exports $3.6 trillion worth of trade and imports nearly $2.6 trillion worth of goods from other countries. Compared to the US, China's trade is almost a trillion dollars more. Their footprint is larger and to decouple China from the world will break global supply chains instantly. It is why the US is asking for the impossible. China can also weaponize their consumer market or even cut away critical exports to countries.

5:26 Certain places like Vietnam might have to comply with the US and it's understandable why. Vietnam exports nearly $150 billion to the US and that amount of trade accounts for 30% of their entire GDP. Remember that Vietnam manufactures very low margin goods like shoes, clothes, and apparel. Their margins are razor thin, especially when you have to ship it halfway around the world. By imposing a 46% trade tariff on Vietnam, the US can break their economy. So the Vietnamese might fall and China's message is a reminder not to give in. Besides just a stick, China also provides a ton of investment money to the world. This is a powerful advantage especially when the US economy is

6:12 turning inwards. Trump wants to reshore everything back to the US. But China is actively globalizing the world and that investment money is a huge carrot on the line. From 2016 to 2023, China pumped nearly $610 billion worth of investments to the global economy, of which $330 billion went to manufacturing projects. Vietnam alone received $20 billion spread across 85 projects, and that provided over 200,000 jobs. Mexico also received $13.5 billion across more than 100 projects. Beijing has a trillion dollars of surplus a year to deploy and some of it will go to boost domestic consumption and local industries for sure but a huge amount will be used to

6:58 diversify their supply chains overseas. So more money will be flowing outwards. Then who do you think will get those Chinese investments countries that embrace free trade with Beijing or those that join the US coalition against Chinese exports? And there's a reason why global markets are starting to recolapse. The world realizes that China is getting serious and they are willing to play to escalate all the way to prove their hand. And a big shout out to our sponsor today, Indigo Precious Metals. When it comes to buying gold and silver, I trust Indigo Precious Metals in Singapore. They have made investing in precious metals safe, fast, easy, and simple for both small and large scale buying. I've been stacking gold for over

7:43 a decade now and I've learned two things when buying. You want to buy authentic gold bullion and you want to buy it at the lowest premium possible to stretch your dollars even further. And I'm glad to say I found both of this at Indigo Precious Metals. Indigo Precious Metals is a leading retailer in Singapore. They specialize in physical gold, silver, and platinum. They are my one-stop shop when it comes to buying bullion. Their prices are sharp and they have the best brands on sale and I can test the gold on the spot. So if you're looking to make your first gold purchase, Indigo Precious Metals is the best place to start. Whether it's 1 oz or 1 kilo, this is the reputable dealer you are looking for. So take action today. Click on the link

8:29 below and enjoy a discount on your first purchase with the code sha fu. Start your gold stacking journey today. US bonds are also crashing back down. The 10-year yield has spiked back up to 4.4%. While gold just made a new record high of $3,400 is a realization that the US economy is in dire trouble and trade policy is getting out of whack. China's additional pressure is coming at a very bad time when everything with the label US is crashing down. Whatever Trump is doing from the trade war all the way to the Federal Reserve is just destroying trust in American markets. Now the situation is even worse for the US dollar. We have reached a new 52- week low with the index going well below 100

9:16 and we might really see it fall below 98 really soon. When the dollar index falls the interpretation is very simple here. There's a less demand for the current supply of dollars in the market. investors, countries, and exporters, they're all losing faith fast. Investing in the US economy is becoming dangerous. It's treating like an emerging market. Now, the US consumer will get clobbered even harder thanks to higher borrowing costs and imports getting more expensive. Now, imagine what will happen if more countries like China start dumping their treasury bonds. It would add fuel to a house that's already burning down. But there's still one person around who doesn't believe that China will dare sell the holdings of US debt and that's none other than Scott

10:03 Bessant. Of course, as you know, Mr. Secretary, China is the second largest holder of treasuries and some would say they could retaliate by selling treasuries given how or what how things are going on the trade front. Does that keep you up at night? The fact that the Chinese could sell treasuries and impact negatively our economy? I could burn down my house if I had an argument with my spouse, but it's not going to do me very much good. So that, you know, if they started selling treasuries, uh they would uh they'd have an effect on the price. Uh but more importantly, more importantly, uh they accumulate dollars and what are they going to do with the dollar? So if they sell treasuries, then they would have to buy R&B and it would

10:50 strengthen their currency. and they've been doing just the opposite. They've had a weak R&B or Joan Juan the uh policy. So, it really served no purpose for them to weaponize. Now, this is where we need to tear Besson's argument apart. It's crazy because he knows better. He's the walking embodiment of Wall Street and he knows China has leverage here. Besson believes China's only strategy in selling treasuries is to buy back the Chinese yuan. That China will take their dollar proceeds and do nothing else but strengthen the R&B which will be bad for the exports. But here's the thing, China doesn't need to use the dollar proceeds to buy back the yan. There are many other avenues they

11:37 can use the reserve currency in. Back in November last year, China issued sovereign bonds in Saudi Arabia and those were US dollar bonds totaling 2 billion. And guess what? The yields were on par with US Treasury debt. China is using their huge dollar reserves to create an alternative dollar market or Euro dollar pool that they can control. China is willing to use their own stash of dollars as collateral to pay back bond holders with interest just to put pressure on the US bond market. Beijing doesn't need to raise dollar liquidity because they have a huge trade surplus. More than 60% of their bilateral trade has been dorized as well. Now, Besson obviously knows this. Denying it won't help. In fact, it just puts the US

12:23 Treasury market in real jeopardy should the Chinese really dump their bonds. And what else can China do with their dollars without buying R&B? Now, investing into BRRI projects is another avenue, but the most obvious answer here is to buy gold. According to the World Go Council, China's gold holdings have been aggressively growing. Their official holdings have hit nearly 2,300 tons. Gold makes up 6.5% of their total reserves today. Contrast that to 2022 when gold was just 3.2% of the total reserve position. It's the exact same period when China started to aggressively dump their stash of US treasuries. And now that China is in a full trade war with the US, Beijing won't stop buying gold. It's laughable

13:10 that Besson couldn't connect the dots. But in all likelihood, he's in damage control mode because if he admits the truth, the US bond market would collapse like no tomorrow. And even Bessant himself admitted that gold is the only asset that is sanction proof, especially when you are dealing with the Americans. But the mistake the Russians made was the Russians got onto war footing in terms of their foreign exchange reserves, but they moved out of dollars into euros. If the Russians had moved entirely into gold, price would be higher, but they would have all their reserves in Moscow. So I you know I think a lot of the you know who who knows whether China's moving on to war

13:56 footing visav Taiwan the Chinese PBOC is the largest buyer of gold now so you know could we imagine you know again back to imagination could we imagine some kind of a R&B that is exchangeable into gold maybe at a premium so Besson either has memory loss or he's keeping quiet to prevent a bond market implosion. But either way, we must wake up and smell the coffee. China can sell their bond holdings without strengthening their local currency, the R&B. But listen to what Besson said about a plan to counter China's Treasury dump. It's a really desperate one, especially doing a tweet. If you saw them trying to weaponize treasuries, how

14:42 does the Treasury Secretary respond? Look, we we have a big toolkit. We we do buybacks but Besson can't do buybacks especially not during this period. It will be seen as another form of QE and how will the buybacks be funded limiting by issuing new bonds. Besson will have to borrow more money at high interest rates from Peter to pay Paul. He'll be paying one credit card with another Janet Yellen style. So the threat of a Chinese treasury dumb is very real especially when we consider the timing. Now, Besson might posture and look really zen, but deep down he's probably sweating inside. But let me know what you're thinking. Will countries really join the US coalition against China? And is the US bond market really bulletproof

15:29 against a Chinese Treasury dump? Let me know in the comments below. Stay safe. Be sure to smash the like button and subscribe as we navigate through this crazy times.