It’s Not A Trade War, It’s A Redistribution Of Trade

“Here, if you have a milkshake, and I have a milkshake, and I have a straw.

There it is, it’s a straw, you see? Watch it.

Now my straw reaches across the room and starts to drink your milkshake. I… drink… your… milkshake. I drink it up!” – Daniel Plainview

I am all for free trade. Countries should freely exchange their goods with each other. But that’s only true if the playing field is level for all involved. No one should be taking unfair advantage of the benefits of free trade. When they do, it is no longer free trade.

Today, there is nonstop talk about “tariffs.” You can practically hear Jay-Z from the rafters at the Barclays Center, “I’m not a tariff man, I’m a tariff, man.”

Not long ago, we spoke equally as much about “TPP.” Remember that? Many have forgotten. It stands for the Trans-Pacific Partnership and it was all over the news in 2013, 2014, and 2015. Ironically, what we read about trade wars today are essentially the same thing as TPP. They only have different names. But achieve the same two goals:

1. Level the playing field for other emerging countries in Asia who want to trade and build alongside the US.

2. Slow down aggressions, for example in the South China Sea, and give others a chance act unilaterally.

South East Asia is a remarkable region of the world. I have travelled to several countries there. Walked the streets, ate the food, and mingled with their people. I have seen the boom and economic movements first-hand. In Vietnam, more than half of its population is under the age of 25. That’s 88 million people under 25. I’m not sure any other country has a demographic as exciting as that.

But something is off in the region. And it’s been off for a number of years. It even reaches Japan. Hopefully you can easily see the following image:

I think any sensible person can look at the map above and see something is wrong. It would appear that one person is trying to drink everyone’s milkshake. You cannot forget about Australia, either, which is not far from this drama.

If history has taught one lesson, it’s to be proactive rather than reactive the second something seems wrong. Someone has to step in, at some point, and change the course. Lately, trade has been a method of doing so. One way to do that is to change the direction of trade to favor others while slowing it down against those who you don’t work nicely with. You can’t be a bully on an empty stomach. And you can’t be a bully for long when the other kids start eating steak.

That’s also why I think the “trade war” narrative is fear mongering at its best. As I wrote earlier, this is not a war of any means. It’s a redistribution – let’s do more trading with these parties who agree to free trade and less with this one who is bending the rules.

I’m increasingly interested in emerging South East Asian countries like Vietnam, Thailand, Singapore, and others. As tariffs hit China, competing countries in the area should rush to fill demand. That means infrastructure and a population that will gladly soak up redistributed business. I even think of Mexico. Why do so much trade with China when you can simply turn south, and pose such an opportunity to your neighbor.

I have several companies in mind, but won’t be sharing them until I have a better grasp and timeframe. There’s a link to my email list at the bottom, and perhaps I’ll reveal a few over time. Each of these companies has a significant presence in South East Asia.

A redistrubtion of trade shows bumpy roads for American multinational companies. Apple, for example, may need to change its supply chain and legal departments. The biggest companies may scale back operations and invest in other regions of Asia. But, over time, new opportunity will present itself. I think often about Cambodia – a dangerously poor country that has been through some of the worst civil wars ever recorded. But today, they have a functional government, vast amounts of land, and increasing tourism.

If you look hard enough and push yourself to look deeply into the world events around you, you will find opportunity. This is the route I am heading. I will keep you posted if I find any success. You can join my email list here.

Thank you for reading.

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