MacroVoices #480 Louis-Vincent Gave: What Comes Next After The Trade War Dust Settles
GAVCAL co-founder Louis-Vincent Gave discusses the recent Trump-China trade deal developments, arguing that the world is experiencing capital flight from the US to other markets amid policy uncertainty, with stealth bull markets emerging globally while the US underperforms.
Summary
Louis-Vincent Gave provides analysis of the Trump administration's tariff policies following the weekend trade deal with China, suggesting the market has reached a relatively stable position with 10% tariffs on most countries and 25-40% on China. He argues this outcome is mildly inflationary for the US, particularly since tariffs tend to weaken rather than strengthen the dollar. Gave identifies a significant shift in global capital flows, noting that foreign investors are increasingly bringing capital home rather than investing in US assets, leading to 'stealth bull markets' in Latin America, Asia, and Europe while US markets remain flat. He contrasts this with 2022-2023 when the US was still considered the 'only game in town.' Gave explains China's economic situation as simultaneously experiencing a real estate bust and industrial boom, stemming from a 2018 policy shift toward industrial independence following US semiconductor embargos. He describes how China has leapfrogged the West in manufacturing quality across multiple industries while maintaining cost advantages. On commodities, Gave notes gold's extreme valuations relative to other assets but suggests the 'different this time' narrative around de-dollarization may justify continued strength, though he's personally rotating from gold into copper and energy. He emphasizes that China's currency appears dramatically undervalued and that either revaluation or continued tariffs will be necessary to address global trade imbalances.
Key Insights
- Gave argues that tariffs weaken rather than strengthen the implementing country's currency, contrary to popular expectations
- He contends that foreign investors are now bringing capital home from the US due to policy uncertainty, creating stealth bull markets globally while US markets underperform
- Gave explains that China simultaneously experiences a real estate bust and industrial boom, with the government redirecting bank lending from real estate to industry since 2018
- He asserts that China has leapfrogged the West in manufacturing quality across multiple industries, not just cost competitiveness
- Gave argues that gold is expensive on historical metrics but the de-dollarization trend may justify continued strength, though he's rotating to other commodities
- He contends that the Chinese renminbi is 'stupidly cheap' and dramatically undervalued given China's massive trade surplus
- Gave suggests that China's birth rate collapse from 18 million to 9.5 million annually represents a policy crisis requiring consumption stimulus
- He argues that US exceptionalism since 2008 was driven by the shale revolution and smartphone ecosystem dominance, both of which are now challenged
- Gave predicts that countries will increasingly stockpile commodities rather than US treasuries as reserve assets due to security concerns and low energy prices
- He contends that the current trade war approach missed an opportunity for a coordinated currency revaluation agreement among Asian countries
- Gave argues that China's policy implementation works through local authorities rather than central mandates, explaining the proliferation of consumption vouchers and local stimulus measures
- He suggests that either Asian currency revaluation or continued trade tensions will be necessary to address massive global trade imbalances
Topics
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