Before I begin today’s essay, I want to remind you about an urgent event I have coming up on Wednesday…
It’s called Great Distortion: The Next Chapter…
And if you’re at all concerned about the markets right now… and you want to learn how to turn today’s volatility into big profits…
You won’t want to miss it.
Because I’ll be unveiling the details of a proprietary new system I’ve been testing and perfecting for the last two years.
To save your spot at this urgent briefing, just follow this link… I look forward to seeing you on Wednesday at 8 p.m. ET.
Now, on to today’s essay…
It’s about a topic that has struck a chord with readers over the past few weeks…
America’s Fraught Relationship with China
The relationship between the United States and China is complicated. It’s fraught with economic co-dependence and geopolitical rivalry.
Over the last few months, many of you have written in with questions and comments about this superpower relationship. And I’ve already given you some historical background from my book, Collusion.
But today, I want to focus on a key White House policy regarding China. It’s one that will impact you and your money for years to come.
And it has come about largely because of The Great Distortion I’ve been telling you about…
That distortion began in 2008, when the Fed started pumping out trillions of dollars to support major financial players and the markets.
The Fed’s massive money fabrication spree during the Covid lockdowns was just the second phase of that Great Distortion.
But while all that money was being pumped out, our leaders paid no attention to what the real economy needed. Or what it would need post-pandemic.
That’s why pent-up demand turbo-boosted prices and exacerbated supply chain problems.
So now, our leaders are back-pedaling…
They’re trying to regain ground they’ve lost over years of not paying attention to what the country needed most.
That’s what the White House policy I’m writing to you today is about. And it has to do with that competitive relationship between the U.S. and China…
China’s Growing Influence in World Trade
Since the financial crisis of 2008, China has accelerated its drive to replace the U.S. as the world’s dominant superpower.
I’ve written to you about the ways it has tried to elevate its currency in world trade.
China has also forged tighter regional relationships and international trade agreements to enhance its global position.
It’s the largest country in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) established in 2017.
And it’s also a key player in the Regional Comprehensive Economic Partnership (RCEP), which accounts for about 30% of global GDP.
The fact that China has been more aggressive about fostering trade relationships has affirmed its position as the world’s largest exporter of goods, as you can see in this chart.
And it has increased its share of global exports considerably in recent years. It now accounts for about 15%, as you can see in this next chart.
But the U.S. is fighting back…
How the New U.S. Trade “Arrangement” Benefits You
President Biden traveled to Asia last month.
While there, he unveiled a new U.S. strategy called the Indo-Pacific Economic Framework for Prosperity (IPEF).
The framework outlines ways for countries in that region to benefit from tighter economic ties with the U.S.
The IPEF has 12 initial partners. They happen to be mostly the same countries that are in the RCEP. But notably, China is not included.
Together, the IPEF members represent 40% of global GDP. They also reflect some of the world’s most rapidly expanding economies. And they have one major rival – China.
Exact details of the IPEF have not been released yet. But we know it will focus on four main economic pillars. These are:
The digital economy
Supply chain pledges
Tax and anti-corruption.
The first three correspond to three of our distortion profit themes – Transformative Technology, Infrastructure, and New Energy.
That’s why I want to put this new development on your radar… as we monitor its progress for money flows and profit opportunities for you…
Serious Threat to International Order
Now, as I mentioned before, I visit Washington regularly for meetings with members of Congress. So I have some great contacts there.
And here’s what I’ve learned via this network…
The goal of the IPEF is to take economic power away from China.
The timing coincides with major supply chain problems linked to China. It also overlaps with China’s support for Russia in its Ukraine war.
In fact, in a speech at George Washington University last month, U.S. Secretary of State Antony Blinken called China the “most serious long-term challenge to the international order.”
Blinken was careful to say that the U.S. isn’t looking for an intense conflict or a new Cold War with China.
And he did note that the U.S. and China must work together on issues like carbon neutrality, food scarcity, and battling Covid.
But he also said that the U.S. will “defend and strengthen the international law, agreements, principles, and institutions that maintain peace and security.”
Essentially, the Biden White House, like the Trump White House, wants to contain China’s growing economic and geopolitical advantage.
Three Words That Spell Opportunity
The Biden administration’s U.S.-China strategy comes down to three words. These are invest, align, and compete.
As Blinken outlined, the White House will:
“invest in the foundations of our strength here at home.”
In addition to the $1.2 trillion infrastructure bill I’ve been telling you about that will modernize U.S. highways, ports, airports, rail, and bridges, the administration wants to support technological innovation and research.
That will cover artificial intelligence (AI), biotechnology, and quantum computing.
It also means augmenting U.S. production by sourcing raw materials in the U.S. and encouraging domestic manufacturing.
“align our efforts with our network of allies and partners.”
The U.S. will forge more economic arrangements – especially in the Indo-Pacific Region – that don’t involve China. It will tighten technology cooperation with South Korea and Japan.
And it seeks to build stronger economic and diplomatic ties between the U.S., Asia, and Europe.
“compete with China to defend our interests and build our vision for the future.”
Today, China accounts for more than half of global steel production. It’s a similar story with solar panels, electric car batteries, and chips, which are key drivers of the new economy.
The main idea is to wean the U.S. from its supply chain dependence on China. That’s a tall order. It’s not going to happen overnight. Or probably ever.
But it does mean that companies supporting U.S. interests will garner more financial support and funding from the U.S. government. Wall Street money will follow.
And that combination of public and private money flows is the “sweet spot” for us as investors…
What This Means For Your Money
I have talked a lot in these pages about how White House policies create opportunities in our New Energy and Infrastructure themes of the Great Distortion.
But the IPEF announcement puts a new focus area of the Biden administration on my radar – national security-related artificial intelligence (AI).
According to the White House press release, the IPEF framework aims to address “issues such as online privacy and discriminatory and unethical use of Artificial Intelligence.”
So I expect digital security, artificial intelligence (AI), and other Transformative Technology and Meta-Reality sectors to get a boost, too.
To take advantage of this, I recommend the First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT).
ROBT tracks the performance of companies engaged in the artificial intelligence (AI) and robotics segments of technology, industrial, and other economic sectors.
It’s primarily invested in U.S. companies, followed by companies from Japan, France, and the United Kingdom.
Because of the choppiness I see in the markets over the coming months, I recommend that you allocate half of your investment now and another half in a few months.
But for an even better… and faster… way to take advantage of this new development, be sure to tune in for my special briefing on June 15.
I’ll show you a strategy you can use to follow the inevitable money flows as the White House forges ahead with its latest political-economic maneuver to keep China at bay…
Sign up here for Great Distortion: The Next Chapter… and be sure to tune in on Wednesday night at 8 p.m. ET.
I look forward to seeing you there.
Editor, Inside Wall Street with Nomi Prins
P.S. As a special thanks to those who attend Wednesday night’s event, I’ll even give away a recommendation – for free. It’s one I believe could double your money. Don’t miss out…book your spot now.
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