Latest / Money Grows on Trees / #229 - How Trump’s Trade Wars Affect Your Money (in Australia)

Transcript

#229 - How Trump’s Trade Wars Affect Your Money (in Australia) · Money Grows on Trees

• 0:00
  Well, just because there's a world event doesn't mean you should then start investing. So
• 0:03
  whether it's COVID, it's a tariff war, it's almost the worst
• 0:06
  time to start because there's so much uncertainty. Most people I've noticed, they're so
• 0:09
  reactive. That's why my Instagram blows up when there's a crisis. People are like, what should
• 0:13
  I do now? I'm like, do what you were doing last week. If your investment
• 0:16
  approach is effective, it shouldn't matter if there's a crisis.
• 0:20
  Most people aren't invested in stocks. Most people don't even know what stocks are.
• 0:23
  To answer that question, it's always the same answer, and it's financial education. Warren
• 0:27
  Buffett doesn't deploy a lot of money when there's a lot of uncertainty. He actually doesn't
• 0:30
  buy the dip. When you're building a portfolio, the price is irrelevant. What you're really
• 0:34
  buying I'm Lloyd James Ross, seven-figure investor and entrepreneur, and
• 0:37
  I've helped thousands of business owners and professionals turn financial stress
• 0:41
  into success. If you're stuck in old money habits, overwhelmed by
• 0:45
  investing, or unsure where to start, this is for you. I'll
• 0:48
  give you the mindset and strategies to take control, grow
• 0:51
  your wealth, and achieve financial freedom. It's time to make
• 0:54
  your money work for you. If you've turned on the news lately, all
• 0:58
  you see is that America and China are in a trade war.
• 1:02
  What does that mean? What does it mean for America? What does it mean for China? But most importantly,
• 1:05
  what does it mean for your wealth and will it impact your
• 1:09
  own money situation? And on this episode, I'm going to jump in
• 1:12
  and dive in and explain to you a little bit about what's happening and also
• 1:15
  the impact it may or may not have on your own
• 1:18
  money. And so let's start off with what's actually happening in
• 1:22
  this trade war between the United States and mainly China,
• 1:25
  but actually the entire world. Because recently what happened was Donald Trump came
• 1:29
  out and he called it Liberation Day. And on the 2nd of April, he
• 1:32
  brought into place many, many tariffs against many different countries
• 1:36
  at the same time. The objective was to try and square
• 1:39
  away or square up and rebalance the trade deficit
• 1:43
  the United States is in. Because at the moment, what's happening in the United States
• 1:46
  is they're trading a little piece of their continent away every
• 1:50
  time they import goods. So it's an IOU. And what's happened
• 1:54
  is it's created a trillion dollar trade deficit. And
• 1:57
  that's a big problem because the United States is spending more than they're earning
• 2:01
  and they need to rebalance it. And how they do that is they start tariffing or
• 2:04
  taxing the imports coming into the country. Now, is
• 2:08
  this the first time the United States has done this? No, it's not. In
• 2:11
  fact, most people don't realize this, but in the 1930s,
• 2:14
  in fact, the year 1930, the president at the time, Herbert
• 2:18
  Hoover, brought into place what's called the Smoot-Hawley Act,
• 2:22
  and that was to implement tariffs across different countries, similar
• 2:26
  to the current rates that Donald Trump is doing, and he implemented 20% tariffs
• 2:30
  on imports into the USA. Now, what it did was it didn't cause
• 2:33
  the Depression, But it exacerbated the depression, the
• 2:37
  1930s economic crisis and depression, which sunk
• 2:41
  the world into an absolute terrible economic period. And
• 2:45
  let's hope it doesn't happen now. But will it happen? We'll explain very shortly if
• 2:48
  it will or will not. What's happening now is
• 2:51
  Donald Trump has gone in heavily and tariffed China at
• 2:56
  145%. Is that sustainable? No. He's actually come
• 2:59
  out recently and said, that's absolutely unsustainable. It will not be there. It will probably
• 3:03
  settle to somewhere around 20 to 30%. Now,
• 3:06
  is that still effective? Probably not. But what is the United States trying to
• 3:09
  do here? What they're trying to do is they're trying to actually claw back some of
• 3:12
  the manufacturing they've shipped out to China and other countries. And
• 3:16
  they're trying to become more of a manufacturer and less of an importer. less
• 3:19
  of a consumer, and they want China to become more of a consuming economy
• 3:23
  so they can actually start balancing the trade deficit. Will
• 3:27
  China play ball? Well, that's the question. It seems to me like
• 3:30
  China doesn't need to, because the reality is, and people don't realize this,
• 3:33
  that only 3% of China's GDP comes
• 3:36
  from USA trade. which means only 14% of
• 3:41
  their exports are actually to the USA. And it doesn't mean
• 3:44
  that they're not going to export to the USA because recently in the news, I saw that
• 3:47
  Sheen, which is actually exporting to the USA, has
• 3:51
  increased their prices by 377%. And
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  what is really funny about that is that their prices are
• 3:59
  still more competitive after a 370% increase than
• 4:03
  most other items in the world. So do you think it's going to have an impact on
• 4:07
  some Chinese goods? Probably not. They're so competitive. But will it
• 4:10
  have an impact? Well, it will in some areas and for some goods. And that's why
• 4:13
  both countries need to resolve it. But what's happening, if you've never read the book,
• 4:16
  The Art of the Deal, Donald Trump is going in full port
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  into a ridiculous price frame on the
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  Chinese saying actually it's going to be 145% tariffs, which is ridiculous.
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  But what he's going to do now is he's going to slowly bring that back down and
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  it's going to seem like 20% is a nice round number for
• 4:34
  them and that's what he wanted in the first place. So his objective is
• 4:37
  to get 20% tariff on imports from China. Will China come to the
• 4:40
  table? We'll see. Now, if they don't, what could possibly happen
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  is an absolute disaster, which will be the decoupling from
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  China and the United States as trade partners. How will
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  that impact you? How will that impact you? Well,
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  it depends where you live. If you live in the United States, it
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  will impact you quite heavily because what will happen is goods
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  will start to rise in price and inflation will go up. So all those
• 5:04
  wonderful Chinese goods that you're enjoying there in the United States, they're going
• 5:07
  to go up in price by a lot because either they're going to get manufactured in
• 5:10
  the United States where they can pay higher wages, and there's no supply
• 5:14
  chain efficiencies there like there are in China. So you're gonna pay three or
• 5:17
  four times what the current iPhone price is if
• 5:20
  they actually decouple. And that's gonna be a short to medium
• 5:24
  term problem that will impact your back pocket literally because
• 5:27
  you will be buying things that are actually worth or priced a lot more than what they
• 5:31
  are today. But also it'll cost about a million American jobs in
• 5:34
  importing and exporting. And obviously if you're in that sector, it's gonna be a problem
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  and it will start to actually exacerbate the current trajectory
• 5:42
  that the United States is on, which is that towards a recession. There
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  needs to be some sort of balance or impasse here where there can be some things manufactured
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  in America and some things consumed in China. And we'll see
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  a resolution, but I can't see the American people making
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  shoes. I just can't see that happening. It's not going to happen.
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  But if you want it to happen, that's great, but you'd be prepared to
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  be paid $200 a month. So good luck with that.
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  I'm sure it's not going to happen that way. For the average person, the trade
• 6:09
  war is not something to worry about, because most
• 6:12
  people aren't invested in stocks. Most people don't even know what stocks are.
• 6:16
  So they see the portfolios of other people falling and rising. They
• 6:20
  see all this uncertainty on the news. And it doesn't really affect them,
• 6:23
  because their portfolio might be just $1,000, or it might not
• 6:26
  be much. Or most people aren't invested in shares. They're in property. And
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  so you won't see a massive shift in your own financial situation
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  unless you are in a country like the USA that if
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  they don't resolve this, you'll see goods a lot, they're
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  a lot more expensive. You'll just pay more for things you're already using. And
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  I think it's really interesting in the United States because there seems to
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  be on X, which is where I spend a lot of time, Probably
• 6:51
  too much time on X. There seems to be a huge amount
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  of ignorance from people in the United States. And by the way, I love America. I've
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  got lots of friends in America. I love America. I'm pro-America, right?
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  But there seems to be a lot of ignorance around when people say,
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  oh, good, we don't need that rubbish from China. People don't realize that is from China.
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  They have no, I just, I'm like, yeah, how much
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  stuff is from China? And so if they don't resolve it, you will
• 7:15
  be paying a lot more in the United States for basic goods. And the USA
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  cannot manufacture the things that China can, because they don't have the same supply
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  chains. They don't have the same processes. They don't even have the same wages, right?
• 7:25
  What are people going to do, make Nike shoes in America? They're not going to sign
• 7:28
  up for that. So in these scenarios where there's uncertainty, so
• 7:32
  whether it's COVID, it's a tariff war, it's an invasion
• 7:36
  from Russia to Ukraine, it's whatever particular world
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  event is impacting the markets, and the news is talking about
• 7:43
  it, whenever that happens, my Instagram gets more messages.
• 7:47
  And my friends, I have friends call me, literally call
• 7:50
  me, I text me, call me, phone me and they always
• 7:54
  only phone me or call me or text me when there's absolute uncertainty and
• 7:57
  fear. And there's two things I want to know. One, will they
• 8:00
  be okay? And two, what should
• 8:03
  they buy? As in like what should they deploy their money into? It's a weird
• 8:07
  thing. I'm like, well, just because there's a world event doesn't mean you should then
• 8:10
  start investing. Like, it's almost the worst
• 8:13
  time to start because there's so much uncertainty. And even Warren Buffett doesn't
• 8:17
  deploy a lot of money when there's a lot of uncertainty. He actually doesn't buy
• 8:20
  the dip, so to speak. He looks for businesses he can buy that are
• 8:24
  priced a lot less than they're worth. And if that happens to be in a crisis, sure. It's
• 8:29
  very hard to deploy money when there's a crisis, because there's so many
• 8:32
  moving parts happening, you don't know where it's going to settle. So you can't
• 8:35
  really deploy money. You don't know when it's going to fall. You don't know when the bottom is.
• 8:39
  You don't know a lot of things. And so sometimes the best thing to
• 8:42
  do is to do nothing and just let the dust settle. And that's what I
• 8:45
  did. So people say, oh, Lloyd, I bet you bought the dip. I'm like, no. We
• 8:49
  were already positioning our portfolio with great businesses for the right prices. And
• 8:52
  what had happened was we already made 25% for the year to date. So
• 8:56
  by the time the tariff war came and collapsed them to 15%, which is where it's at now,
• 9:00
  I've already beat the market for the year, even after the trade war. So I
• 9:03
  don't position my portfolio for crises. I position it for
• 9:06
  long-term growth in great businesses. And that's what allows me to move
• 9:09
  through crises. That's how I approach my own portfolio, my own investing. Whereas
• 9:13
  most people I've noticed, they're so reactive. That's why my Instagram blows up
• 9:17
  when there's a crisis. People are like, what should I do now? I'm like, do what you were doing last week. If
• 9:21
  your investment approach is effective, it shouldn't matter
• 9:24
  if there's a crisis. If you are following that strategy and there's
• 9:28
  a crisis and you can buy more for cheap, try and execute more, but
• 9:31
  it shouldn't change your strategy. No way. And I think what
• 9:34
  people are trying to do mistakenly is they're trying to create a strategy out of a crisis. And
• 9:38
  that's very much like trying to build a financial plan out of tax deductions alone.
• 9:42
  It's like one small section of what you ought to be doing. And it's not that.
• 9:45
  How you should approach your investing in money management and financial plan
• 9:49
  yourself is the same through all
• 9:53
  sorts of different seasons, wars, natural disasters. personal
• 9:58
  grievances, loss, whatever you were doing prior, typically
• 10:02
  it should be fairly similar. Underspend your income, buy
• 10:05
  good quality assets, learn how to make extra money, show up,
• 10:09
  do the work, be patient, all those things you probably don't want to hear. They're what's
• 10:12
  still important before, during, and after any crisis. So before
• 10:16
  you send a DM for help, just ask yourself, what are
• 10:19
  you doing before the crisis? Because that's what you should be doing right now. Just quickly, if
• 10:23
  you're ready to take control of your finances but feel stuck on where to start,
• 10:26
  I have a solution. My book Money Bias Happiness simplifies
• 10:30
  investing and wealth building with practical steps to help you achieve financial
• 10:34
  peace. Get your copy via the link in the show notes and let's get your
• 10:37
  money working for you. Now back to the episode. So while
• 10:41
  this trade war is happening, how can you approach your investments? Or
• 10:44
  are there any tricks you can take or trades you should make or things
• 10:48
  you should do to take advantage of this? And the answer is no.
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  Very difficult to invest in very uncertain times. The best
• 10:56
  thing you could probably do is to stick with the strategy you're
• 11:00
  already with, but buy more for less. So for example, if
• 11:03
  you happen to be indexing or you happen to be buying real estate
• 11:06
  or whatever it is you're doing with your money, if you see an
• 11:10
  opportunity to buy the same thing for a lower price, it makes a lot of sense to
• 11:13
  do it. But this particular scenario wouldn't
• 11:17
  dictate a strategy, meaning you shouldn't base
• 11:20
  your whole strategy around what's happening. So stick with what you know,
• 11:24
  keep going with what works, and if you can pick up assets for a lot cheaper
• 11:27
  because of the uncertainty, it makes sense to do it. How will
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  it impact you if you're in China? I'm not as certain as to
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  what it could do there, but China's economy can manufacture and
• 11:37
  consume at the same time. So as long as they issue stimulus and
• 11:41
  they start getting their people to spend money, they can actually probably weather the storm
• 11:44
  a lot easier, which is why President Xi from China is
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  not coming forward and bending over backwards for Donald Trump,
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  because he knows he's got more leverage, in my opinion. So if you're living
• 11:54
  in China, it's probably not as bad. If you're living in Europe, it could
• 11:57
  be not a boom, but it could help you because
• 12:01
  China may then steer a lot of their cheap products into Europe to get rid
• 12:04
  of the inventory. So you may be experiencing in Europe cheaper products
• 12:08
  than what you're getting now. So that could be a bit of an advantage. But
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  if they don't, if Europe doesn't, ban together and start trading effectively
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  with the other nations, particularly the United States, there might be a short-term problem. In Australia, we're
• 12:19
  pretty insulated from it in Australia because our biggest resource
• 12:22
  that we export is usually minerals, and China is one of
• 12:25
  our biggest export parties, if not the biggest. We also export to the United States.
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  But the United States is not placing tariffs so much on us. There's a 10% tariff,
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  I believe, on things like coal. There could be certain
• 12:36
  resources that they're tariffing us on at the moment, natural gas. But
• 12:40
  it won't have a huge impact on people in Australia. What may have an impact is
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  if it does curtail the American economy
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  and the Chinese economy and they start to actually grow less effectively,
• 12:51
  if it starts to impact their growth, then we have a knock-on effect from
• 12:54
  that. So they will probably require less iron ore from us. They'll
• 12:58
  probably require less natural gas. And so it's difficult to
• 13:01
  see where it's going to sit or what's going to happen, but Australia will
• 13:04
  be fairly insulated from it because we're still going to export a
• 13:08
  fair bit of stuff irrespective of the impact it's going to have. I
• 13:11
  don't think it's going to be a huge issue for Australia. Yeah, we're pretty safe
• 13:15
  here from it. When a world event happens like this, not only do I get
• 13:18
  DMs, texts, and phone calls, but I do get a lot of comments on
• 13:22
  Facebook posts and Instagram. And one
• 13:25
  of the things people ask is, again, what should I buy? How
• 13:29
  do I get into shares? manage my money
• 13:32
  better, when do I start a side hustle? These are all great questions. And hopefully
• 13:36
  a crisis like this prompts the questions, which obviously it does. To
• 13:39
  answer that question, it's always the same answer. And it's financial
• 13:43
  education. It's always financial education. That's
• 13:46
  always the answer. Because if I told you what to
• 13:49
  buy and I told you what to do, what I'm doing is giving you a fish. And
• 13:53
  if I give you a fish to eat for a day, you'll need me to eat
• 13:56
  every single day of your life. And what I prefer for you to learn is how
• 14:00
  to fish Meaning, what are shares? What
• 14:03
  is investing? What are good
• 14:06
  quality assets? What is a good side hustle? How do I do? These are
• 14:10
  good questions, but I want you to answer them yourself through education. That's why I wrote
• 14:14
  books. And that's why. you can get them because inside
• 14:18
  them are the answers that you seek. It's just that people
• 14:22
  aren't prepared to do the work and if that's you, I'm sorry, you're never going to get ahead.
• 14:25
  But if you're prepared to spend a bit of time learning and then implementing, you
• 14:29
  will absolutely get ahead and financial education is always the best next
• 14:33
  step. Now you understand kind of what's happening, what I anticipate
• 14:37
  will happen between the two countries this week even. And
• 14:40
  we're recording this episode and it's changing day by day by day. So by the time this goes
• 14:43
  live, maybe it's changed a little bit. But what I anticipate
• 14:47
  happening is the United States will realize that they don't have the cards they
• 14:50
  thought they had. And rather than throw the world into a deep financial
• 14:54
  crisis, they will probably start to bring the tariffs back from China.
• 14:57
  China will come to the table and start talking to the United States. They'll negotiate tariffs,
• 15:01
  something more reasonable at 10% or 20% for certain imports on
• 15:05
  certain goods. And the world will start to steady away, and
• 15:08
  the markets will recover. Now in the short term, while they're discovering what's
• 15:11
  gonna happen or while they're talking and negotiating, your share portfolio
• 15:15
  will go up and down. No doubt about it. Will it affect the real estate
• 15:19
  market? Probably not. It's not as volatile. Will it affect your share portfolio?
• 15:22
  Probably yes. But long-term, I think they're gonna come to
• 15:26
  some sort of agreement and you'll see a lot of this volatility come away. All
• 15:30
  right, so. That's how it's going to affect things in the short term.
• 15:33
  That's how it's probably going to affect your money situation being where you live. And
• 15:36
  that's what's happening at the present time when it comes to the USA
• 15:40
  and China on their tariffs. Is there a reason to worry? Probably
• 15:44
  not. So you can rest assured all will be well, I'm sure, but
• 15:47
  time will tell and the proof will be in the pudding. Now, how will this affect
• 15:51
  your share portfolio? Well, it's definitely going to go up and down. Because the share
• 15:54
  market doesn't like uncertainty. And so whenever there's uncertainty in
• 15:57
  the market, you'll see a rapid fall in your portfolio and a rise. Just
• 16:01
  the other day, after Liberation Day on the 2nd of April, my portfolio fell
• 16:05
  about $400,000 in about three days, which was exciting
• 16:09
  to say the least. And I shared it onto my Instagram. I call
• 16:12
  it lost porn. So if you see me share it to my Instagram, it's all these losses. There
• 16:15
  was hundreds of thousands of dollars in losses. I'd like to share that. Because you
• 16:18
  have to understand when you're building a portfolio, the price is irrelevant. What
• 16:22
  you're really buying is businesses. And will the businesses change? Well, I
• 16:25
  happen to buy businesses that will have some impact from the tariffs, but
• 16:29
  not a drastic impact. Because when you invest, you have to invest in
• 16:32
  really sturdy businesses that can actually move through any
• 16:36
  economic environment. I'm talking wars, tariff wars
• 16:40
  or otherwise, natural disasters. You have to be invested in
• 16:43
  businesses that stand the test of time. And because our portfolio is positioned like
• 16:46
  that, I can still sleep at night whilst the lost point is happening as
• 16:50
  well. So how will your portfolio act in the next few days
• 16:53
  or next few weeks? It's definitely going to go up and down just like mine, but the
• 16:56
  most important thing is to ignore it and make sure you're positioned for
• 16:59
  the worst case scenario. So I know, for example, that if the China
• 17:03
  and USA trade war doesn't come to a resolution, and
• 17:07
  they both decouple, I know that we'll still do very well
• 17:10
  long term. And that's the most important thing for you to understand. That's why
• 17:13
  you don't use leverage. That's why you don't trade. You've got
• 17:16
  to be so careful, because the only person that knows what's going to happen is
• 17:20
  seemingly Donald Trump. And I don't think he even knows what's happening. So you've
• 17:24
  got to plan for the worst. And this is a great example of
• 17:28
  what happens when you don't. You're asking questions all
• 17:31
  the time, you're worried, you're getting sleepless nights. And if that's happening, you
• 17:35
  know, without a doubt, you've positioned your portfolio the wrong way. Hope
• 17:38
  that makes sense to you. That's what's happening. That's how it's affecting your money. If you've enjoyed
• 17:42
  the episode, leave us a comment below and ask a question or
• 17:46
  share this with a friend. Hit the subscribe button on YouTube. And
• 17:49
  if you're listening on Spotify, I hope you're enjoying the show. Leave us a five-star review and
• 17:53
  we'll see you on the next episode of the Money Grows on Trees podcast. Thanks
• 17:57
  for listening to Money Grows on Trees. If you enjoyed the episode, leave a
• 18:00
  five-star review on Apple Podcasts and Spotify and subscribe
• 18:04
  to us on YouTube so you never miss an episode. And if you're serious about
• 18:08
  building wealth, make sure to check out the links in the show notes and follow me
• 18:11
  on all social media platforms, at LloydJamesRoss for