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Of all the disruptive policies President Trump has made so far in his second term, his hardball strategy to reform global trade has received the most scorn.
His detractors call it "non-sensical" and "hamfisted".
That it's based on faulty logic, poor math, and has done grave injury to relations with our closest allies.
They fear it's actually driving the rest of the world into China's -- our chief competitor's -- arms. And as a result, substantially damaging America's future prospects.
Is this true?
And is this the reason why bond yields are rising, the dollar is weakening, and gold is soaring?
And most importantly, will China end up drinking America's milkshake?
For answers, we're fortunate to welcome back to the program Brent Johnson, CEO & Portfolio Manager at Santiago Capital and publisher of The Macro Alchemist.
#china #tradewar #dollar
0:00 - Trump’s deliberate power strategy 4:29 - Likelihood of trade plan success for America 6:02 - Timeline & indicators for plan’s success 9:07 - Geopolitical goals: MAGA & China containment 11:06 - Trump’s communication fail on China strategy 17:37 - Rationale for rapid, heavy-handed trade approach 29:22 - China’s weakened position vs U.S. resilience 38:37 - Historical parallels to Nixon’s gold window closure. 43:46 - Long-term geopolitical cycles & Rome analogy 49:01 - Fourth Turning & non-binary thinking 53:17 - Post-settlement U.S.-China trade vision 58:24 - Dollar & gold outlook for 2025. 1:03:55 - Market forecast & 2022 analogy 1:06:23 - Investment strategy amid volatility 1:09:48 - Resources to follow Brent’s work 1:13:17 - Parting advice for retail investors _____________________________________________ Thoughtful Money LLC is a Registered Investment Advisor Promoter.
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Trump's aggressive trade and tariff strategy represents a deliberate reordering of global economic power rather than chaotic policy-making, and despite short-term volatility, the US retains sufficient structural advantages to maintain geopolitical dominance over China and other competitors through the transition to regionalized trading blocs.
- Trump's tariff policy is methodical power consolidation using the US consumer market as leverage, not improvised chaos
- China faces intractable challenges (debt, demographics, real estate crisis) that limit its ability to replace US dominance even if US withdraws from global markets
- The dollar's fundamental role as settlement currency for global debt means capital will continue flowing to US assets despite short-term volatility
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When analyzing where capital will flow over the next 3-5 years, investors must consider what everyone else will think, not just their own conviction, because capital flows determine market performance.
“the question you have to ask yourself is what do you think everybody else is going to think because it's where the capital flows go that determines how markets are going to perform”
All of the US's problems and mistakes do not confer sainthood or superiority on its competitors; it is a common error to assume that criticizing American leadership and policy failures automatically means the rest of the world is run by geniuses.
“all the sins of the United States do not bestow saintthood on its competitors... it's very easy to look at our leadership and all the mistakes we've made and say, 'God, these guys are a bunch of clowns, you know, and then automatically think that the rest of the world is run by geniuses.' But that's just not the case.”
It is not credible that the US assets will continue to fall AND the dollar will continue to fall while asset prices and currencies rise in Europe and Asia; if that pattern persists, Johnson will have to reassess his entire framework.
“I don't think we're going to go into an environment where the US assets continue to fall, the US dollar continues to fall, but asset prices and currencies rise in Europe and Asia. That just does not make any sense to me. Could it happen? I'll have to if that happens, I'll have to kind of reassess and figure out what to do.”
When the US allies got frustrated with Nixon and France especially began siphoning out US gold reserves, Nixon closed the gold window; this was not a response to enemies but to allies losing confidence.
“that was a time period where it wasn't America's enemies getting frustrated with it. It was America's allies getting frustrated with it... when the when the when the US allies started to say, 'Hey, you know what? We're just not comfortable with the way you're running things anymore.' And they started to, you know, France most uh sternly uh said this and they they they took their gold away. There was rumblings that that England might do the same or Germany might do the same.”
If countries were forced into complete self-sufficiency and had to produce everything internally, the US would have all it needs (though not all it wants) while the rest of the world would not be able to meet internal demand; the US has the natural resource base, manufacturing capacity, and capital that others lack.
“if every country had to be self-sufficient... the United States has everything that it it has everything that it would absolutely need. It might not have everything that it wants, but it would have everything that it needs. And I don't think that can be said for the rest of the world.”
The best investment approach is to remove personal preferences and emotions from analysis, focus on what is most likely to happen rather than what you want to happen, and maintain an open mind by listening to different perspectives before forming conclusions.
“try to keep an open mind. don't get too, you know, tied to one school of thought or one way of thinking about things... try to take your personal wants and desires out of your analysis and just figure out what's most likely to happen.”
Institutional decline and power transition happen over decades, not months or years, and those who plan for a 6-month crisis or reset are missing the timeline at which these changes actually unfold.
“It takes a long time for these things to play out... this is going to take years to play out... in today's instant gratification society, they want it all over in the next six months... that's just not going to happen.”
Globalization is the historical anomaly, and mercantalism is the norm; the pendulum has swung toward mercantalism far faster than most people anticipated.
“Michael Every has been saying this for a long time. In fact, he was predicting it for a long time. You know, ringing the bell, saying that globalization is the anomaly and and mercantalism is much more the norm. Um and and it certainly seems the pendulum has swung very quickly towards mercantalism way faster than most people thought.”
The last 50 years of globalization and peaceful trade have been historically anomalous; for most of history, economics was driven by power dynamics and political authority; investors in developed markets must now adopt the geopolitical and political risk analysis frameworks that emerging-market investors have always used.
“for much of history, it wasn't peaceful and it was very much based on power and it was very much based on the woke the local uh king or queen or governor saying this is the way it is... I think many of us grew up in kind of this golden age of peace and tranquility... I think in many ways, those days are gone.”
The tariff/trade conflict is fundamentally a power play to force other countries to choose sides in the US-China contest, not primarily about achieving objectively 'fair' trade deals or correcting trade imbalances in a traditional economics sense.
“there's two primary goals. Number one, make America great again. Whether you agree with that, what that means, it doesn't matter. That's what he wants to achieve. When I say he, I mean Trump. And the secondary thing is the containment of China. I I think everything is ultimately about making America great and containing China. Um when we talk about Mexico and Canada, we're really talking about China. When we talk about Europe, we're really talking about China.”
Trump's tariff strategy and trade reordering represents a deliberate consolidation of US control and power, not chaotic decline—a shift from globalization frameworks to 'real politic backed by financial warfare' where access to the American market is the ultimate pressure point.
“This is not the chaos of decline. This is not the flailing of a fading empire. This is the world's dominant power consolidating its control unapologetically, aggressively, and with the full weight of its economic engine behind it... Real politic backed by financial warfare.”
Investors and asset managers who have focused on 'developed markets' only on pure financial metrics (cash flow, NPV) without incorporating geopolitical risk analysis will need to fundamentally rethink their approach, since the era of separation between economics and power is ending.
“I think many people in my profession over the last 50 years have had the luxury of... just looking at the numbers... I think those who focused on emerging markets... have always had to put a certain level of political risk... I think those who focused on it just being a numbers game... are having to rethink.”
Trump's tariff policies were not a surprise to those paying close attention; he was vocal and consistent throughout his campaign and first term about doing exactly what he is now doing, making the current pivot entirely foreseeable.
“if you're surprised by this then you weren't paying attention because uh un unlike many past um you know politicians Trump has been incredibly consistent and transparent um and quite vocal that he was going to do pretty much exactly what he's done here.”
China cannot afford a scenario where the US successfully containing it and cutting off market access, because China's revenue collapse would be catastrophic given its extreme leverage (2-3x more debt growth than the US) and lack of external demand for yuan; China must either sell internally at lower prices or face currency debasement.
“China cannot sell all of their inventory internally or even locally in their region at the same prices that they could sell them to the United States... their revenue is going to fall... China has borrowed a lot more money than the United States has... their economy has levered two or three times more than the United States economy”
Rome's decline from 120-60 BC exhibits uncanny parallels to modern US (illegal immigration, inflation, political infighting, foreign wars) but took 60 years of oscillation between strengthening and weakness before the republic fell; the US is unlikely to collapse overnight and will likely oscillate for years before any systemic change.
“there's a book called The Storm Before the Storm... basically a history of Rome from the year 120 to 60 BC... it was the, you know, 60 or 70 years before the fall of the Roman Republic. And what's really interesting is during that 60-year period, the similarities between that and the United States are uncanny... Whether it was illegal immigration, whether it was inflation, whether it was political infighting, whether it was the wars on the other side of the world... But in that 60-year period, there were so many periods where it went this way and it went that way... Even though it was steadily declining, it's not a straight line.”
Monroe Doctrine framework—focusing US strategy on the Western Hemisphere while disengaging from global military commitments in other regions—is increasingly attractive and sensible.
“I'd love to keep digging into this sort of regional trading blocks. Um I've had a lot of people talk about how they they do think Trump sort of has a a modern Monroe Doctrine view of the world which actually you can you can argue makes a lot of sense, right? Which is hey let's disentangle ourselves... it's so obvious. Anybody who denies this is just denying reality. This is this is clearly what he's doing.”
Capital allocation is increasingly constrained by political decision rather than individual investor choice; investors will be barred from certain allocations and mandated into others; the era of unfettered free market choice for capital deployment is ending.
“investors are not going to be as free to choose as they have been in the time period I've been growing up right political decisions are going to be made about your capital that's just reality you know you are going to be barred from doing certain things you are going to be mandated to do certain things”
Those who plan on a global reset or debt collapse within 6 months are wrong; the more realistic case is that volatility and uncertainty will extend over 4-5-6 to 10+ years with alternating periods of apparent US strength and apparent Chinese/other-power strength.
“those who plan on that and that's their number one, you know, base case that this all comes down in the next six months, I I think I think that's just wrong... my prediction is there will be moments of time over the next four, five, six, 10 years where it will look like the US is doing really well. And then there will be moments of time where it looks like the rest of the world has the upper hand. And then it will go back and forth”
When global liquidity stress occurs (as in 2008 and 2020), the dollar initially falls as assets are sold and repatriated home, but if stress intensifies into crisis, the dollar rebounds sharply as global liquidity demand overwhelms local needs; current dollar weakness follows this pattern and may reverse if markets deteriorate further.
“The reason the dollar is falling and the reason US asset prices have been falling is because the US has sucked up all of the world's capital over the last several years... when that happens, what do you do? You sell your assets and you repatriate them home... So, how does that work? Well, they sell US dollar stocks or bonds. They get dollars in exchange and then to send them home they exchange them to euros or pounds... as a result US asset prices fall and the US dollar falls. Same thing happened in 2008 and in 2020. But then if it continues to get a lot worse and we go into a real crisis, a real liquidity crisis, that's when both times the dollar rebounded very quickly”
Capital allocation decisions are increasingly being constrained by political and governmental mandates, with individuals and companies prohibited from certain investments and mandated into others, representing a transition to mercantalism from free market capitalism.
“investors are not going to be as free to choose as they have been in the time period I've been growing up right political decisions are going to be made about your capital that's just reality you know you are going to be barred from doing certain things you are going to be mandated to do certain things”
Wall Street benefited from 50 years of globalization and unquestioned US dominance, and is only now discovering that the status quo has shifted, creating volatility that Main Street working classes experienced years earlier.
“success might not be measured by the stock market going back to all-time highs... It's just that now it's becoming more of a front page crisis because Wall Street's feeling it rather than Main Street.”
Mercantilism feeds certain parts of the economy while starving others, based on national priorities, whereas unfettered free markets allow pure economic optimization.
“Mercantalism is... you feed parts of your economy and you may starve parts of your economy... based on national priorities... unfettered free markets that we're so used to... doesn't nearly apply as much in a mercantalist world.”
Trump's tariff and trade strategy is not chaotic or the flailing of a declining empire, but rather the world's dominant power consolidating control through financial warfare and leverage over market access, employing real politic instead of rules-based cooperation frameworks.
“This is not the chaos of decline. This is not the flailing of a fading empire. This is the world's dominant power consolidating its control unapologetically, aggressively, and with the full weight of its economic engine behind it.”
If countries are forced to choose between the US and China, they will not align with China, because the US consumer market is so large and essential that no nation can afford to lose access to it, and because China faces structural challenges that make it an unreliable long-term partner.
“I do not think that they are running into the arms of China and I think that will be borne out over the next year or the next couple years however however long this whole thing plays out... I think once you know when people really have to make a decision when countries really have to make a decision I don't think they will choose China over the United States for a whole number of reasons”
The US dollar maintains structural advantages over alternatives like the yuan because global markets require dollars to service US dollar-denominated debt and conduct international trade invoicing, while zero external demand exists for yuan outside China.
“there is zero external demand outside of China for yuan. Nobody outside of China needs the yuan. But as of it stands right now today, everybody outside the United States needs dollars. Now, that may change someday. And I know many people are working on ways to change that. But right now, today from a purely hardcore perspective, the rest of the world still needs dollars to operate on the global stage. And if nothing else, just to service all their US dollar debts and US dollar invoices uh that they trade in.”
Trump wouldn't be in the White House if the crisis hadn't already started among Main Street populations; his election is a symptom of pre-existing pain in working-class communities, not the cause of current economic disruption.
“Trump wouldn't even be in the White House if the crisis had not yet started. In other words, for somebody like Trump to get elected on a populist platform, there had to already be a large group of people in crisis to some extent or another. That is why he is in the White House. It's just that now it's becoming more of a front page crisis because Wall Street's feeling it rather than Main Street.”
Globalization and rules-based international cooperation were the anomaly in human history; mercantalism and power-based geopolitics are the historical norm, and the current transition simply reflects return to historical baseline.
“I think Michael Every has been saying this for a long time. In fact, he was predicting it for a long time... globalization is the anomaly and and mercantalism is much more the norm... the pendulum has swung very quickly towards mercantalism way faster than most people thought.”
A Monroe Doctrine framework for the US (focusing on the Western Hemisphere) is strategically sensible and reduces military entanglement abroad while preserving security and trade opportunities within the hemisphere.
“I'd love to keep digging into this sort of regional trading blocks. Um I've had a lot of people talk about how they they do think Trump sort of has a a modern Monroe Doctrine view of the world which actually you can you can argue makes a lot of sense, right? Which is hey let's disentangle ourselves. It's so obvious. Anybody who denies this is just denying reality. This is this is clearly what he's doing.”
Investors must remove personal preferences and moral judgments from analysis and simply forecast what will happen; the job is to understand likely outcomes and profit accordingly, not to pass judgment on the morality of current events.
“whenever I come at this I'm coming at this from a asset allocation money-making perspective. I it's not my job to pass moral judgment on what's happening. is my job to remove my emotions from it. Just look at what's going to happen, figure out what's going to happen, and then try to make money off of it.”
Capital flows, not ideology or moral preference, determine market performance and alliance formation; investors and policymakers should think mercenarily about where capital will flow, not about where it 'should' flow.
“whenever I come at this I'm coming at this from a asset allocation money-making perspective. I it's not my job to pass moral judgment on what's happening. is my job to remove my emotions from it. Just look at what's going to happen, figure out what's going to happen, and then try to make money off of it.”
Money at its core is a projection of power, comparable to the biggest goon in the prison yard whom everyone must obey as long as he can back up his statements with brute force.
“What really is money? At its basis core, what is it? It really is a projection of power... the biggest goon in the prison yard... everybody has to do what he says as long as he can back up his statements with his brunt.”
Nixon's 1971 decision to sever the dollar from gold was not a sign of weakness but rather a reassertion of US power: when allies refused to accept dollar hegemony on the old terms, the US unilaterally changed the rules, and allies had no choice but to accept because they depended on US markets.
“Nixon severed the final ties... basically the US got boxed into a corner... other countries started calling that by siphoning out our gold... Nixon finally just said... 'I'm shutting the gold window'... Everybody eat it. Right? You're stuck with us.”
The transition to regional trading blocs will replace global free trade; China will likely lead its region, Germany or Europe will lead another region, the US will lead the Western Hemisphere, with more intra-regional trade than inter-regional trade but continued inter-regional commerce.
“the world is going to go from being one big economy and globalization to more regionalized alliances and more regionalized economies... China would most likely be the, you know, the head of its region... Germany's kind of the leader of Europe... the US would be kind of the head of the the Western Hemisphere... I think there will be more trade intra region maybe than there will be between regions”
The current crisis affecting markets was not created by Trump but rather Trump gained office because of a pre-existing crisis; Main Street was already in crisis before tariffs started; Wall Street is now experiencing similar crisis, making it more visible but not newly created.
“Trump wouldn't even be in the White House if the crisis had not yet started. In other words, for somebody like Trump to get elected on a populist platform, there had to already be a large group of people in crisis to some extent or another... But I think that I think to blame everything on Trump and tariffs is to misunderstand the environment completely... Now it's becoming more of a front page crisis because Wall Street's feeling it rather than Main Street.”
The current volatility and tariff-driven chaos is not exceptional and will not result in imminent collapse; even if Trump is removed from office, the direction toward China containment and mercantilism is locked in because the 'genie is out of the bottle' and broader political and economic forces support it.
“I think the genie is out of the bottle and I think that's where the you know the dice have been thrown and this is what's happening. Mhm. Um so you know what's interesting about this is um you know you you said look if if you're surprised by this then you weren't paying attention because uh un unlike many past um you know politicians Trump has been incredibly consistent and transparent um and quite vocal that he was going to do pretty much exactly what he's done here.”
Nixon was similarly unpopular and not liked as a 'grandfatherly type' like JFK, yet implemented the shock of breaking the dollar-gold link, which was tremendously disruptive but ultimately worked for US interests.
“Nixon wasn't really super liked. Nixon was kind of a bully. Nixon didn't talk as prettily as prettily. I don't know. Is that a word? Any He doesn't talk as nicely as as JFK, right? He didn't come across on television as the nice warm grandfatherly type. Um, do we know anybody else that's kind of along those same lines right now?”
Trump was relatively clever in his approach to China, not railing against it directly but instead blaming US leadership and business leaders for allowing China to 'beat the hell out of the US,' thereby avoiding alienating voters while still preparing them for confrontation.
“I I think he's actually been pretty clever and I know nobody ever wants to ascribe anything positive to him, but I think he has been relatively clever with the way he has dealt with China even in his first term and now and that he's always said, 'I don't blame Z. I don't blame China. They work really hard. They've done a great job. They've raised themselves out of poverty. And he never really speaks badly about China other than that they've beat the hell out of the US. Right.”
China will not become the dominant power despite its rise, because it faces intractable structural problems: a balance sheet recession, a real estate crisis where most citizens' wealth is concentrated in property, rapidly declining demographics with shrinking population, and much higher debt levels relative to economic growth than the US.
“China's got a lot of things to deal with right now. like it it you know Trump Trump may be picking a good time to to to push back on China here because China's already kind of on its heels being stuck in a in a balance sheet recession having you know this incredibly morbid real estate industry which is where the majority of their citizens hold their wealth. Um it's got a big demographic problem. the population there is actually shrinking now”
The dollar weakened 5% over a two-week period in April 2025, but this is consistent with historical patterns from September 2008 and February 2020 where similar capital repatriation occurred due to the monetary system's design, not a fundamental shift in dollar dominance.
“gold dollar has had a huge move down... the dollar went down 5% over a two-week period. What's really interesting and so people say this is proof it's different this time, but the fact is is this has happened a couple other times. And the reason that this has happened is because of the design of the monetary system.”
A post-Trump, post-tariff world would likely still pursue China containment and mercantalist restructuring because the genie is out of the bottle and the structural incentives (wage stagnation, manufacturing loss, geopolitical competition) remain regardless of who is president.
“And I actually don't think if if if Trump were somehow removed and he was no longer the president, I think this would still be the game because I think the genie is out of the bottle and I think that's where the you know the dice have been thrown and this is what's happening.”
The dollar remains the dominant global reserve currency because the rest of the world needs dollars to settle international trade and service US-dollar-denominated debt; there is zero external demand for yuan, making the dollar structurally superior to any alternative currency in the near-to-medium term.
“The reason that that would hurt China more than it hurts the United States is there is zero external demand outside of China for yuan. Nobody outside of China needs the yuan. But as of it stands right now today, everybody outside the United States needs dollars. Now, that may change someday. And I know many people are working on ways to change that. But right now, today from a purely hardcore perspective, the rest of the world still needs dollars to operate on the global stage. And if nothing else, just to service all their US dollar debts and US dollar invoices uh that they trade in.”
It is not credible to argue that the rest of the world can walk away from their debts with no consequences while the US cannot walk away from its debts with no consequences; either both can or neither can.
“I say, okay, well, the rest of the world has all that debt as well. What are they going to do? And they say, well, they'll just walk away from it. Okay. Well, why does the rest of the world get to walk away from their debt with no consequences? But the United States can't walk away from its debt with no consequences.”
Russell Napier's prediction that bank heads would fire developed market specialists and promote emerging market specialists to developed market desks was prescient, as developed markets are now operating with the complexity and political risk of emerging markets.
“Russell Napier made this call four or five years ago. He said, 'If I was the head of a major bank, I would fire the developed market heads and I would promote the emerging market guys to the developed market desks.' And it's I mean, every day that becomes more and more preient.”
Investors should consider whether they would allocate capital overseas (China, Europe, Brazil, Argentina, Africa) for the next 3-5 years; if not, capital must flow to the US by process of elimination.
“You have to invest for the next three to five years and you have to pick a region. Where do you put your money? Are you gonna would you send your money to China right now? Would you send your money to Europe right now knowing that what Europe has to deal with? Would you send it to Brazil and Argentina for the next five years? Would you send it to Africa? Right? Would you send it to India?”
If global markets experience sharp, severe downside, the dollar will rebound strongly as global liquidity crises force all market participants to seek dollars, reversing the current pattern of dollar weakness.
“But then if it continues to get a lot worse and we go into a real crisis, a real liquidity crisis, that's when both times the dollar rebounded very quickly and went up very quickly. And that's the same thing I would expect to happen again. If if we have more downside, hard, sharp, and severe downside in global markets, I would expect the US dollar to start, you know, making a rise higher as that global liquidity starts to trump the local liquidity needs.”
Trump can be seen as both a continuation and an escalation of recent US foreign policy precedents (Nixon, Eisenhower's warnings about the military-industrial complex) rather than as a radical departure.
“A lot of people talk about how they think Trump sort of has a modern Monroe Doctrine view of the world... Anybody who denies this is just denying reality. This is clearly what he's doing.”
Say's Law (production equals demand) applies to trade: China cannot manufacture excess goods without finding buyers, so production capacity unused is a loss to the producer.
“Well, there's this theory called sees law. Well, production equals demand. However much you can produce then then that equals demand because uh you know that it just offsets what's produced the people that produce it they they're making money from it. So then they need to buy stuff and so but the reality is you can't China cannot sell all of their inventory internally or even locally in their region at the same prices that they could sell them to the United States.”
The rest of the world will not align cohesively with China against the US even if the US is perceived as acting aggressively, because China and other rivals face structural challenges (demographic collapse, balance sheet recession, unsustainable debt) equal to or worse than the US, leaving them weakened rather than strengthened.
“The fact is the rest of the world has made all the same mistakes or many of the same mistakes and they are not they are not fighting back from a position of strength... Europe, I mean China, I mean South America... they all have similar problems... all the sins of the United States do not bestow saintthood on its competitors.”
Russell Napier predicted four or five years ago that if he were the head of a major bank, he would fire developed market analysts and promote emerging market analysts to developed market desks, recognizing that EM expertise would become more valuable.
“Russell Napier made this call four or five years ago. He said, 'If I was the head of a major bank, I would fire the developed market heads and I would promote the emerging market guys to the developed market desks.' And it's I mean, every day that becomes more and more preient.”
Trump's strategy of speed and aggression (similar to Milei's approach in Argentina) is necessary because moving too fast prevents the establishment bureaucracy, lawyers, and lobbyists from blocking reforms; slowing down would allow institutional inertia to derail the plan.
“if you were to try to achieve what he is trying to achieve under quote unquote normal methods, right? I don't think you would even get more than two steps before you start getting stymied by committees and conference calls... that's why things drag on so long”
Trump's strategy of rapid, aggressive action with tariffs and other economic pressure is more likely to succeed than a slower, consensus-building approach because the latter would get stymied by committees, meetings, and bureaucratic processes that historically enable the establishment to block reform.
“if you were to try to achieve what he is trying to achieve under quote unquote normal methods, right? I don't think you would even get more than two steps before you start getting stymied by committees and conference calls and you know trade meetings and you know summits and all this kind of stuff. I think at best, you know, it would be September, October, November before you had a legitimate sitdown, right?”
The sins of the United States in terms of poor policy and leadership do not automatically confer virtue on its competitors; assuming the rest of the world is run by geniuses because US leaders appear incompetent is a logical error when evaluating relative geopolitical positions.
“all the sins of the United States do not bestow saintthood on its competitors. it's very easy to look at our leadership and all the mistakes we've made and say, 'God, these guys are a bunch of clowns, you know, and then automatically think that the rest of the world is run by geniuses.' But that's just not the case, you know, and and and it is a relative game.”
The Trump administration's primary goals are to make America great again and contain China, and these two objectives ultimately subsume all other trade negotiations—when discussing Mexico, Canada, or Europe, the real subject is China containment.
“there's two primary goals. Number one, make America great again. Whether you agree with that, what that means, it doesn't matter. That's what he wants to achieve. When I say he, I mean Trump. And the secondary thing is the containment of China. I think everything is ultimately about making America great and containing China. Um when we talk about Mexico and Canada, we're really talking about China. When we talk about Europe, we're really talking about China.”
Nixon's closure of the gold window in 1971 was not a popular move and created widespread concerns about dollar viability, but the US successfully maintained dollar dominance for 50+ years afterward despite serious structural problems, suggesting similar resilience is possible today.
“there was all these social movements and there's a lot of parallels in the early 70s to to right now. But you fast forward 10 years and all of the US allies were still doing business with the United States... despite all of those problems, despite all of the challenges, the US figured out a way to keep it going.”
Rome declined over approximately 60-70 years before the fall of the republic, with constant oscillations between decline and apparent recovery, and the empire lasted another 400 years after the republic fell, suggesting long-term processes that don't happen suddenly or in straight lines.
“it's basically a history of Rome from the year 120 to 60 BC. So it's like a 60 70 year period. And it was the, you know, 60 or 70 years before the fall of the Roman Republic... during that 60-year period, the similarities between that and the United States are uncanny... there were so many periods where it went this way and it went that way... just when you think it can't go on any longer, well then it does”
If China lost access to US markets and was forced to sell all its production internally or regionally at lower prices, its revenue would fall but its debt obligations would remain fixed, creating a solvency crisis that would likely force currency devaluation rather than resolution through internal debt writeoffs.
“you can't China cannot sell all of their inventory internally or even locally in their region at the same prices that they could sell them to the United States. So yeah, if they had to dump all their inventory, all their production domestically or within the Asian region, they're going to have to do it at lower prices and therefore the revenue is going to fall. The problem is China has borrowed a lot more money than the United States has.”
Trump envisions himself achieving two contradictory things: becoming the greatest president ever (which requires containing China as a global superpower) while also being a great dealmaker who preserves global stability; he wants the US to be 'president of the world' with everyone trading under US dominance, not ruling over smoldering ashes.
“Trump envisions himself as two things... the greatest president ever and the greatest dealmaker ever... if you're going to be on Mount Rushmore... you cannot be the president when China ascends to become the global superpower... he doesn't want a global depression... he wants to be president of the world... he wants the US to be the shining city on the hill”
Calling all countries to the negotiating table via tariff threats (the poker table analogy) accelerates coalition-building for containment of China; without this shock, consensus-building under normal processes would take until September-November and allow the establishment to block initiatives.
“he just called everybody at the poker table... he basically said 'Look, we all got to put our call. I'm calling everybody. Everybody put your cards down.' And he's just betting that he's got the best hand... he controls access to the world's biggest consuming economy”
The post-settlement global system will likely feature regionalized trading blocs rather than one integrated global economy, with China leading its region, the US leading the Western Hemisphere, and Europe potentially led by Germany, with more intra-regional trade than inter-regional trade.
“the world is going to go from being one big economy and globalization to more regionalized alliances and more regionalized economies. And you know, China would most likely be the, you know, the head of its region, right? And you know, maybe Germany's kind of the leader of Europe... and then I think the US would be kind of the head of the the Western Hemisphere, so to speak, right?”
Nixon's unilateral suspension of the gold standard was controversial and many predicted the end of the dollar, but 10 years later all US allies were still doing business with the US; the dollar survived and thrived despite the prediction of its demise, suggesting similar resilience is likely for the current US under Trump.
“you fast forward 10 years and all of the US allies were still doing business with the United States... There, you know, the these hippies out in San Francisco and there was all these social movements and there's a lot of parallels in the early 70s to to right now... Despite all of those problems, despite all of the challenges, the US figured out a way to keep it going... those who automatically say there's no way they can keep this going for another 10 or 20 years... There's no way. You know, I think you got to keep a little bit of an open mind. Maybe there's a way.”
When investors must choose where to place capital, the US remains the default destination despite risks, because alternatives (China, Europe, Brazil, Argentina, Africa, India) all have comparable or worse structural problems; this is a relative game, not absolute judgment.
“You have to invest for the next three to five years and you have to pick a region. Where do you put your money?... Would you send your money to China right now? Would you send your money to Europe right now... Would you send it to Brazil and Argentina... the money has to go somewhere. And are you really so convinced that the US is on its last legs that you are willing to lock up your capital overseas... if the answer is not yes 100% yes then you have to look at the US because that's the only place left right”
The Fourth Turning generational cycle is frequently misinterpreted to mean imminent apocalypse, when in fact it describes periods of upheaval followed by new order creation, with America having successfully navigated multiple turnings.
“I think a lot of people think, 'Oh, we're in a fourth turning and you know, when it ends, that's when everything's going to be on fire and there's going to be ashes left, right?' And it's like no no no like we we America has been through several forth earnings right there are periods of upheaval but then there's a new order that arises from them and then the cycle starts again”
Trump's ability to endure political pain and public criticism without backing down is a key strength that most politicians lack, though it is also his greatest weakness because he doesn't listen to advice or consider alternative perspectives.
“And that this is one area where I think Trump's a little different than most politicians. I think he largely has the ability to withstand pain because he just really doesn't care what anybody else thinks. Right. Right. Well, and and the thing is is his I think this is his greatest strength, but it often times your greatest strength is also your greatest weakness, right? And the fact that he doesn't listen to anybody and he thinks he knows everything and it's his way or the highway, that's a that that that can be a real detriment.”
Gold rising reflects expectations of sovereign debt crisis and US debt crisis emerging, which was the original thesis driving the dollar milkshake theory.
“I think a lot of that is the reason that gold has been rising... we are entering this period of sovereign debt potentially a sovereign debt crisis... that was the initial impetus for the whole dollar milkshake to begin with.”
Trump's strategy is likely to work 'better than many seem to think' despite significant pain, because the US maintains strong comparative advantages in natural resources, market size, and technological capability, even accounting for considerable debt problems.
“despite all its problems, it just has so many incredible natural advantages. And whatever TR that so let's just let's just war game it out... the United States can outperform them. And if every country had to be self-sufficient... I think the US has everything that it would absolutely need. It might not have everything that it wants, but it would have everything that it needs. And I don't think that can be said for the rest of the world.”
Success of Trump's strategy should not be measured primarily by stock market returns to all-time highs but rather by restoration of manufacturing, creation of middle-class jobs, geopolitical repositioning, and national security outcomes.
“looking at the administration, I am not sure that that is their primary goal here. Um, they like it and I think they hope it will be a secondary result. Um but if we take them at face value... their scorecard is much more about a national security um but also you know we want to restore manufacturing we both for national security reasons but also you we want to we want to try to rebuild the middle class in this society.”
Trump has burned his ships (Cortés strategy) by fully committing to tariff/trade policy, making retreat politically impossible; slowing down or returning to 'Mr. Nice Guy' approach would be 'politically over' for him.
“To a certain extent, he's kind of taken their Cortez strategy where he has burned his ships, right? He's he's fully committed... if he tries to go back and play Mr. Nice Guy, it's it's politically over for him.”
Regarding the unexpected currency shift (tariffs + policy announcement surprises), Trump may not have communicated his full hand in advance because revealing all negotiating cards before play would weaken his bargaining position against counterparties.
“the negotiator is not going to reveal all his cards before he plays them. And I think he I think he did kind of want to catch not necessarily Wall Street by surprise, but but but but uh wanted to catch the attention of of all the trade players he's trying to wrangle together.”
The initial impetus for the dollar milkshake thesis was a prediction that a sovereign debt crisis would occur, causing interest rates to rise and treasury prices to fall; this scenario has not fully materialized over the past 5 years but remains the underlying driver of current gold strength and potential future volatility.
“I thought we would go into a sovereign debt crisis. the world would go into a sovereign debt crisis. I thought interest rates would rise. I thought treasury prices would fall. So that never really happened to a big degree over the last five years, but potentially that's what we're going into now.”
Communication of the China containment strategy has been poor; Trump has not adequately made the case to the American public that belt-tightening and potential recession are necessary sacrifices for national security and containing China; this communication gap explains public frustration.
“the China part, I'm just not sure he's he he presold that to the American people... he could have gone and made nice to all of our allies and and you know initiated a charm offensive... I think a lot of people just weren't brought along well enough in that to really understand the why behind it all. And that's one of the reasons why people are are just sort of wondering why the hell are we doing all this right now?”
The transition to Trump's new trade regime will be volatile, with significant pain; benefits like manufacturing return, wage pressure increases, and companies relocating production to the US should emerge by Q4 2025 or early 2026, though stock prices recovering to all-time highs is not necessarily the primary goal.
“it will not be easy and it will not be smooth and there will be great pain involved... by Q4, maybe by early next year, we will start to potentially see some benefits... companies around the world will move production here... wage pressures will rise because better paying jobs will come back”
Gold has rallied 25-30% year-to-date and likely experienced a blowoff top, with expected pullback over coming months before resuming longer-term uptrend, but individuals should hold core strategic positions even while hedging tactical profits.
“gold I feel like just had a big blowoff top. Um you know, it had a huge runup. It's pulled back. My guess, if I had to really guess, we'll probably in the next week go back up and retest those highs and then probably pull back for a couple months... it's up like 25 or 30% for the year already. I don't think we're going to $10,000 gold today”
Johnson was positioned correctly for the 2025 market decline by hedging significantly in December 2024 despite initial losses, then profiting from the January-March decline, and is now reducing hedges while selectively buying oversold equities in anticipation of further volatility.
“We had a pretty tough December because all again, remember at the beginning I said anybody who hasn't been paying wasn't ready for what Trump's doing... I thought we would get a bounce out of the election... but I thought once they started to figure out what his policies actually were, the markets would sell down. Uh so we started you know adding hedges pretty significantly in December and it went against us pretty hard... but they started to pay off pretty well in January, February and March.”
Fixed income allocation should be restricted to short-duration instruments (Treasury bills and 2-3 year bonds) with minimal duration exposure due to expectation of sideways-to-higher interest rates in current environment.
“I still think that interest rates probably go sideways to higher u so we're not uh you know all of our fixed income exposure is very short term uh mostly T bills maybe a few that go out two or three years but really no duration at all”
For the next 4-6 months, markets and asset prices will likely continue to decline with volatility, similar to 2022, but by Q4 2025 and early 2026 benefits may emerge including companies moving production to the US, manufacturing return, and rising wage pressures from better-paying jobs.
“for the next four, five, six months, we're going to continue to have volatility and we'll probably see lower prices in in in markets and asset prices. Um I guess I think by the end of the by by Q4, maybe by early next year, we will start to potentially uh see some benefits of of what I'm of what I think is going to happen.”
Even if the rest of the world aligns cohesively against the US in a worst-case scenario, the US could still compete because it has natural advantages (resources, food production, energy, geography) that would allow self-sufficiency; most other countries lack these capabilities.
“the US despite all its problems, it just has so many incredible natural advantages. And whatever TR that so let's just let's just war game it out. Let's say that that does happen. Let's say five years from now the rest of the world is aligned cohesively and it's US all by itself. I don't think the transition period to go from here to there is going to be a smooth one.”
Trump could not have won the presidency by directly campaigning against China, so his approach of blaming US leadership and predecessors for allowing China's gains, while framing China positively ('They work hard, they've raised themselves out of poverty'), is strategically clever.
“he's always said, 'I don't blame Z. I don't blame China. They work really hard. They've done a great job. They've raised themselves out of poverty.' And he never really speaks badly about China other than that they've beat the hell out of the US... 'They lie and they cheat and they steal, but I get it. They can get away with it. My predecessors let them.' And and that's probably the right way to go about it, right? um if he were to come out on the campaign trail and just rail against China, maybe he doesn't win the presidency, right?”
Trump initially thought that the market euphoria following his election would flip to selling once his specific tariff policies were revealed; this is why Johnson added significant hedges in December despite the rally.
“I thought that everything that started happening in January would start happening in December. I thought we would get a bounce out of the election just on the euphoria of Trump coming in... but I thought once they started to figure out what his policies actually were, the markets would sell down. Uh so we started you know adding hedges pretty significantly in December”
Trump is not removing his positions on trade simply to reset; he will face political death ('politically over for him') if he tries to become Mr. Nice Guy after playing hardball, making reversal strategically impossible regardless of circumstances.
“if he tries to go back and play Mr. Nice Guy, it's it's politically over for him”
The administration's primary goals are not to maximize S&P 500 returns but to restore manufacturing/middle-class jobs and achieve geopolitical containment of China, so they will measure success by employment, industry growth, and geopolitical wins rather than stock market returns.
“they're saying look it's Wall Street's had its time it's now time for Main Street. My sense is they are their scorecard is much more about a national security um but also you know we want to restore manufacturing we both for national security reasons but also you we want to we want to try to rebuild the middle class in this society. And so they're going to be measuring it more in terms of jobs, you know, in terms of growth of industry, things like that, not necessarily by the S&P price.”
The administration should have made a stronger public case for why sacrifices are necessary to contain China, framing it as a national security priority requiring shared sacrifice, rather than letting people assume all the pain is just Trump being chaotic.
“A lot of people just weren't brought along well enough in that to really understand the why behind it all... that's one of the reasons why people are just wondering why the hell are we doing all this right now.”
The transition Trump is initiating—changing how the US does business with the world after 50+ years of one model—will involve periods where the US looks strong and periods where rivals look strong, but the overall arc will be toward a new equilibrium over 4-10+ years.
“My prediction is there will be moments of time... where it will look like the US is doing really well... then there will be moments where it looks like the rest of the world has the upper hand... but I think this is a really big deal... it's going to take a long time to fully play out.”
Gold has experienced a major runup and probable blowoff top; near-term pullback is likely over next month or two, with potential retest of highs followed by months of sideways-to-lower trade through summer; this pattern mirrors prior cycles where gold strength did not persist.
“gold I feel like just had a big blowoff top... My guess, if I had to really guess, we'll probably in the next week go back up and retest those highs and then probably pull back for a couple months... I will say if you zoom out and look at a chart of gold, the last two times what just happened happened, the following years were not great... It's had a really good run. It's served its purpose. You know, my guess is that it's probably topping right now. Maybe it pulls back for a couple months.”
People who have closely followed Trump's statements and campaign promises should not have been surprised by his current policies, as he has been remarkably consistent and transparent about his intentions.
“unlike many past um you know politicians Trump has been incredibly consistent and transparent um and quite vocal that he was going to do pretty much exactly what he's done here.”
The 2022-2023 market pattern (strong downturn followed by 2 years of strong bull market) is likely to repeat; if Q4 2025 marks a bottom, 2026-2027 should produce solid bull market returns, though not necessarily returning to all-time highs immediately.
“2022 there was a lot of uncertainty, a lot of volatility. The market went down a lot... and then we had two years of a of a pretty strong bull market. I I could easily see that same thing play out again.”
Johnson's current portfolio hedges equity exposure for the first part of 2025 (protecting during January-March downturn), but is transitioning to reduced hedges and adding equity on dips; he maintains strategic gold allocation and very short-duration fixed income with minimal duration risk.
“we started you know adding hedges pretty significantly in December... they started to pay off pretty well in January, February and March... We we have dramatically reduced our hedges a couple weeks ago. We still have a couple little ones and we've started to put them back on... we have exposure to US equity ities. Um, again, they were hedged for the first part of the year... Right now it's hedged, but we're not net short... we're starting to add back with the anticip... we use this dip to actually start buying... all of our fixed income exposure is very short term... maybe a few that go out two or three years but really no duration at all”
2022 analog suggests 2025 will have relief rallies of 5-17% interspersed within a broader downtrend, making it valuable to sell rallies rather than aggressively buy weakness.
“Wouldn't shock me at all if we have, you know, I think we'll probably go down. We'll probably retest those lows, maybe even go a little bit lower, but then we'll probably have a hard rally, right? Um, but my guess is that it's going to be later in the year, Q3, Q4, before we find any kind of solid bottom, if we find one.”