America’s JV With Xi
America’s JV With Xi
Donald Trump’s trade policy is set to face its biggest test yet over the next five weeks.
Not that Bloomberg put it that way when it published this story on Friday: “China is pushing the Trump administration to roll back national-security restrictions on Chinese deals in the U.S., dangling the prospect of a massive investment package as part of a proposal that would upend a decade of policy.”
How massive? “The Chinese floated a figure of $1 trillion earlier this year… but the size of the potential investment being discussed now is unclear.”
Source, you ask? Bloomberg cites the usual “people familiar with the matter, who asked not to be identified discussing private deliberations.”
Supposedly this arrangement was discussed during the most recent round of U.S.-China trade talks last month in Madrid.
On a phone call a few days later, China’s president Xi Jinping urged Donald Trump to help make it possible for “Chinese enterprises to invest” in America.
As mentioned in this space last December, the Trump 47 administration’s trade policy can be summed up as: “If you want to export to America, you must invest in America.”
As Trump put it Bloomberg News on the eve of the 2024 election, "The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States, so it doesn't have to pay the tariff.”
Squeeze your trade partner with steep tariffs and that partner will build in America. That was the blueprint followed by the Reagan administration with Japan in the 1980s. Result: Japanese automakers built factories in Ohio, Indiana and Tennessee.
But as your editor also pointed out… Japan in the 1980s was an ally. China in the 2020s is… well, something other than an ally.
As I put it at the time, imagine Xi Jinping feeling squeezed by tariffs and announcing, “Yes, Mr. Trump. I see the light. I see the error of our ways. Effective today, I will marshal the resources of my nation’s mighty industries to build 50 new gleaming factories in each of your 50 states.”
I figured on Republicans and Democrats howling in unison: Trojan horse!
But maybe Trump thinks Washington and Beijing can do business together.
Bloomberg published a follow-up story yesterday: “As Trump pursues a trade pact with the U.S.’ biggest economic and strategic rival, advocates of a tougher China policy fear they’re being sidelined inside the administration as the tech industry’s influence grows — alongside the president’s appetite for what he’s called ‘a big deal.’”
To be sure, there’s no guarantee “a big deal” — a joint venture with Xi, as it were — will come to pass. But the time in which to get a deal done is limited.
Trump and Xi are set to meet in person sometime this month, perhaps in South Korea. There’s a looming deadline for a deal — Nov. 10.
That’s when the current tariff truce between Washington and Beijing is set to expire. Yes, there could be another 90-day pause on top of the previous two — but then Trump runs the risk of affirming the TACO criticisms flung in his direction (“Trump always chickens out”).
Much could undo a deal: Bloomberg says as part of any agreement, Beijing insists Washington will have to change its Taiwan policy.
And even if a deal is struck, the devil is in the details — especially that $1 trillion of Chinese investment.
Trump has boasted that to date his tariff threats have extracted promises of $17 trillion in investments from America’s trade partners. But those numbers are squishy to say the least. The $550 billion pledged by Japan? As mentioned here in July, that figure is higher than the Japanese government’s annual tax revenue!
Do the Chinese government and economy — both choking on debt — really have the resources to invest $1 trillion in America?
We’ll see. Again, Trump’s trade policy is about to face its biggest test yet. And we’ll know whether it gets a pass, fail or incomplete in just over a month.
(Oh, and one other thing could undo a deal. But that will have to wait for Bullet No. 3. We have today’s market action to tackle next…)
Another Strategic Mineral Deal?
Clearly the Trump administration isn’t done with its acquisitions of companies engaged in the production of “strategic” minerals — much to the benefit of Paradigm Press readers.
On Thursday, Barbara Humpton — CEO of USA Rare Earth (USAR) — told CNBC her company is “in close communication” with the White House.
CFO Robert Steele was more specific — saying the government might be “a capital source through the combination of loans, grants and other potential opportunities.”
Key point: The Pentagon is already taking a 15% stake in another rare-earth player, MP Materials.
USAR shares leaped 23% to an all-time high on Thursday. They jumped another 14% Friday and as we check our screens today they’re up another 5%.
Now it can be told: USAR was the stock in question when Paradigm Press convened its first “All-In Summit” back on Thursday, Aug. 7.
Our macro maven Jim Rickards… our AI-and-crypto authority James Altucher… our trading pro Enrique Abeyta… all of them were in agreement USAR was a screaming buy.
And with that, members of the Paradigm Mastermind Group are up 89% in less than two months.
Enrique Abeyta is telling them to hold on tight: “While shares of USAR have rallied a lot in the last few months, we think there is a LOT more upside ahead.”
If you missed out on this one — or on MP Materials, recommended by several Paradigm editors earlier this year — rest assured there’s more where this came from. Stay tuned…
The big market-moving story today is Sam Altman’s OpenAI striking a chip deal with AMD, potentially even taking a 10% stake in AMD.
“OpenAI will deploy 6 gigawatts of AMD’s Instinct graphics processing units over multiple years and across multiple generations of hardware,” says CNBC. “It will kick off with an initial 1-gigawatt rollout of chips in the second half of 2026.”
Checking our screens, AMD is up 29% on the day.
Let’s see here: As of Friday’s close, AMD’s market cap was $267 billion. That means if OpenAI takes a 10% stake, it would cost $26.7 billion — or about twice OpenAI’s expected revenue this year.
“Am I missing something?” I inquired on Paradigm’s internal e-chat.
Evidently not. Two of our top analysts — Dan Amoss (who works with Jim Rickards) and Ari Goldschmidt (who works with James Altucher) have been skeptical about OpenAI’s vast ambitions for a while.
➢ There’s also deal-making news in the regional banking space today, Fifth Third acquiring Comerica for $10.9 billion in an all-stock deal. FITB is flat on the day but CMA is up 15%.
Enthusiasm for tech is pushing all the major U.S. stock indexes beyond the record closes they set Friday.
At last check the S&P 500 is up 0.4% to 6,742. The Dow’s gain is similar; the Nasdaq is up nearly three-quarters of a percent and the small-cap Russell 2000 is up 1%.
“Sellers simply cannot keep this market down,“ Greg Guenthner tells his Trading Desk readers. The S&P 500, he informs us, “has fallen for five consecutive sessions only twice since the April low — the last week of July and the third week of August.
“The market’s climb from the Trump tariff lows has encountered numerous obstacles, but nothing it couldn’t easily sidestep. And now that stocks have a rate cut under their belt and will likely have two more by the end of the year, perhaps even a government shutdown won’t slow their ascent.”
➢Don’t expect any meaningful news on the shutdown this week. House Speaker Mike Johnson says members of his chamber won’t return until a week from tomorrow. (Wow, he’s really desperate to avoid a vote on the Epstein files.)
Meanwhile, non-dollar assets are soaring to record levels — or at least highs not seen in a while.
Gold starts the new week up $80 to another record of $3,958. Silver is up 61 cents to another 14-year high of $48.52.
And crypto is finally joining the party — Bitcoin in record territory, less than $100 away from $125,000. Ethereum sits at $4,668, a three-week high.
China and Iran… and the Next U.S. Airstrike
There’s another factor at work that could undo any Beijing-Washington trade agreement — China’s purchases of Iranian oil.
Iranian oil is subject to stiff U.S. sanctions. But this morning’s Wall Street Journal cites “current and former officials from several Western countries” as saying Beijing has found a clever workaround.
“Iranian oil is shipped to China — Tehran’s biggest customer — and, in return, state-backed Chinese companies build infrastructure in Iran.
“Completing the loop, the officials said, are a Chinese state-owned insurer that calls itself the world’s largest export-credit agency and a Chinese financial entity that is so secretive that its name couldn’t be found on any public list of Chinese banks or financial firms.”
The Journal reckons China bought $8.4 billion of Iranian oil this way last year — with zero involvement by the international banking system.
The Journal article doesn’t say so, but Washington’s sanctions on Iranian energy are as feeble as its sanctions on Russian energy.
Russia continues to sell oil and gas to willing buyers despite sanctions imposed after the Russian invasion of Ukraine in 2022. The only difference is that the buyers are no longer European; they’re Indian and Chinese.
Here too, buyers and sellers have resorted to workarounds that don’t require dollar financing or even Western insurance coverage.
So really, the only way to stop the flow of oil from Iran to China is with armed force. Which is something Chinese leaders have known for years. That’s why they’re so gung ho to electrify the country’s transportation; doing so reduces their dependence on imported oil.
But that’s still in the future. For now, if a conflict in the Middle East broke out and the flow of oil through the Straits of Hormuz were shut off, China would feel the impact the worst.
In a not-unrelated development… Donald Trump says he’ll bomb Iran again if Tehran restarts its nuclear program.
“They can start the operation all over again, but I hope they don’t because we’ll have to take care of that too if they do, I let them know that,” he said yesterday at Naval Station Norfolk in Virginia.
Wait… Didn’t Trump say after bombing Iran in June that its nuclear program was “completely destroyed” and “obliterated”? And didn’t he further say that it would take years to rebuild Iran’s nuclear sites? He did.
So what changed? Apparently this changed. File under “Now they tell us…”
Days after Charlie Kirk was murdered last month, The Grayzone cited a “longtime friend” as saying Kirk personally urged Trump last June not to bomb Iran — and that Trump “barked at him,” shutting down the discussion.
With Kirk gone, there’s no one left with any sway inside the White House who could forestall a second bombing attack. (Tucker Carlson? Trump labeled him “kooky” ahead of the bombing last June.)
Not that you’d know any of this looking at the oil price today.
A barrel of West Texas Intermediate fetches $61.39 — up barely from last week’s four-month lows after the OPEC+ nations announced a production increase that’s less than expected.
TrumpCoin (Not a Crypto Story)
Tired: The U.S. government is looking to introduce yet another dollar coin. Wired: It would be emblazoned with the image of Donald Trump.
Dollar coins have been a bust for as long as most of us have been alive.
The U.S. Mint stopped making silver dollars in the 1930s after President Franklin Roosevelt revalued gold against the dollar.
A few years after the end of all silver coinage in the 1960s, the Mint introduced the copper-nickel Eisenhower dollar in 1971… then the Susan B. Anthony dollar in 1979… then the Sacagawea dollar in 2000… and then dollar coins with the mug of every deceased U.S. president.
And nobody wanted them.
Deep in our voluminous archives is an item from 2011 revealing that more than a billion $1 coins were sitting idle in Federal Reserve vaults around the country. Even though no new $1 coins have been issued for general circulation since then, a Fed report issued last December says the inventory still stands at 809 million!
Anyway, “the Treasury Department is considering producing a $1 coin featuring President Donald Trump to commemorate the 250th anniversary of U.S. independence next year,” reports Politico.
There’s even a tentative design under consideration…
A Treasury flack issued this florid statement: “While a final $1 dollar coin design has not yet been selected to commemorate the United States’ semiquincentennial, this first draft reflects well the enduring spirit of our country and democracy, even in the face of immense obstacles.”
Trump signed legislation in 2020 authorizing dollar coins to be issued for 2026 — with the design to be decided later.
“Congress has imposed various restrictions on the ability of Treasury to feature living people and living presidents on currency,”Politico points out. “It’s not clear whether the latest Trump coin envisioned by the Treasury Department would run afoul of those laws.”
Hmmm… At the founding of the country, George Washington famously refused to allow his image on the coinage — it reeked of monarchy, he thought.
Washington’s example was so powerful that even dead presidents on the coinage were taboo for over a century. Alas, the taboo was broken with the centennial of Abraham Lincoln’s birth and the introduction of the Lincoln penny in 1909.
Idea: Let’s reintroduce that taboo. Better yet, let’s issue coins whose face value reflects the metal value they contain.
Yes, I’d like a pony too…
Mailbag: Love Those Mining Stocks
After an update on the state of precious metals in Friday’s edition, we got the following note of appreciation…
“As best as I can remember, it was Sean Ring who mentioned some mining stocks that he was interested in during one of your Whiskey Bar livestreams. I believe it was late 2024, just before the elections. I paid attention and wrote down some of the ones he was taking a flier on.
“I bought some shares of Avino Silver & Gold Mines Ltd. (ASM) and as of today, I'm up 448%. I see in Friday’s 5 Bullets that Emily reported Sean's thoughts on the state of silver, gold and mining stocks. I appreciate getting updates like this as it reaffirms my willingness to keep what I have and not sell with the gains in hand.
“I wanted to thank Sean for his insight on commodities and especially for the amazing tip on ASM. Would love more recommendations from him for sure.
“Thank you!”
Dave responds: We’ve passed along your kudos to Sean. The best part about his recommendations is that they’re all free!
Strictly speaking, they’re not recommendations; they’re just a frank discussion of what he’s doing in his own portfolio. And the best way to keep up with them is with a free subscription to our sister e-letter, the Rude Awakening. Sign up for daily access at the Rude’s homepage!
Best regards,
Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets
