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U.S. Trade Deal Sparks Market Jump Amid Manufacturing Reshoring Trends
As this report goes to press, the United States has secured a trade agreement with an undisclosed country.
Commerce Secretary Howard Lutnick stated:
“I have a deal done, done, done, done, but I need to wait for their prime minister and their parliament to give its approval, which I expect shortly.”
With our publishing deadline approaching, more details will follow tomorrow. However, markets are already reacting positively, with all three major indexes rising, led by the Dow, which is up 0.80%.
Chinese Perspective on U.S. Worker Productivity
According to a report from Chinese state media, there are doubts regarding the revitalization of the U.S. manufacturing sector. Two weeks ago, they released a video that mocked the potential for American workers to operate a renewed manufacturing base.
Here is a screenshot from that video:
Source: jambo1286/TikTok
In contrast, if the Trump Administration effectively reshapes U.S. manufacturing, the labor force will not resemble the image projected by Beijing.
Technology expert Luke Lango offers insights on this issue:
“Trump’s industrial renaissance only works if robots build it.”
“The 21st-century American factory will not resemble Detroit in the 1950s; it will look like Tesla Inc.’s (TSLA) Gigafactory, scaled across various industries.”
As Lango indicates, the future factories will utilize automation extensively. Workers will increasingly be replaced by robots capable of handling tasks once performed by humans.
Implications for Companies and Workers
Regular readers of the Digest know that I have emphasized this point recently. In our April 16 issue, we highlighted the real beneficiaries of Trump’s onshoring efforts:
“The companies that leverage robotics, and the investors who recognized the trend early.”
This understanding is rooted in fundamental corporate finance. Reshoring incurs higher labor, real estate, and energy costs, among other expenses. Companies that resist these changes to avoid costs may face new tariffs.
This presents a lose/lose scenario for corporate managers—on one side, profit margins are compromised, while on the other, consumer spending is impacted.
As a result, many CEOs may turn to a third option: automation. Replacing human workers with robots could reduce costs significantly.
The comparison is stark:
Humans: High salaries, benefits, sick days, and the risk of human error.
Robots: Initial capital expense, minimal yearly maintenance, and flawless performance without breaks or benefits.
Ultimately, the move towards onshoring is likely to accelerate the transition to robotic solutions.
As Lango puts it:
“That is why our team sees physical AI—robots, automation systems, machine vision—as the next leg of the AI Revolution.”
While much of the current AI focus has been on software advancements, the next major developments are expected to occur in physical applications.
- Factory robots that can see, learn, and adapt.
- Warehouse pick-and-pack bots utilizing machine vision.
- Autonomous forklifts and mobile platforms.
- AI-powered robotic arms for manufacturing and inspection.
Last week, I recommended investing in large AI and robotics ETFs as a cautious approach to capitalize on these developments, and more expert insights will be shared soon.
Upcoming Insights on AI and Robotics Investments
This Thursday at 7 PM Eastern, Luke will present his “MAGA 7” stocks. This term stands for:
Make AI Great in America.
During this presentation, Luke will explore a select group of AI and robotics companies that he believes are poised for significant investment interest.
If his predictions hold true, May 7 could signal the beginning of a substantial surge in physical AI stocks.
Crisis in the U.S. Farming Industry
Peter Friedmann, the executive director of the Agriculture Transportation Coalition (AgTC), describes the present situation in the U.S. farming industry as a “full-blown crisis.”
He notes that the agricultural sector is suffering substantial financial losses due to the trade war, particularly from China’s abrupt cancellation of large orders for U.S. agricultural products.
As stated in a recent report released by the U.S. Department of Agriculture:
“`# China Halts Pork Orders as Trade Tensions Escalate
China has made its largest cancellation of pork orders since 2020, ceasing a shipment of 12,000 tons of pork.
A wood pulp and paperboard exporter reported the immediate cancellation or hold of 6,400 metric tons in a warehouse, along with a hold on 15 railcars, incurring what’s known as “demurrage,” where fees apply for delayed goods.
Additionally, the exporter indicated that 9,000 metric tons are en route to China, anticipated to arrive on May 13, but face potential diversion to bonded warehouses or other countries as Chinese buyers may reject and abandon the cargo at ports.
Another exporter of grass seed revealed to AgTC that they received two weeks’ notice regarding the cancellation of eight loads by Chinese customers, despite having secured vessel bookings.
Decline in Shipping Traffic
Shipping traffic from China to the U.S. has seen a significant slowdown. According to Vizion Global Ocean Bookings Tracker, vessel traffic from China to the U.S. has decreased by 22.2% in the last two weeks and is down 44% year-over-year.
Vizion representative statement:
We have observed a continued decline in booking demand for U.S. imports, particularly from China, which is now reflected in reduced departures.
Today, the Port of Los Angeles has forecasted a 35% drop in shipments from China next week as tariffs begin to take effect.
Gene Seroka, executive director of the Port of Los Angeles, stated:
Realistically, unless some agreement is reached with China, shipments will remain very low, except for a few commodities.
Escalating Trade War: Who Will Yield First?
This intensifying trade conflict raises a crucial question: who will yield first, the U.S. or China?
Treasury Secretary Scott Bessent expressed that the responsibility falls on China:
It is up to China to de-escalate, given they sell five times more to us than we sell to them, making these high tariffs unsustainable.
However, this may prove to be difficult. Cultural values in China emphasize “saving face.” Historically, the “Century of Humiliation” (1839–1949) left a lasting sensitivity to perceived inequities in agreements.
During the 2019 trade war, President Xi Jinping illustrated this perspective:
In the West, the approach is to turn the other cheek; in our culture, we push back.
This sentiment was echoed recently, as the The Wall Street Journal reported that the Chinese Ministry of Foreign Affairs released a video on social media stating, “China won’t kneel down.”
Source: China Ministry of Foreign Affairs
Alternative Strategies for China
Instead of yielding, China may consider several strategies:
- Cease all exports of critical rare earth minerals essential for various technologies.
- Increase imports from countries like Brazil and Argentina to replace U.S. products.
- Completely halt imports from specific U.S. companies to apply financial pressure.
- Boost spending through new bonds and consumer subsidies to stimulate domestic demand.
- Utilize the People’s Bank of China to implement interest rate cuts and reduce bank reserve requirements to support growth.
Potential Economic Impacts
“Jeff, losing the U.S. as a trading partner would cripple China. They will have to yield,” a concerned observer noted.
While the U.S. could inflict significant economic damage on China, the political structure in China is quite different from that of the U.S.
China’s authoritarian regime permits leaders to enforce economic hardships without immediate political repercussions. With no free elections, the Chinese Communist Party can portray economic sacrifices as nationalistic efforts.
This landscape contrasts sharply with the U.S., where public opinion directly influences elections. U.S. administrations must respond swiftly to any voter dissatisfaction, limiting their ability to sustain painful trade policies over time.
As an illustration, a recent report indicated that Amazon planned to display cost increases stemming from President Trump’s tariffs. Resisting potential backlash, the White House promptly labeled that decision a “hostile political act” by Amazon, leading the company to reverse its plan.
Market Sensitivity and Future Trends
This responsive dynamic is also evident in investment markets. Although President Trump claimed that recent bond market fluctuations did not trigger his decision to pause reciprocal tariffs, such assertions seem unlikely.
It appears more plausible that ongoing market turmoil particularly in the bond market, prompted concerns of an economic downturn, influencing the administration’s actions.
Ultimately, if this trade war intensifies, it may lead to rising prices. This could hurt U.S. companies and consumers but may also ignite innovation, pushing businesses to adopt AI and robotics to manage increased costs.
In light of these developments, it’s essential to remain informed about market responses and economic strategies amid ongoing tensions.
Wishing you a profitable evening,
Jeff Remsburg
