China’s Economic Slowdown Is Now Impacting Other Countries

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

If you wish to listen to this commentary, please click here

China’s Economic Slowdown

China’s economic slowdown is now impacting South Korea, which is now in the midst of its longest manufacturing slowdown in nearly 50 years. Japan and Taiwan are also experiencing a manufacturing slowdown.

Malaysia, Thailand, and Vietnam are all experiencing slower economic growth due to China. Only Australia is not being adversely impacted by China, due largely to the fact that China this year lifted the tariffs on coal, barley, lobsters, and other goods imported from Australia.

LFP Battery Domination

Interestingly, China is building battery plants that are far beyond its domestic needs, so clearly the Chinese are striving to dominate the worldwide demand for iron-phosphate (LFP) and lithium-ion batteries. Specifically, China will soon manufacture enough batteries for 22 million electric vehicles (EVs), which is more than double its domestic demand.  Chinese manufacturers, BYD and CATL dominate worldwide battery manufacturing.

South Korea’s LG Energy Solution has the third-largest battery manufacturing capacity based on new plants coming online. Gotion, which is in China and the U.S., is boosting its battery output and has an LFP-manganese battery that is expected to be widely adopted by VW Group since it has comparable energy density to lithium-ion batteries without any fire risk. Overall, it appears that China may soon make more batteries than the world needs, so discounting may ensue and help to lower EV prices.

Russia Uses Starvation Tactics

Ukrainian grain facilities at important ports continue to be attacked by Russian drones.  As a result, starvation in Sudan and other countries that have traditionally relied on Ukrainian grain are increasingly under duress. Ever since the Black Sea Grain initiative was canceled by Russia, concerns over global food supplies have been growing, especially since droughts in Brazil, Canada, Europe, and the U.S. midwest this year have curtailed global crop harvests. As a result, the global food problem is now raising a call for a ceasefire between Russia and Ukraine.

Complicating matters further, U.S. National Security Advisor, Jake Sullivan, recently met with high-ranking Ukrainian officials to discuss efforts to squelch ongoing corruption. Shortly after that meeting, Ukrainian President Volodymyr Zelensky removed the Minister of Defense after fiscal mismanagement exposed the corruption associated with the billions in aid that Ukraine has received. This is resulting in waning support from NATO, where some allies, like Hungary, are not expecting a positive outcome.

In the meantime, inflation is ranging in Russia since the ruble has dropped from 0.17 to 0.10 in the past year. The U.S. and European Union (EU) this week warned the UAE to stop helping Russia to circumvent Western sanctions. Since Dubai and other regions in the UAE pride themselves on free trade, I suspect that the U.S. and EU demands will be politely ignored.

Global Free Trade Is Breaking Down

Chinese President Xi Jinping will not be at the upcoming G-20 meeting in India.  This is the first time that President Xi will miss a G-20 meeting. China is becoming increasingly unpredictable as a trading partner, so its G-20 snub will not help its reputation. China will instead be represented at the G-20 by Premier Li Qiang.  Additionally, Russian President Vladimir Putin is also expected to miss the G-20 meeting and is expected to be replaced by Russian Foreign Minister Sergei Lavrov.

The International Longshore and Warehouse Union recently ratified a six-year contract covering dockworkers at West Coast ports. Due to the drought in the Panama Canal that is forcing containers to be unloaded so the container ships can pass through the Panama Canal, the West Coast container ports are now more important than ever.

In recent years, the West Coast container ports were losing market share to Houston, Jacksonville and other major container ports that were better run and did not have the labor or trucking (due to low-emission diesel truck restrictions) slowdowns.

UAW Strikes

The next big labor agreement will be the United Auto Workers (UAW), which is prepared to go on strike on September 15th. Right now, only Ford has proposed a counteroffer to the UAW demands, while GM and Stellantis have not provided the UAW with counteroffers. Ford has more U.S. workers than GM and Stellantis, so Ford has the most to lose if the UAW strikes.

Another possibility is that the UAW may try to secure a good deal with Ford and then go on strike at GM and Stellantis plants. Due to an impending UAW strike, the unemployment rate may rise above 4%, which will be embarrassing to the Biden Administration.

Coffee Beans: Dig a Hole

Two construction workers were arrested for using an excavator to dig a hole through the Great Wall in central Shanxi province. The pair of suspects told the authorities that they dug the hole in order to create a shortcut through the ancient wall to lessen the distance the excavator had to travel for their construction work. Source: UPI. See the full story here.