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all right guys so let's talk about Germany today and unfortunately they have learned nothing absolutely nothing they have unar on a path of economic pain and there's simply no going back now ever since northstream blew up Germany lost their biggest industrial advantage and that was cheap Russian gas it's important we realize Germany's new paradigm now at least under the new government there is no u-turn back to Affordable energy and the direction today is to reduce reliance on all these autocratic States like Russia and China harbec has said this multiple times now Germany cannot depend on Russian gas anymore and needs to rain the way it trades with China however there's a really big disconnect here between reality and fantasy German Industries require two things to stay competitive on the supply side they need cheap inputs and on the demand side they need consumers around the world to buy stuff made in Germany both of which are collapsing in the latest update German Factory orders have dropped once again in May demand fell by 1.6% despite all the big weeks of Wall Street calling for 0.5% gain remember this is comparing against a very low base in May last year even after 2 years Germany's deindustrialization still hasn't bottom out yet mixing for poliy policy with the economy has been truly disastrous if we zoom out and we just take a look at the big macro picture Germany's future as a manufacturer is getting this method firstly there Japan the crashing yen is making their exports cheap much cheaper than Germany so amongst the G7 themselves airies will happily buy Japanese Goods because staff is dirt cheap and let's not forget China there's a reason why the West is imposing tariffs Chinese goods are affordable and Western manufacturers simply can't compete the only way Germany can compete is to get their cost of production down dramatically but they actually doing the exact opposite the economy Minister harc confirmed the words Germany wants to cut away Europe's last 20% of Russian energy Supply and listen to this for the sake of our energy sovereignty and security we must continue to systematically reduce Imports of gas oil and all also radioactive material from Russia and he means uranium and he said that this is straight from the Twilight Zone guys cutting away the remnant of Russian energy sounds really great it sounds really Noble but replacing it with expensive enery from the US or catar just going to make things worse the gas supply will simply flow to China and help Chinese Industries even further this is really counterproductive and if you think that was bad it kind of gets worse Germany just took another action that pushes them away from economic recovery just a week after harbeck's trip to Beijing Germany has blocked a Chinese deal and this is a very big deal this potentially Rings the death nail to any future collaborations between Beijing and Berlin a Chinese state-owned firm was supposed to buy a Volkswagen subsidiary the sale involved against turbine business and the German government blocked it this wasn't an issue of price this once again revolved around National Security let's be real here if this was an American company buying the unit the sale would most definitely go through now the excuse was simple Germany doesn't want Technologies to come under the influence of countries not on friendly terms with Germany at least that was the reason given now the real truth was the buyas timeses to the Chinese military the Germans are quite afraid of the technology ending up on China m ships but it's rather shortsighted as a result of this the company is closing down their business unit instead of selling it off for some money at least once again this is another example of foreign policy superseding economic sense I think we must understand the problem with being too protectionist here simply put china can play the same game as well they just won't invest in Germany money and Technology especially from critical sectors which just flow elsewhere the the Germans face a whole host of economic issues while energy is a big one falling demographics is another crisis we can ignore of the entire G7 Germany has the biggest working age population crunch ing to the IMF by 2030 the number of working age Germans will fall by over 0.7% and this is another STW on the Cam's back when you have less labor this creates a ton of problems just in manufacturing alone the cost of production will remain high GDP will also be pressured down because now overall value ad will drop there are more retirees than workers and that isn't good for manufacturing country competing against the US Japan and China Chinese money living would mean new technology expertise and Investments simply won't enter Berlin the country will lag behind a technology especially in automation where China is the global leader looking at evidence on the ground is really ironic here while Berlin is trying to decouple from Chinese trade it's German companies that decoupling from Germany take Volkswagen for example domestically they are cutting cost by 10 billion EUR and like most companies this means job Cuts over 6,000 jobs are going to disappear on German soil on the flip side Volkswagen is doubling down on China they are investing €2.4 billion e in China to develop better EVs and self Drive driving cars and this is happening across the board in Mercedes-Benz bch and BASF the industrial collapse is benefiting China Chinese companies not investing in Germany will only accelerate this even though Europe is in trouble one thing is really staying constant and that is war spending Von has confirmed the new military industrial complex made in Europe is coming Security in Europe also means doing more on our own defense our common goal should be very clear we need to turbocharge our defense industrial capacity in the next 5 years and at the heart of this must be one simple principle Europe must spend more Europe must spend better and Europe must spend European and this will help us feel the urgent need to rebuild replenish and modernize member States armed forces and to keep supporting UK ukine and in doing so Europe should strive to develop and manufacture the next generation of battle winning operational capabilities now giving it to Ukraine is obvious to fight the Russians we all understand that the EU has to turn out more weapons and more ammunition seizing the Russian assets isn't enough the money has to translate into something tangible but it goes beyond just defense notice V Lan's words Europe has to spend European that's because a war economy might be the only way left to save the EU industrial complex Chinese cars are displacing German automakers companies in Berlin are also moving to Beijing countries around the world find EU products and exports just too expensive but what is the one country that needs your products no matter the cost that is Ukraine is the good old American Playbook once again blink confirmed this saying 90% of the assistance we have provided has been spent here in the US with our manufacturers and our production this produce more us jobs and growth in our own economy can it be any more obvious here this marks a prev in European and German Industries there's now a serious shift towards a war economy to sustain their Industries to keep GDP as high as possible this is really bew wildering especially for Germany which has tight budget controls so cilian manufacturing might be collapsing but military production will be booming across europe6 billion of defense spending has been cleared in Germany half of which are going to buy 105 LEP two tanks the money is Flowing towards KND DS which is a German arms manufacturer it's interesting to see Europe taking a page out of the Russian playbook in a shortterm war production does help to bolster your economy why do you think countries like France are pushing for total rearmament is the ultimate bandaid to prevent a collapse and to add insult to injury the World Bank has upgraded Russia to a high income country Russian real GDP has grown by 3.6% which is an incredible jump compared to the rest of Europe that's over three times more than the average EU country but this is a desperate move to try to copy Russia Europe isn't Built For War production not anymore Russia can do it sustainably because their energy cost is low and they a ton of Commodities like copper and nickel in the ground Europe on the other hand has to import stuff in all this does is to leech away industrial capacity from the civilian all the way to the military manufacturing sectors in other words it going of leavs them more vulnerable to economic competition especially from China now if you didn't know yet the EU tariffs of Chinese EVS are now online it's official it's here taxes have now gone from from 10% up to nearly 50% on certain brands byd was hammered and seic got clobbered the harest and there will be repercussions over the past 12 months the EU imported 440,000 EVS from China that's worth nearly $10 billion in Revenue to Chinese Brands and with tariffs going up that number would most definitely fall and this marks the start a very dangerous start of industrial trade war between Europe and China firstly the tariffs are not nearly high enough to destroy demand for Chinese cars Chinese EV still hold nearly 9% of Europe's market share even after it was announced thanks to cheap energy and vertical integration China can still build everything inhouse at a much lower cost but eukar brands are going to continue to regress if China hits German exports of Volkswagen and Mercedes into China all the large cars all the large engine cars this will absolutely the entire business model now when you have less Revenue this means less profit as well for R&D which means in the years ahead they will be seeding more ground to all these Chinese Brands Chinese car brands have officially taken the US in global sales now these aren't just cars made in China but authentic Chinese Brands like byd Europe is the next region to be top up they have a sizable lead today but the future outlook isn't looking very good the EU is still committed to project Ukraine a ton of resources are channeled there instead of their own civilian economy and this next chart tells us how effective government spending is in Beijing when they year marked EES as the next sector to Boom they went all in since 2009 China has spent $230 billion on the EV sector this meant building up everything from local infrastructure to supply chains and tax exemptions they buil vertical integration into the system so that everything can be sourced inh housee there isn't a need to import any critical resource China has complete control of the supply chains as a result China is now easing all the subsidies they have already War the EV war and subsidies are starting to drop now this hit a pick of 25% in 2020 it has dropped down all the way to 11.4% last year every country in the world can have their own subsidies no one is preventing them from doing so Europe's problem is the misallocation of their Capital doubling down on Ukraine denies their real Industries money for growth Europe is caught in a very tough pickle here they have committed too much to fight the Russians and now they can't afford to stop priority is now foreign policy and not industrial policy if you have money being funed endlessly to defense you have less to channel towards Public Works it's a really binary conclusion not hard to understand since 2018 Germany has had one of the lowest levels of public investment slightly higher than Spain which is all the way at the bottom even the US France and Japan has had higher levels of infrastructure investment nearing 4% of GDP Germany on the other hand only reinvested back 2.6% at the very most and this is why the gap between their Industries and Japan or even China is growing wider and wider how are you going to commit to building back your economies when you are fighting an endless war against the Russians Beijing is focused on winning while Europe is focused on not losing there's a very big difference here the economic divide is just going to get wider and wider and wider but as always let me know what you think will Europe continue decoupling with China and is a trade retaliation coming soon let me know in the comments below stay safe be sure to smash the like button and subscribe as we never get through these crazy times