By coinnews 
00:00 Speaker A
You say toward in in a note recently. You say there’s now a 90% chance of what you call a VTRR. Explain what you mean by that, Torsten.
00:15 Torsten
Yes, so if we really back up and think about normally, the economy is constantly faced with all kinds of what you could describe as shocks. For example, it was a shock that COVID came along, that created a recession. It was a shock when Lehman Brothers went under, that was a recession. We also had a shock in the early 1990s, of course, with the commercial real estate crisis. And we had a shock in 2000 when the IT bubble popped. So what is the shock today? Well, the shock today really is a voluntary trade reset recession. In other words, from one day to the other, a politician got elected. He comes in and says, I would like to start a trade war. And this trade war is now implemented in a way where we in financial markets can only conclude that it comes with more downside risks than if it was implemented in other ways. And it is mainly the implementation that is the biggest challenge when it comes to the economic outlook, namely that it comes with the risk that there is a requirement that, for example, your retailer who sells toys in the Midwest, who’s now an independent store that normally has been importing from China, and now needs to find other ways of getting these toys, and there is no easy quick way to do that because the same toys are not produced in the US. The same toys might not even produced in other countries. 75% of toys that are sold in the US, they come from China. So the conclusion is that the way that this unfortunately has been implemented is going to have a more negative consequences. And that is what we will call a voluntary trade reset recession. In other words, it’s voluntary, it’s a trade reset, and we are worried that there’s a 90% chance now that this is going to result in a recession if these tariffs stay at these levels.
04:27 Speaker A
Torsten, what do you make of the argument about what the administration is trying to achieve in the end in terms of, they, as you say, they are resetting the trade paradigm on purpose. Um, is what they’re aiming to do, A, is it achievable? And B, is it worth achieving?
05:20 Torsten
Well, one important aspect of course is the discussion around that the manufacturing sector only makes up today around 10% of US employment and 10% of GDP. It’s been declining over the last many decades from around 40, 50%, if you go back to World War II, so now making up a much smaller share of the economy. So if the goal is to increase the manufacturing sector, then depreciating the dollar of course comes with another set of risks as we have constantly talking about in markets today. So the question here is, is it possible to grow the manufacturing sector? And if we want to grow the manufacturing sector, is that coming then with enough value added? For example, producing large language models, producing AI, of course, has more value added embedded relative to producing T-shirts and and shoes and toys, etc. So there is some very fundamental questions around if you grow the manufacturing sector, and that is definitely possible, but is the cost that has to be paid to achieve that goal going to be significant in terms of what it might mean for labor that could otherwise have been spending hours inventing large language models again, and AI and technology. So to your question, Julie, yes, it is a very important part of this discussion to debate whether the goal is to increase manufacturing, and if it’s possible and desirable to increase the manufacturing sector, and if so, what type of products is it that we are imagining should be produced in the factories that potentially has to be built in this country.