What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing since russia invaded ukraine. Three weeks ago, the west has imposed crippling economic sanctions to cut off russia from the world economy. This has already resulted in skyrocketing energy prices, which will be very painful for energy importing nations and further fuel. The fire of inflation.

The u.s and other western countries are trying to decouple themselves from russia, which produces 10 percent of the world's oil and significant amounts of other vital commodities. But even before russia invaded ukraine, there has been a growing trend of isolationism as countries try to insulate themselves from perceived security risks from abroad. Over the past two decades, globalization has been a major driver of economic growth and has lifted billions of people out of poverty. It has allowed export-heavy countries like china to become economic superpowers and other countries like vietnam to transition from subsistence agriculture to manufacturing and, on the other hand, it has allowed developed countries like the us to import massive volumes of cheap products and enjoy levels of consumption, which Would be unimaginable to previous generations.

This chart shows a total value of global trade over the past 30 years. You can see large decreases in 2008 as a result of the global financial crisis and in 2016, when the u.s fracking bubble caused oil prices to collapse. But aside from these two blips, the trend has been clearly positive, with a nearly 40-fold increase from 1970 through the peak in 2018. in 2019, trades started declining.

Despite the absence of any recession, this trend was accelerated by the pandemic, with the eu looking to decouple itself from russia and cutting it off from the western financial system. The decline in trade volumes will likely accelerate going forward. At the same time, biden is continuing. Trump's trade war against china and things look to be getting even worse.

Between the two countries, global economies have gotten more and more intertwined with each other over the past two decades. As this world order comes unraveling, the consequences will be immense. In the 1990s, the soviet union collapsed and china started opening up to the rest of the world. At the same time, shipping costs were declining which set the stage for the golden era of globalization with globalization.

Each country can specialize in whatever they're good at which reduces cost for consumers around the globe. China took advantage of its cheap labor and abundant labor force, assembling everything from apparel to iphones russia specialized in the extraction of their vast oil natural gas deposits and became a major energy exporter. The united states benefited tremendously from importing chinese products which can be imported for a fraction of the cost to produce them domestically energy. Poor europe benefited tremendously from importing vast amounts of oil and natural gas from russia.

Everything looked to be going fine. Each country can specialize in a few industries which increases efficiency, they trade their production amongst each other, and everyone is better off, but this would all change. After donald trump's election in 2016., trump was concerned about traditional manufacturing industries, which have been decimated, as jobs are outsourced to lower cost countries like china and mexico, while the economy as a whole benefits from cheaper imported goods. Certain cities have been destroyed as multinational companies outsource their jobs.

This can be seen in the rapidly expanding trade deficit. The us runs with the rest of the world. Trump responded by placing tariffs on a wide range of chinese imports in an attempt to reduce this deficit and bring back jobs at first, his crusade against china seemed like traditional trade protectionism, which is not a new concept by any means, but the crackdowns against china extend Well, beyond pure economic concerns. In recent years, china's technology sector has grown tremendously, especially in the telecommunications industry.

Huawei became one of the biggest telecommunication equipment producers and was a leader in 5g infrastructure. They also produced smartphones and other consumer electronics, trump targeted huawei, as well as another chinese company called zte for supposed national security risks. The idea is that if u.s cell phone carriers used chinese-made equipment, the chinese government would be able to intercept u.s communications and spy on americans. Many european countries joined the us in banning huawei, citing similar national security concerns.

The trump administration banned u.s companies from exporting products to huawei and zte. This wiped out a large portion of both companies smartphone businesses overnight, as they rely on u.s semiconductor companies like intel and qualcomm. At the same time, china is also cracking down on its own companies. For supposed data privacy violations in 2021, they banned new downloads of dd's app, which is the largest ride-hailing company in china.

This destroyed the company's growth prospects and, to this day its app is still not returned to the app store. The crackdown came within days of dd's listing on the new york stock exchange. China feared that dd could provide sensitive data to u.s securities regulators. China is also concerned about its reliance on u.s technology.

They've been investing billions of dollars into state-run semiconductor company smic. To reduce this dependence and with russia's recent invasion of ukraine, things on the world stage are getting even worse. The west has levied economic sanctions which aim to cut off russia from the global financial system. We made a video going into this in detail link in the description below, but another aspect to consider is how this could push russia closer to china and china.

Further from the west, over 300 u.s and european companies have shut down their russian operations since the invasion began. This includes big names like mcdonald's, which generated almost 10 percent of its revenue from that country. Both mastercard and visa announced their shutting down russian service. In response.

Russian banks are reportedly planning to switch over to union pay a chinese payment processing company, which does the same thing as visa and mastercard. For years, putin has worked to insulate russia's economy from potential western sanctions. So far he has had limited success, but he is now accelerating these efforts, with the help of china they're investing tens of billions of dollars in new pipelines to supply natural gas to china, as europe looks to cut imports, to the extent that russia can increase its Ties to china, this will insulate them from western sanctions and give putin near impunity to continue his invasion of ukraine and possibly even expand further. There are growing fears that the western allies may impose secondary sanctions against chinese companies if they help russia to evade the existing sanctions.

This would not be without president, in fact, part of the rationale behind the crackdown against huawei and zte was because they secretly helped north korea and iran evade u.s sanctions, but with russia this is taking things to a whole different level. Russia is a major trading partner of china, and china relies on russia for oil and natural gas. President xi recently went as far as to say that the two countries friendship knows no bounds. It seems unlikely that china would capitulate to the west, especially as they have made it a strategic priority to become more self-reliant unless the ukraine situation can be peacefully resolved.

The world is at a severe risk of ending up in something of a new cold war. On the western side, you'd have nato and a few other allied countries on the eastern side. You'd have russia, belarus, china and possibly iran. The two sides could levy sanctions on each other and greatly reduce international trade.

Many countries are working to expand domestic production of semiconductors as a strategic, economic and national security goal. As we said before, china is rapidly boosting its semiconductor manufacturing capacity, but thus far, they've only had success with less advanced, so-called lagging edge chips. Currently, the western block would have a big advantage in semiconductors. Most of the important chip designers such as intel amd and qualcomm are based in the us.

Most of the production of leading-edge chips is done by samsung and taiwan, semiconductor, which are both located in western friendly nations. China has never recognized the independence of taiwan. As recently as a few months ago, president xi said that reunification of the island must be and will be fulfilled. If china does decide to take over taiwan, the strategic implications would be huge.

They would take control of taiwan semiconductor, which is the global leader in manufacturing leading-edge chips such as those using smartphones and high-performance data centers. They could threaten cutting off supply to the west as a political bargaining chip, because of this, western nations would likely support taiwan, at least to the same extent, that they're supporting ukraine today such a development would greatly increase the probability of world war iii. Even if the politicians can avoid world war iii we're already starting to see the effects of the current situation on the global economy, oil prices have spiked the 10-year highs and european natural gas prices are at the highest levels ever recorded. The european union announced plans to reduce russian natural gas imports by two-thirds by the end of this year, which could see prices skyrocket even further.

This could be a disaster for energy-intensive industries such as automobiles, as europe has very little in the way of domestic energy resources. At the same time, intel is taking advantage of billions of dollars worth of government subsidies to build new semiconductor plants in the us. The net effect of the ukraine war, as well as growing tensions between the us and china, will almost certainly mean a decrease in trade and increasing inflation. As a consumer, you will almost certainly see the effects of higher prices at the gas pump and higher prices for cars, phones, computers and everything else that uses computer chips.

Alright, guys that wraps it up for this video. Do you think russia's invasion of ukraine will mark the end of globalization? Let us know in the comments section below, as always. Thank you so much for watching and we'll see in the next one wall, street millennial signing out.