Drilling for Truth

Let’s start with how Treasury Secretary Scott Bessent implied less than two days ago that a deal with China was getting close, as was de-escalation of tariffs. Then, President Trump said recently that talks with China are in progress:

"Well, they had a meeting this morning... we may reveal it later, but they had meetings this morning, and we've been meeting with China."

Trump added, when asked for more details:

"...it doesn't really matter who 'they' are."

Well, maybe it does matter because the “they” that is China replied to all of this, solidly confirming my earlier take on it:

China on Thursday said that there were no ongoing discussions with the U.S. on tariffs, despite indications from the White House this week that there would be some easing in tensions with Beijing.

“At present there are absolutely no negotiations on the economy and trade between China and the U.S.,” Ministry of Commerce spokesperson He Yadong told reporters in Mandarin, translated by CNBC. He added that “all sayings” regarding progress on bilateral talks should be dismissed….

The Commerce Ministry’s comments echoed those of Chinese Foreign Ministry spokesperson Guo Jiakun, who said on Thursday afternoon that there were no ongoing talks, according to state media.

Then, Minister of Commerce Yadong offered China’s only solution:

“If the U.S. really wants to resolve the problem ... it should cancel all the unilateral measures on China,” He said.

Both spokespersons held to the official line that China would be willing to talk to the U.S. subject to Beijing being treated as an equal.

In other words, “Cancel your tariffs first, and then we’ll talk.” Everything said by the Trump administration about a deal progressing with China and talks with China was a flat-out lie.

Nevertheless, stocks gained because of the president’s words, because lies sell. So, that’s all that matters in Pretend World.

Trade talks with the world’s second-largest economy are not happening. Instead …

China earlier this week threatened countermeasures against countries that might make deals with the U.S. at the expense of Beijing’s interests.

“We also need to recognize that this is a ‘whatever it takes’ moment for China in terms of U.S.-China relations,” Su said. “I wouldn’t be surprised if China adopts a more hawkish stance if the U.S. continues to escalate tensions.”

Trump can spin it like a piano, but keep reading here for the actual news, even though the stock market clearly prefers to focus on the words investors glean from the White House if those words give them any reason to hope greedy days are here again.

Drilling for truth

As another example of the difficulty of drilling through the overburden to find the golden truth, take Trump’s promise that, from his inauguration forward, it was going to be “drill, Baby, drill” for the oil industry. Markets slavered all over those words, and, so, the stocks of major oil producers soared, but I’ll ask, “How’s that working out for you now?” Because when markets choose to rise on vain promises, they ultimately collapse because there was nothing there. Hope only floats so long.

Let me answer how it is actually going now:

“Drill, Baby Drill” has morphed rapidly into “Wait, Baby, Wait”:

[Trump’s] Energy Secretary, Chris Wright, the former CEO of Denver-based Liberty Energy, also vowed that Trump’s energy policies would create a “golden age” for the U.S. oil and natural gas industry.

Within the first few months of Trump’s new administration, the opposite has been true, with layoffs increasing, rig counts dropping, and industry executives expressing alarm.

After Trump was reelected, “the initial mood in the industry was euphoric” [as happens when markets are easily manipulate by being told what the want to hear] because the industry believed the administration was “pro-energy,” Odessa-based Latigo Petroleum president Kirk Edwards said. “But within the first few months, a different set of challenges emerged. Tariffs have driven up the cost of drilling, squeezing margins just as operators look to expand.”

The Trump administration pushing OPEC to increase production in an already oversupplied global market contributed to oil prices plummeting. “This sharp price decline has thrown U.S. producers into limbo,” Edwards said. Trump’s mantra, “Drill, baby, drill,” turned into “wait, baby, wait,” he said. As a result, the industry isn’t adding rigs to drill when “price signals are so unclear,” The Center Square reported.

Chaos.

(Still wishing I had called 2025 “The Year of Chaos,” rather than 2024 (thinking particularly post-election 2024), but, hey, better a two months early than late, I suppose).

The rig count has dropped under the Trump administration, with the biggest losses reported in Texas, the oil and natural gas capital of the U.S. As of March 28, there were 290 rigs in Texas, down from 376 in March 2024, according to newly released Baker Hughes data.

“The U.S. shale industry faces significant challenges as production issues and economic pressures rise,” Linhua Guan, CEO of Houston-based Surge Energy, said in a social media post….

“You’ve really got to hunker down. You may have to lay off some people. You’ve got to focus on your best prospects. We’ll see what happens over the next two or three years,” Bloomberg News reported.

A very far cry from the Trumpian promise, but it is exactly where I said tariffs would take the entire US economy, except that this example is playing out in the oil plays of America, where Trump had promised the biggest moves into his new “Golden Age for America.”

Ironically, under Biden, of all things (because I can’t stand the guy) …

The Texas oil and natural gas industry in the last two years reported record production and for many months was adding jobs and leading the U.S. in job creation, The Center Square reported. In March, it reported a loss of 700 jobs in the upstream sector – the sector that drills primarily in the oil rich Permian Basin, The Center Square reported.

Also last month, BP announced it was shedding 7,700 jobs globally and shifting roughly 1,100 U.S. based jobs to Hungary, India and Malaysia, Pipeline & Gas Journal reported….

Uncertainty in the industry continued after Liberty Energy [where Trump’s energy secretary of golden promises was CEO] published its first quarterly earnings report showing a profit of $165 million, the lowest since the first quarter of 2022. “Net income (after taxes) totaled $20 million for the first quarter of 2025 compared to $82 million in the first quarter of 2024 and $52 million in the fourth quarter of 2024,” it said.

Its new CEO Ron Guzek said, “In recent months, tariff announcements and a more aggressive OPEC+ production strategy have sent ripples across the energy sector….”

U.S. oil and gas executives are overall expressing pessimism, according to a Dallas Fed survey. The company outlook index decreased by 12 points; the outlook uncertainty index increased by 21 points.

It’s chaos on the oil plays of America.

The dollar’s demise

Now some hot news about that dollar collapse conspiracy that I wrote about just this past weekend. You can read the conspiracy theory here if you missed it:

THE DEEPER DOLLAR: Evidence of a White House Conspiracy to Collapse the Dollar

David Haggith

·

Apr 22

 

 

Read full story

Today, two—yes, two—major banks reported said they are now expecting a massive decline in the dollar due to the tariff wars.

Deutsche Bank said it expects to see the dollar decline by 30% from it high of almost par to the euro at the start of the year:

Deutsche Bank AG is warning of a structural dollar downtrend in the coming years which will knock the US currency to its weakest level in more than a decade against the euro….

The dollar fell to a 16-month low earlier this week as heightened US policy uncertainty fueled questions about its status as the world’s reserve currency. The Bloomberg Dollar Spot Index is down nearly 4% in April, on course for its worst month in more than two years.

“The pre-conditions are now in place for the beginning of a major dollar downtrend,” the strategists at Deutsche Bank Research wrote in a note. “Given the historical developments of the last few months our EUR/USD forecasts now anticipate the dollar entering a long-winded downcycle.”

The bank now forecasts the euro will climb to $1.30 by the end of 2027, a level last seen in 2014….

By the end of 2027, the bank expects the dollar to tumble against other currencies, and sees the pound climbing to $1.45, a level last seen in 2016….

Saravelos and Baker said US President Donald Trump’s trade policies are reducing foreign investor appetite to fund the country’s twin deficits.

And Goldman Sachs indicated its belief in a similar decline:

The dollar, battered and bruised by U.S. tariff uncertainty and recession fears, has much further to fall, Goldman Sachs chief economist Jan Hatzius says.

The dollar has fallen over 4.5% in April, set for its biggest monthly drop since late 2022, as investors dump U.S. assets, sparking talk of a crisis of confidence in the world's No.1 reserve currency.

It has slumped 8% this year against a basket of other major currencies.

Further falls would exacerbate price pressures when tariffs are already pushing up inflation….

“With all due humility, I believe that the recent dollar depreciation of 5% on a broad trade-weighted basis has considerably further to go."

Hatzius, noted that two historical periods with similar dollar valuations to the present day -- the mid-1980s and early 2000s -- set the stage for a 25-30% depreciation….

Hatzius adds a U.S. current account deficit of $1.1 trillion has to be financed by a net capital inflow of the same amount every year. In theory, this comes from foreign buying of U.S. assets, so even a pause in foreign U.S. asset purchases could hurt the greenback.

Now the intriguing part: You may remember that in early March I wrote:

The dollar’s demise

Everyone reading here knows I’ve held out against the idea of any imminent dollar collapse due to the BRICS nations and sanctions against Russia and even crypto currencies and central bank digital currencies. The dollar would weather all of that, I’ve said, but that was all before any talk of the Trump Tariffs, much less the present spectacle of absolutely massive tariffs raining down all around us, practically compounding by the minute with retaliatory moves….

The tariff war could also finally be the straw that breaks the dollar’s back:…

Obviously, trade is the heart of the dollar’s role as the international trade currency. It is because the whole world sells so many products into the United State’s vast economy that the dollar has become king. Oil is a part of that as the dollar was particularly tied to oil trade by Nixon via Henry Kissinger’s diplomacy. With trade likely to go down more and more, the longer these tariffs stay in place, the less need there is going to be for dollars. That poses a huge additional collateral problem for financing the US debt.

What sanctions and BRICS retaliation never even came close to doing, US withdrawal from European defense and widespread implementation of very high tariffs may accomplish at last. Again, it depends on how far this goes….

The past week’s sweeping chaos from Trump has stood so many global relationships in trade and defense on their heads in a mere matter of days that his changes may be diminishing the United State’s roll throughout the world enough to finally start knocking the dollar down. …

Nations doing all their trade with other nations can forego US dollars.

That was based on a prediction I had made in a Deeper Dive at the very start of the year, which I summarize two days later for everyone:

This weekend’s Deeper Dive, for those who don’t get it, could have been called “The Trouble with Tariffs.” What I delved into was something I’ve not heard from anyone about the way in which tariffs could blow up the national debt and demolish the dollar to where it is no long the global trade currency. If you’ve read here awhile, you know I’m not big on the whole rapid dollar-collapse hypothesis, but this is something I had NEVER thought about, and it has nothing to do with other nations trying to ditch the dollar just to end US global dominance:…

Economic uncertainty and trade tensions might discourage foreign investment in the US, potentially impacting the dollar's strength and the government's ability to finance its debt….

Bottom line is that TRADE is the only reason the US dollar IS the global currency at the most fundamental level. Kill trade with the US, and you kill the most foundational reason to use the dollar as a global currency, and if that happens, the debt goest thermonuclear.

The simple mechanics are this:

Countries with trade surpluses against the US often use their excess dollars to purchase US Treasuries. If tariffs reduce these surpluses, there may be fewer dollars available for Treasury purchases

Well, now we are seeing all of that in process of happening, and everyone in finance is now talking about it. How far the chain reaction goes depends on how far Trump goes with his tariff wars. At some point, as one article below by Stephen Roach points out today, the world will not forgive the US for its tariff wars even if Trump does stop it due to the damage inflicted. It will, instead, isolate itself from the US for year. There is a point at which rage and feelings of betrayal make the deep damage nearly irreversible.