Two weeks ago, Commerce Secretary Wilbur Ross was back on Bubblevision to throw cold water on the idea of any Trade War breakthrough at this weekend’s Group of 20 summit in Japan:
“There might be an agreement to restart the discussion, but a sidebar at the G20 is no place to handle a 2,500-page trade deal.”
Cut to Treasury Secretary Steve Mnuchin, yesterday, as the stock market was showing signs of failing to break out from “Peak Trump”:
“We were about 90% of the way there” on a deal with China “and I think there’s a path to complete this.”
Of course, equity futures soared, again, on that bon mot. And we’ve stayed in the green today, probably because Donald Trump is going full goombah with his Federal Reserve Chair.
“Here’s a guy – nobody ever heard of him before,” he said this morning on Fox Business. “And, now, I made him, and he wants to show how tough he is. OK. Let him show how tough he is. He’s a… he’s a… he’s not doing a good job.”
That’s the presidential response to Jerome Powell’s remark on Tuesday that it’s important the Fed not bend to “short-term political interests.”
Jay just doesn’t get it. You see, “The Don” – Corleone, I mean – was just a “don.”
Only the Donald is the Donald.
All Hail Donald Trump
And Trump , folks, is an authoritarian, through and through,
That’s why whatever deal we see – whenever we finally see it – will be a product of enhanced managed trade. It’s not a move toward freer commerce among consenting parties.
In fact, the deal Donald Trump demands is not an economic document at all. It’s an Imperial Washington lawyer’s belt-and-suspenders special. It’ll keep K Street meters running ’round the clock. They’ll all gin up “fine print” complaints for American companies operating in China or exporting goods there.
There’s another side of that trade, too, another set of high-class grifters mounting defenses for Chinese companies forced into the jurisdiction to hire the best ’slingers a 2,500-page morass can engender.
No team or imperial city of lawyers is going to solve America’s $443 billion bilateral trade deficit with China.
It’s about economic fundamentals and monetary policy.
The stuff to do with China’s intellectual property laws, foreign investor rules, and state-driven development programs are details and symptoms of larger, structural problems that, up until now, have left the major beneficiaries pretty much immune from recrimination – and extremely well-off.
To hear Donald Trump’s consigliere and Beltway muscle tell it, you’d think American competitors are pure as the driven snow when it comes to patent infringement and respect for the proprietary claims of incumbent suppliers.
So, why are there 15,000 patent-infringement cases filed in U.S. courts every year, the vast majority of them American-on-American lawsuits?
Infringement losses are estimated by the patent law defense bar to be in the hundreds of billions annually. But less than 8% of that is attributable to Chinese malefactors.
Let’s say we could instantly bring every Chinese company to a Fortune 500 level of patent law compliance and eliminate China’s development subsidies entirely.
It still wouldn’t move the needle on America’s trade deficit with China.
What’s happening is that factions in Imperial Washington – primarily virulently anti-Chinese national security “hawks” and neocons like Mike Pompeo and Peter Navarro but also old-school protectionists like Wilbur Ross and the Fortune 500 lobby – are trying to drive a square peg into a round hole.
From a Chinese nationalist perspective, it’s not too far fetched to say that this 2,500-page “deal” amounts to is a return to the humiliating “Unequal Treaties” signed by the dying Qing Dynasty in the mid-19th century.
They’re using Donald Trump’s goombah-authoritarian tendencies to further their own, essentially non-economic agendas.
It’s sheer madness.
And it’s going to get worse.
For Cooler Heads Only…
Desperate times call for… “common sense” measures.
And these are desperate times… Markets are corrupted by monetary central planning. They’re confused. And the road back is going to be treacherous.
We’re looking at a major re-pricing for all financial assets. And thousand-point intraday or day-to-day swings are part of that equation. Those can be frightening… for “buy and hold” investors.
I have a different approach, one that combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos. It’s called “The Stockman Model.”
All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents…