Yesterday, Trump took to Twitter and unexpectedly threatened to raise tariffs on Chinese goods this coming Friday. This caught most people by surprise given incessant commentary over the past several months about how good trade talks were going and how close both sides were to signing a monumental deal. Although Trump’s tweet led to immediate turmoil in global financial markets, U.S. equities have gone up in a straight line since the market opened and are barely down as I write this. Investors appear to assume this is just theater meant make the U.S. public think he’s being tough, so that when he ultimately signs a largely meaningless sham deal with no teeth he can talk it up and pat himself on the back for being a brilliant negotiator. I’m not convinced this is correct, but it’s what markets seem to be pricing in. Either way, we’ll have answers soon enough.
More importantly, I continue to think the U.S. and China are on a major collision course irrespective of what happens with the trade deal. This charade will likely resolve either with no deal and an immediate dangerous ratcheting up of tensions, or we’ll get a deal so weak and irrelevant it’ll fail to fundamentally alter the U.S.-China economic relationship in any meaningful way, which was supposedly the whole point.
Many people still assume the “trade war” is actually about trade, when in reality it’s about geopolitical power. The Trump administration wants to knock China down a notch and consolidate global hegemony, which is why it’s been pressuring China on a variety of fronts. This pressure will not cease until China either rolls over and becomes a client state of a U.S. unipolar empire, or it fights back. My view is China will fight back.
from Liberty Blitzkrieg http://bit.ly/2ZZReWS
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