Hedge Fund CIO: “Americans Voted For Real Change And It’s Coming”

Submitted by Eric Peters, CIO of One River Asset Management

The planet’s most powerful military threatened to reconsider NATO unless Europeans meet their spending commitments. Europe’s leaders repeated unfulfilled pledges to do just that, returning to their parliaments to find the funds. Earth’s biggest consumer threatened to impose 10% tariffs on another $200bln of imports from the planet’s largest producer. Beijing vowed to retaliate. Its deeply indebted economy, overleveraged to ever-rising global trade, now faces the opposite. Lady Liberty warned the West of immigration’s profound threat to cultural identity, domestic security, harmony. Americans voted for real change. And it’s coming.

Battle Lines:

Peter Navarro, White House Trade Director, published a 36-page paper last month titled: How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World. If you subscribe to the view that the current trade conflict with China will pass with some modest concessions, it’s a must read. Navarro also made a 30min speech on the topic, which emphasizes just how deep the conflict runs. America’s trade deficit is an issue, but far from the primary conflict.

“It’s very sad when Germany makes a massive oil and gas deal with Russia, where you’re supposed to be guarding against Russia, and Germany goes out and pays billions and billions of dollars a year to Russia,” said Trump. “You’ve given up all of your strength. I think it’s very bad for Germany. It’s very bad for the German people. And I don’t think it’s very good for NATO, if you want to know the truth.” And the message was intended for Europe, but also Americans, who pay China billions and billions of dollars a year. $375bln to be exact.

Peter Navarro details 6 Chinese strategies of economic aggression and 50 state-directed acts, policies and practices that Beijing uses to achieve their goal of global economic dominance. “This also has military implications. It is what we’re up against when we’re trying to build an international trading order based on free, fair, balanced, and reciprocal trade,” he said. “If you have a negotiation and take 25 of these 50 issues off the table,” warned Navarro in the video, drawing clear battle lines, and in no mood to negotiate, “you still have 25 of them left.”

Onshore:

Chinese drivers purchased roughly 28mm vehicles in 2017, 26.8mm of which were produced in China. Only 1.2mm were imported due to the 25% tariffs Beijing applied to inbound vehicles. 15mm of the 28mm were domestic Chinese brands. The remaining 13mm were foreign brands, but 11.8mm of those were produced onshore in China. The intellectual property and business-process transfer accompanying onshore production is staggering, ongoing. By contrast, US drivers purchased roughly 17mm vehicles in 2017, of which just 4mm were produced here.