The Elusive China Trade Deal

Forbes asks the $382 billion question this morning,  Is A China Trade Deal Slipping Away?

President Trump and Chinese leaders are trying to put a positive spin on their marathon trade talks, but the fact is that there is little sign of progress. – Forbes, Feb 16th

That is our thinking and watched with astonishment the Puff The Magic Dragon rally on Friday, with the Dow closing up over 400 points.

You know our thoughts,

Seriously, folks,  do you really think the Middle Kingdom, with all its history and past glory, after climbing back to global superpower status after hundreds of years, is now going to cave and give up some of its sovereignty because Trump demands it?

President Xi already seems to be preparing his population for the worst case scenario, warning of “challenging times ahead” possibly in the event Trump goes ahead with the tariff hikes.  Maybe we are reading too much into it and maybe not. – GMM

No way in hell will the Chinese give up sovereignty because Trump, whom they now view as Paper Tiger, demands it.  No doubt they were watching the government shutdown negotiation debacle with great interest and learning.

Potemkin Trade Deal

So, it looks like we will get an extend and pretend of the March 1 deadline unless Trump decides to play hard and bring down the markets and economy.   Xi’s big gamble is that he is too politically weak to do so and won’t.

There is a possibility that I will extend the date. And if I do that; if I see that we’re close to a deal or the deal is going in the right direction, I would do that at the same tariffs that we’re charging now. I would not increase the tariffs.  – President Trump,  Feb 15th

The Trump team has run into a “Great Wall” of Chinese negotiators and seem to have failed to access what the deal breakers are for President Xi, which is one of the first principles of negotiations.  Bullying and tariffs won’t work and will end up making the situation worse than the status quo.

The final deal will be some sort of convoluted Potemkin trade deal (yet another one) with little structural reform to the Chinese economy, which will then invite great criticism of the administration.  That is that he caved once again.

Again, we reserve the right to be wrong and will eat our crow BBQ style drowned in sriracha sauce.

BS Degrees From MSU

All administrations, political parties, and governments, in general, are full of officials with BS degrees from MSU.  BS, as in Bull Shit;  MSU, and Make Shit Up.

But they seem ubiquitous in the Trump administration, starting at the top.  Weak in economic training, expertise, and understanding, and strong on ideology,

…Malpass nomination highlights the remarkable character of Trump’s economic appointments.

Remarkable in what way? Well, remarkably bad. Every economist, yours truly very much included, gets it wrong sometimes. But Trump only seems to choose men who have been wrong about everything.

Beyond that, however, what’s remarkable is the extent to which this president consistently chooses economists whose ideology is at odds with his own professed views on policy.  – Paul Krugman, Feb 14th

When will Mr. Market learn?