China Trade Deal

“They broke the deal,”  is Trump’s rallying cry.  And really very dumb, because there was no deal.  There were drafts of critical pieces of a deal.  The Chinese have responded much more quietly, and that is a continued belief that a negotiated trade agreement is reached.

Trump probably has walked away from a hundred deals.  It is what real estate investors do every day.  The price and terms of a deal are not to his liking, he has the right to walk away.

Trump has also talked how he likes to win. That doesn’t make for good diplomacy.   The chief negotiator is Robert Lighthizer, who has been in the thick of trade negotiations many times and successfully crafted agreements.   He is known as a trade hardliner.   I am hopeful he can avoid massive tariff hikes, but he’s definitely running out of time.

The other hardliner is Peter Navarro,   And I am very worried about his influence as it’s all about principle and not compromise.  He could be the number 1 deal breaker.   He looks at what other countries are doing, which puts the US industries in a weaker position,  and argues for aggressive action.   Punishing countries through tariffs can really do major damage to our own economy.  The one industry which will suffer the most, are Trump’s most ardent supporters,  the Midwest farmers through tariffs on soybean exports.  Peter Navarro is a professor of economics, and has written many books, where he can hold the high ground of ideology.  Now, he’s in the trenches.

So, let me for a minute, put myself in Vice Premier Liu He position, China’s top trade negotiator, who arrived in Washington today.  Of course, he will remind Trump that both countries will suffer as a result of intensifying the trade wars.   He will tell Trump that China will retaliate by raising tariffs on a large number of products.   Citrus growers in Florida will feel the impact.   Now, the president is listening, because that’s 29 electoral votes in 2020 and Florida is definitely a swing state.  Texas will also be impacted, and there’s  38 electoral votes.   Vice Premier Liu He, can’t tell Trump that he will lose California – that ship has already sailed.

Trump will be divided, not on how the trade war will affect the economy,  but his chances of being re-elected.   That’s really the sad part of all this.  Trump is thinking  whether he can sway millions of Twitter followers, that China broke the deal, which of course, was still being negotiated.  Of course, a worsening global economy and increased unemployment will definitely speak louder than the Twitter feeds.

Stay tuned,

Dave