Welcome To The Forever Trade War

Are you surprised?  We’re not (see our repost below).

Now markets will have to grapple with does Trump carry through with the December tariffs? If not, he looks weak, weak, weak. If so, the stock market is going to get weak, weak, weak.

Thus, President Trump is faced with the choice of protecting the elite 10%, who own 80 plus percent of all stocks or playing Mr. Tough Guy on China to placate his base.

As the Phase One of his physical examination was completed this past Saturday,  a Phase One Trade Deal can’t be ruled out, but it is gonna need a big ginormous shovel.


China Still Looking For A Rollback

We posted our,  Roll back: The Verb China Is Looking For,  two months ago and China is still looking for a rollback on some of the tariffs that have already been implemented.

We wondered out loud if President Trump is about to cave and cut another meaningless trade deal — Phase 1, Phase 2, Phase 7, whatever  — which has already caused enormous pain with almost no gain,

So, after all the American economic carnage caused by Trump’s trade war, is the administration about to, or willing to cave on what they said were the most important issues:  1) intellectual property protection, 2) industrial policy reform?

Will Trump cut another meaningless Potemkin Trade Deal?

Markets salivate at the prospect of the end of trade conflict no matter who is the perceived winner.  However,  from a game-theoretic perspective, it is hard to imagine President Trump caving on tariffs unless the Chinese make major concessions on some of the structural issues, such as economic restructuring, lest he looks weak going into the 2020 election.

President Trump is not a rational actor, has no strategy,  and his negotiating team is divided, in our opinion, so who knows what will happen.  It’s clear to us, President Xi has the upper hand and the administration is grappling behind the scenes.

It is widely expected that, as part of a phase one deal, the U.S. and China will roll back part of the tariffs levied during the year-long trade dispute. 

But Peter Navarro, assistant to the president and director of the Office of Trade and Manufacturing Policy, argued forcefully against and even shook his head no at the suggestion of tariff relief in an interview with Yahoo Finance’s The Final Round on Friday, casting a shadow over the much-anticipated deal signing. 

“There’s no rollback at all,” Navarro said. “So we need the tariffs there, but the tariffs are really our best insurance policy as well to make sure that the Chinese are negotiating in good faith.”  – Yahoo Finance

China says no deal without a rollback.  Peter Navarro says no rollback.  It sounds like we are at Walmart.

We may or may not know more as President Trump delivers his speech at the Economic Club of New York on Tuesday.

Must View

By the way,  we highly recommend you watch the latest Frontline documentary (here) about the global struggle for AI supremacy to gain some perspective on what is really going on underneath the surface of these trade negotiations.

Roll back: The Verb China Is Looking For

Roll back is the verb China is looking for.

Mr. Market is all lathered up this morning on the following report,


Source: @FerroTV

Not so fast.


A senior White House official said the U.S. is “absolutely not” considering an interim trade deal with China.

Bloomberg News reported earlier Thursday the Trump administration discussed putting together a limited trade deal that would delay and remove some China tariffs, citing five people familiar with the matter. The news had driven stocks to session highs. — CNBC

Major Cave 

From our cheap seats in the peanut gallery, we can’t help but notice for the past month the Chinese have been sending signals and tossing the Trump negotiating team a few bones to walk back the new tariffs that went into effect on September 1st with more to come.   No bite from Trump as the September 1st tariffs went live.  Ditto for China’s retaliatory tariffs.

Then we heard China is willing to buy American ag products to jump-start negotiations.


The source said China could also offer more market access, better protection for intellectual property and to cut excess industrial capacity, but would be more reluctant to compromise on subsidies, industrial policy and reform of state-owned enterprises.  – SCMP


That would be short-term positive for the farmers but, come on, man,  central planning in trade?  Remove the price distortions and let the market forces rip and do their thing.

We also wonder if Trump’s negotiators understand the concept of hysteresis,

Hysteresis in the field of economics refers to an event in the economy that persists into the future, even after the factors that led to that event have been removed.  – Investopedia

Even if tariffs are completely rolled back, it may take a long time for U.S. farmers to restore their export markets, if ever.

Deal Or No Deal?

So, after all the American economic carnage caused by Trump’s trade war, is the administration about to, or willing to cave on what they said were the most important issues:  1) intellectual property protection, 2) industrial policy reform?

Will Trump cut another meaningless Potemkin Trade Deal?

We don’t know.  These clowns are so unstable and divided, losing the support of the American electorate, and seem to be in panic mode as Trump’s polling numbers continue to drop like the Hard Rock Cafe in Atlantic City!

The polls du jour show President Donald Trump trailing basically every Democrat in the 2020 general election, both nationally and in individual states — even in Texas.

…Their [polls] message is pretty simple: Trump looks weak. The president is lagging in the low 40s in head-to-head polls, consistent with his stubbornly low approval ratings. A lot of Americans seem to be fully committed to or are actively considering voting for somebody else. That’s not where the incumbent, after three years in office, should be if they want a second term. – Vox, Sep 12th

China Will Never Cave On The Big Issues

We are fairly certain Trump will never force the Chinese to speak English as their primary language…err…change the structure of their economy.

A Potemkin trade deal?

It is looking more likely but a big political risk for President Trump as his right flank will begin to turn on him as looking weak.   The left will bring out massive firepower and label the deal a “No gainer, but massive pain.”

Deals Galore? 

We also wonder if the Administration is on the verge of a “deals galore” flurry with, say, China, North Korea, Iran, and the Taliban (“the Fab Four”) before the election?  We are perplexed by, and the way John Bolton exited the White House yesterday,

And as impulsive and unpredictable as the president’s actions may be, firing Mr. Bolton reveals a certain consistency in Mr. Trump’s worldview: Though attracted to never-been-done theatrics like bringing the Taliban to Camp David or meeting with Mr. Kim, the president is also moored by suspicion of military adventures and has a huge appetite for deals.

What Mr. Trump really wants from his foreign policy is a diplomatic victory as he heads into his 2020 re-election campaign. — NY Times, Sept 10th

Why do we have that sinking feeling the “Fab Four” are licking their chops and looking at each other, thinking

Time to feast! 

Place your bets, folks.

P.S…. We have given up on any short-term calls on the market as it already difficult enough fighting against the algos and trading ‘bots, much less the central planners who now manipulate the markets almost hourly with their twitter accounts and the dropping of tape bombs.  Pretty fracking disgusting.

SEC where the f&*k are you?   That’s right, we forget, a sitting president cannot be indicted.

Nevertheless, we are sellers at 3025-3100 on the S&P and feel pretty confident the market can be bought at much lower prices sometime during the next 18 months.  We do reserve the right to be wrong and to remain solvent, thus our stop at 3125.

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