U.S. President Donald Trump faces a difficult weekend at the G7 Summit in Biarritz, France. The weight of three years of resistance from all sides leading up to the edge of the 2020 election cycle are piling on the embattled presidency. Everyone it seems, has something to gain from seeing him fail.
Ignore for the moment the Democratic Party which quite honestly have been knee biters at best in their efforts to undermine Trump. The president has far more formidable problems to contend with that he summarized in two particularly provocative Tweets on Friday morning.
On the edge of the G7 summit, China boldly announced that it was reinstating its plans for 25% tariffs on U.S. automobiles in December plus additional new tariffs on $75 billion in U.S. goods including 5% to 10% increases on some items starting on September 1st. This tit-for-tat response by China follows an announcement of new U.S. tariffs on some $300 million worth of Chinese goods.
These are bold moves by China making Xi Jinping appear to be strong standing up for Chinese interests domestically. Some of this may be driven by Xi’s need to bluster given his governments difficulties coming to terms with the Southern Chinese culture of Hong Kong.
It doesn’t change the fact that both the U.S. and China still need a strong cross-Pacific trade economy; something the U.S. acknowledged recently in announcing that tariffs on certain consumer goods would be delayed until after the U.S. Christmas buying season.
Going into the G7 Summit, Xi’s efforts to provoke Trump are seen by some as China angling to embarrass the U.S. on the world stage. It caused the U.S. President to react.
7:59AM, Aug 23, 2019
“Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States.
Also, I am ordering all carriers, including Fed Ex, Amazon, UPS and the Post Office, to SEARCH FOR & REFUSE all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Xi said this would stop – it didn’t. Our Economy, because of our gains in the last 2 1/2 years, is MUCH larger than that of China. We will keep it that way!” – @realdonaldtrump
Whatever discussions take place in Paris will obviously now be more stressful. The Chinese have committed to a tough stance approach to the U.S. steeling themselves to the fact that it means internal sacrifices are ahead for them. Xi faces the decision on whether to shrink China’s economy as the U.S. trading addition wanes, knowing full well the internal human cruelty that means; or, beginning to meander down the path of expansionism trying to become that next “Greater East Asia Co-Prosperity Sphere” hegemonic power.
Both strategies are fraught with risk for Xi. Personally, I’d keep trying to kick that can down the road making deals with Donald the Strong and telling his domestic constituencies “now is not the time and this is not the way”; but what do I know?
Some of Trump’s domestic enemies hope it means it will precipitate a U.S. recession.
Democrats seeking to win the White House in 2020 hope for an economic disaster that will create some sort of tangible proof that the Trump agenda is a house of cards. The end of a job boom winning over the U.S. population to the Trump agenda is worth the pain to the DNC. Particularly for the far left, pain that creates the opportunity to sell social engineering agendas other the traditional U.S. capitalism model.
Capitalists too oppose the White House. Wall Street firms in many industrial sectors have deep dependencies on the Chinese supply chain connection in their business models and are reluctant to give that up. The stock market tanking every time it thinks it might need to make long term capital investments inside the U.S. border is evidence of a deep addiction to cheap outsourcing.
And then there’s the perfect storm problem that Trump doesn’t have the backing of his own government apparatus. In a telling tweet, Trump expressed frustration that the U.S. Federal Reserve is pursuing an economic agenda seemingly completely disconnected from the infrastructure investment agenda of the White House. Trump’s frustration of comparing Jay Powell to Xi Jinping is telling about how critical he feels the Feds support is to the nation’s agenda.
7:57AM, Aug 23, 2019
“As usual, the Fed did NOTHING! It is incredible that they can “speak” without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work “brilliantly” with both, and the U.S. will do great. My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” – @realdonaldtrump
The cold hard truth here is that Trump’s problem may be institutional inertia. Many financial analysts believe the Fed is lost in its own virtual universe because it’s been kicking the monetary policy can down the road of quantitative easing for so long that it’s no devoid of ability to drive the economy in support of Trump’s great America agenda. The U.S. financial system never really changed the bandages from the 2008 crisis. That timidity itself sowed the seeds for this current crisis of not being able to repatriate U.S. industrial capacity as global tariff realignment faithfully follows global influence realignment.
Combine that with Congress’ intent to gridlock the system and there’s very little steering available to maneuver the U.S. ship in the face of the efforts of the other world’s largest economy similarly trying to not wind up on a reef in the South China Sea.
Both nations are operating with their hands tied behind their backs in my opinion. The problem is, the rest of the world is depending on this Bob and Bing road movie not becoming a box office disaster.
Will these two men be able to act like men and lead their nations to keep the world stable over the weekend? I hope so.