Breaking China Not as Easy as Toppling Tijuana

Breaking China Not as Easy as Toppling Tijuana by David Haggith for The Great Recession

A bump from Donald Trump’s thump on Mexico’s head is causing the US stock market to swell this week. Trump tariffiedthe market last week because his new threat against all things Mexican seemed to say Trump might use tariffs as leverage to get anything he wants. Agent Orange apparently got what he wanted — though it remains unclear whether he got anything that wasn’t already in the offing, but he says he did — so the market’s knock on the head is healing this week.

All par for the course in a market that is smoking rope anyway. Soon enough, however, we return to the market thinking it is all about China, and China is an entirely different syndrome than a Mexican border problem that Mexico was already helping with. It’s also a different tariff war than one in which tariffs have already been implemented, negotiated and removed months ago.

It may have been a bit nerve-wracking to some that Trump was willing to risk blowing that up; but I suspect it was just a case of the president pulling out his new favorite trump card. It was a safe bluff. How hard would it be to wring enough out of Mexico to say he got what he wanted, regardless of how little he got, when he never stated specifically what he wanted in the first place? A reasonable question, I think, given that the president has also been unwilling so far to state what it was he got that was any different than things that had already been largely agreed to.

Perhaps time will tell that he got something seriously worth the threat, but by then the newsfeed will have moved on down the ticker tape anyway.

I put no stock in a China trade deal

China is a different problem for the stock market than Mexico was because of how long the market has denied the truth about that particular Trump Trade War. Months of denial have left the stock market with a lot of distance still to correct if China doesn’t capitulate, which the market is doing reluctantly in fits and starts. Mexico was a blip by comparison.

By Neuroxic (Own work) [CC BY 4.0 (http://creativecommons.org/licenses/by/4.0)], via Wikimedia Commons

The market finally fell in May after months of rising because it started to become clear there will be no Chinese trade deal in the near future. (It was always clear here, but most of the market willingly believed the president’s every tweet because it wanted to believe.) Prior to May, the market had been rising for months on Trump’s hot air about the Chinese deal coming soon because it had little other reason to rise. The Fed was not backing down rates as the market hoped it would, and the economy was not cooperating with the president’s MAGA plan. Economic numbers were starting to retreat.

The only thing that changed in May was that Trump walked away from a China deal he had been touting, and China started talking as tough as Trump. The market trembled in fear. That demonstrated that the market had been stupid in that a large number of self-deceived investors chose to believe against all evidence that Trump was telling the truth every time he said a deal was likely imminent with China. Trump never offered any evidence to back up what Trump was saying. All that mattered was that he was saying it. (If you cannot trust your president, who can you trust?) All evidence was actually to the contrary in that every statement from the Chinese has been saying repeatedly they would not capitulate to Trump.

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David Haggith

Knave Dave — vigilante against the false profits of The Great Recession Too many criminal CEOs still fill their porky bellies with the biggest taxpayer bailouts in the history of the world. These bailouts protect their reputations, saving them from the fall they should have taken. They continue to receive bonuses for having done an unparalleled job of destroying their companies! Many of their companies wouldn’t be making any profit at all if not for the interest they’re making off of nearly free government bailouts. Just this week Hewlett-Packard fired its CEO, but is still paying him a bonus of millions of dollars in exchange for a year of corporate wandering in the wilderness. Netflix’s CEO cost his company hundreds of thousands of subscribers and had to reverse his decision. Bank of America’s CEO launched a debit-card fee plan that was immediately stupid in the eyes of many, but greed an arrogance led him to think he could pass it by his customers, and he lost customers in droves and had to reverse his decision, as did the many major banks that followed him. Since these corporate leaders do things most of us can immediately see as being dumb, why are they rewarded with salaries a thousand times greater than many of us make?