5/8/2019
By Charles Payne, CEO & Principal Analyst

Everyone has gotten comfortable with the notion a US-China trade deal was done and just a matter of cleaning up a few details.  I was in that camp as well, and still think a deal happens, which is why I applaud the tweets from President Trump on Sunday.

Not only was China dragging its feet and beginning to ask to alter things tentatively agreed upon, I think they were emboldened by comments from former Vice President Joe Biden who expressed little concern about China being a threat to America.

Tweets

Donald J. Trump

‏....of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!

Donald J. Trump

‏For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billion Dollars....

Is Big Business Really Looking Out for Consumers?

Big business and Wall Street screaming about these tweets are once again showing they care more about business bottom lines than American jobs and know-how.  Sure, they mask this by saying they are looking out for consumers, but the fact of the matter is, there is no business that will not have to eat the lion share of higher costs.

Moreover, unfair trade and theft of intellectual property shouldn’t take a back seat to corporate profits.  This is why capitalism is losing in the hearts and mind of the general public.  They should be happy to put skin in the game and not become allies of China leadership that has openly violated rules and expressed determination to rule the world by hook or by crook.

According to the Economic Policy Institute, a left-leaning think tank that does good work (I often have different opinion on the conclusion of their work) or financial relationship with China is anything but fair or free trading.

“The China toll deepens”

Growth in the bilateral trade deficit between 2001 and 2017 cost 3.4 million U.S. jobs, with losses in every state and congressional district

https://www.epi.org/publication/the-china-toll-deepens-growth-in-the-bilateral-trade-deficit-between-2001-and-2017-cost-3-4-million-u-s-jobs-with-losses-in-every-state-and-congressional-district/

If Americans knew and agreed the current makeup of our trade relationship with China cost jobs in every single congressional district, I suspect there would be great support for tough action.

Conclusion

I still believe a trade deal gets done.  The stakes are too high for both countries, but more so for China, which could reach its goals; albeit, with a longer time line, without its economy being completely derailed.  That said, China must be weighing holding out until the presidential election, as it did through the midterms hoping a change in the White House keeps the status quo.

Certainly, hearing democratic front runner Joe Biden say China is no threat must have elicited cheers throughout Beijing.

T

Charles Payne
Wall Street Strategies

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