We are going to find out soon whether Mr. Art of the Deal can bring China around on trade issues. It’s encouraging that Trump has already turned what had begun to look like a full-blown trade war with Europe into a success story for global business. However, it remains to be seen whether he can extract concessions from the hardball players in Beijing. For the time being, the news media have ratcheted down their Trump Derangement Syndrome sufficiently to report more honestly on what incorrigible scumbags the Chinese are in all things having to do with trade. We are dealing with one of the most corrupt governments on Earth, after all, and it is hardly unreasonable for Trump to demand that they show some respect for, at the very least, intellectual property.
The Next Big Rally
His odds of success have taken a favorable turn recently with the run on China’s currency and stock market. Bears have been piling up bets against both, and it’s only a matter of time before the government is forced to do something about it. Up until now, official policy has been to allow the currency to drift lower in order to compensate for the effects of higher tariffs on Chinese goods. This strategy cannot work for long if at all, however, since Trump can raise tariffs quicker than China can devalue its currency. Bottom line: Look for China to blink first. If and when this happens, it’s going to kick the U.S. bull market into high gear.