Over the last several weeks, the market has gone through various fits of panic over whether a global trade war, sparked by the US, might imperil the global economy. However, over that period, sentiment has generally improved, with most investors now thinking a trade war unlikely. That view may be far off the mark, as two major disagreements are worsening. The first is between the US and Europe, on whom Trump may impose additionally steel tariffs imminently. Europeans have vowed to retaliate. With China, the situation is eve more worrisome, as the country has refused to even respond to Trump’s requests tha it slash $100 bn from its trade surplus with the US and lessen its backing for industrial upgrades.
FINSUM: China seems to feel it is finally big enough to stand up to the US. It is probably correct, which means we may end up in a big standoff with Beijing. Here is the big question though—will that ultimately (e.g. 3-plus years from now) be bad for the US economy?
In what will likely lead to a sigh of relief from Congressional Republicans, Trump made clear yesterday that he will not take any action to shut down the DOJ investigation into his administration’s ties to Russia. The comments came shortly before the Senate judiciary committee passed a bill to protect special counsel Robert Mueller from being fired. That bill has very little chance of becoming law, however, because of the composition of Congress and the position of Senate majority leader Mitch McConnell.
FINSUM: We think this is a very wise move from Trump. No only does it make him appear more innocent of any wrongdoing, but it also makes him look more committed to the investigative process.
Those close to Michael Cohen and the situation say that the lawyer seems poised to turn on his friend, Donald Trump, if put under pressure by investigators. At least that is what long-time Trump legal advisor, Jay Goldberg, is telling the president. Goldberg was a former prosecutor who has advised Trump since the 1990s. Trump reportedly called Goldberg asking for advice, and the Wall Street Journal quotes Goldberg as saying “On a scale of 100 to 1, where 100 is fully protecting the president, Mr. Cohen ‘isn’t even a 1,’”. He explained that if Goldberg were faced with criminal charges, he would tell all.
FINSUM: So it looks like Goldberg is going to tell all, but what nobody knows is how much of value he might really have to say.
One of the world’s most respected economists has explained something all investors need to hear—why a trade war with China is impossible to avoid. Stiglitz says that so long as the US does not accept China’s right to develop its economy, there will be no meaningful agreement. Because of the path China is on, and the US’ position—led by Trump—no durable trade deal can be achieved. Fundamentally, the US does not accept that China is a “developing country”, rather it sees it as a large and mature nation, and this conflict will keep any serious deal from getting done.
FINSUM: There may be a short-term deal to save public face, but the US and China seemed destined to square off on trade for the foreseeable future.
One of the big overarching questions regarding the Mueller probe over the last few weeks has been two-part: will Trump try to fire Mueller, and will the Senate step in to protect Mueller from said firing. Well, one half of the answer is now clear. Senate majority leader Mitch McConnell has made clear that the Senate will take no action to protect Mueller from whatever moves Trump might make. McConnell said “I am the one who decides what we take to the floor … That’s my responsibility as majority leader. And we will not be having this on the floor of the Senate”.
FINSUM: The one Caveat here is that McConnell thought he said protecting Mueller was unnecessary because he did not believe Trump would try to fire him, which slightly leaves the door open to a change of position.
In what must be seen as nothing other than a major diplomatic breakthrough, reports are out that the head of the US’ CIA, Mike Pompeo, had a face to face meeting with North Korean leader Kim Jong Un. The meeting comes in advance of President Trump’s planned meeting with Un. The meeting apparently took place over Easter weekend and was a way to lay the groundwork for the president’s meeting. Reports of the meeting were first covered by the Washington Post, and the White House confirmed it had been having meetings at “very high levels”.
FINSUM: We are not sure why Un is talking to the US after decades of diplomatic silence, but we certainly see the dialogue as good news.