Politics

(Washington)

For all intents and purposes, the US government has just declared a trade war on China. Rightly or wrongly, President Trump’s list of demands for China to undertake on trade are so onerous that it is impossible they will acquiesce. The US seems to know this, but is drawing a line in the sand. Here is an example of the scope of the demands: “China is to reduce the US-China trade imbalance by $100bn in the 12 months beginning June 1 2018, and by another $100bn in the 12 months beginning June 1 2019”.


FINSUM: We have very mixed views about the new US protectionist approach. On the one hand we do feel the US has gotten the short straw on several trade deals, but on the other, we think this standoffishness could possibly damage the US economy (short-term), or worse, cause a geopolitical conflict.

(Washington)

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?

(Washington)

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.

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