thependulumswings

With all due respect to Sumo wrestling, does the competition, strategy, and drama get any bigger than when the World Series of Poker’s final table gets down to the last two players?  The chips are stacked high for both contestants and the stakes are higher.  For the winner the financial reward is great.  For the runner up the financial reward is good.  For the ego, winning trumps everything.

So at the final table in the World Series of Trade Negotiations (aka tariffs) we have President Donald Trump from the United States and President Xi Jinping from China (you know the country with the name that Trump pronounces “Chiii Nna”) going heads up.

The final table has been down to these two for several months now.  The hold (pocket) cards were dealt decades ago.   The US, in a sense, holds the advantage as the Chinese imports to the U.S. far outweigh the U.S. exports to China.  Plus, the U.S. economy is larger than China’s, hence its chip stack is bigger.  The Donald knows this.

Onto the board came the flop (the first three of five community cards).  And for months verbal threats about raises were bantered about.  But each player checked. And checked. Manufacturers eyes began to have that “I’ve been in Vegas too long” look about them.  Then, Trump check raised.  Last weekend, tired of the slow play, he threw down a 25% pot sweetener on about 200 billion worth of imports.  Xi Jinping didn’t blink.  He quickly called that with an import penalty on $60 billion in U.S. goods.

Now the turn (community card number four) card is exposed.  Trump immediately, showing strength, pushed further.  His administration on Wednesday slapped a major Chinese firm with an extreme penalty by adding Huawei Technologies Co. Ltd. to the Commerce Department’s “entity list.”   This is effectively a death penalty for a foreign company to survive as it blocks its attempt to do business in the U.S.  You can get off of the list, but the cost is more painful than mucking a winning hand.

The department said that it reached this decision because Huawei “is engaged in activities that are contrary to national security or foreign policy interest.”  Perhaps and probably, but why now?  Why not?   Who cares as who is Huawei you ask?  Well, they are only the world’s largest telecommunications equipment maker located in, you guessed right, “Chiii Nna.”   The ramifications to Google, chip makers, the 5G platform itself, and many other global entities is huge (or yuge if you will).

Evidently, Trump isn’t bluffing.  He sits confidently sipping his favorite beverage ( “just for the taste of it, Diet Coke”) staring at his opponent.  He knows that his political base is standing right behind him yelling words of encouragement and even holding up signs in support.  “Go President Go.”  Meanwhile, Xi Jinping considers calling in a back masseuse while he ponders just how strong his hand might be compared to The Donald’s.

Next month the river (the final community card) presents itself.  The two leaders plan to meet in Japan.  President Trump often speaks to the great relationship that he has with Xi Jinping.  Hold your friends close and your enemies closer and your cards closest of all.  By then some economic damage will have been done as the world’s two biggest economic powers are under the gun but seem content to hold em for now.  The stock market has side bets pending galore.

The buy-in for the tournament was steep.  The pot has grown considerably steeper.  Both men and the countries that they represent are now pot committed.

Will we see more raises?  It sure looks likely as we see no fold from either in sight.