tariffs

“How” and “Why” Matter.

Posted on by thependulumswings staff

Journalism 101 teaches to insure that the “who”, “what”, “when”, and “where” is included in every lead of a story.  Optional, but also important, is the “how” and the “why.”  Getting the first four “w’s” in is relatively easy.  Figuring out the how and the why is harder as it sometimes requires some interpretation.

Take late last week as an example.   In a span of 48 hours on Thursday and Friday (when) President Trump (who) castigated (what) Fed Chairman Powell (who)
on Twitter (where) of not being aggressive enough with rate cuts and economic commentary.  He barely took a breath, then he ORDERED American companies importing manufactured goods and the like from China (he pronounces it as CHII Nah) to find a way to bring the manufacturing back to the U.S.  By mid Friday morning he announced further tariffs(import taxes) almost across the board on goods coming from across the Pacific from said China.

The result of his actions and words seems, at the outset, that Powell said nothing, American companies did nothing not already planned, and China said “we’ll see your bet, and raise you one or five.”  The other result is again, at least for a day, the American stock market and those still open abroad, tumbled hard.

We think his political base added the to the story by questioning “how” he did this?

How he swung three times seemed almost petulant, petulant like a child that is.  In the Trump Tower when you hold the decisions as to who gets massive building contracts and what your expectations are and when they get paid is one thing.  When you ORDER (we use all caps because he did in the Tweet) American companies around you cross way too far into government attempted control on free enterprise at a minimum.  At the maximum you sound like a second grader who doesn’t get his way on the playground.  Plus, it’s the exact opposite of the many government regulations that he has pulled back to free businesses up.

In the tariff tiff he seems to think that he can bully China like he bullied Mexico.  Maybe.  Maybe not.  It seems to have not worked so far.

The Powell undressing is tired.  Take the repeated rants indoors already.  You hired him Mr. President.

We think even his political base questioned “why” as well.

Why did he do all of the above?  Well, we admit that every time he seems to have face planted off a newly built tower he actually has packed a parachute and landed just fine, and ready to fight for the American people for another cause on another day.

And, just this AM he is tweeting that China is ready to come to the table.  Maybe Powell will cut again and again and sooner.   And, maybe more American companies will build or rebuild factories here.

But, when how Americans feel about their investments (401k, education, house) turns south, they stay home if they voted for you prior, and turn out if they voted against you prior.  The very recession talk (at this point talk) that you are trying to squash becomes self fulfilling.

The tightrope that is being walked is high, higher than most Trump Towers built.  The fall would be unpleasant for all.  How you walk across, and why you walk across matters greatly in the next 15 months.

On Thursday you anointed yourself as “The Chosen One” to combat the decades long China advantage in import and export tariffs.  China seems to have chosen too.  Their choice looks like they want to see if  “The Chosen One” is chosen again in November of 2020.

A small fracture in the Trump base and someone else will need to “Keep America Great.”  Perhaps there will be another “Chosen One?”  Although that seems as cloudy as the smoke created from last week’s outbursts.  The lead candidate against Trump was in New Hampshire, was asked about New Hampshire, and sung the praises of Delaware.

It’s another week.  Can the American political leaders gaffe meter possibly keep up?

 

The Final Table

Posted on by thependulumswings staff

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.