“Trade wars are easy to win,” bragged the putative president earlier this year. Slap a few tariffs on and watch other nations come crawling on their knees, begging for mercy. It hasn’t exactly turned out that way, though. The US stock market has given up all its gains for the year in the past few weeks. Markets around the world are in turmoil as all signs point to a slowdown in global economic activity. Bloomberg contributor Barry Ritholtz has identified the “smocking gun” at the heart of all this depressing economic news — Donald Trump.
“The Trump administration’s policies, passed as legislation by Congress and implemented by the executive branch, have driven interest rates higher, made deficits bigger and led to a trade war, and are risking a global slowdown and even a recession,” Ritholtz wrote on Monday.
Rising Interest Rates
One factor he points to is the Federal Reserve pushing up interest rates, led by new Fed chairman Jerome Powell. Trump appointed Powell — whose aggressive views on interest rates were well known — instead of re-appointing Janet Yellen. According to Ritholtz, Trump considered Yellen “too short” for the job.
“Rates have gone higher, and it is the proximate result of the president’s appointment. There is no one else to blame for this mistake but the president. This has to be one of the great unforced mistakes in the postwar history of U.S. monetary policy.”
A Global Slowdown
Those higher interest rates are contributing to economic jitters around the globe, Ritholtz writes. “Corporate profits may have hit a peak. Economies are cyclical, and the U.S. has gone almost a decade without a recession, roughly two times longer than the average interval between slowdowns. That implies we are overdue for a slump. None of the usual signs of an imminent recession are present, but 2020-21 isn’t an unthinkable time line.”
What Ritholtz implies but doesn’t say is that the policies of President Obama have been powering the US economy for the past two years. Now the chickens are coming home to roost under Trump.
How’s That Trade War Going, Donald?
The stock market has reacted negatively to the Trump-initiated trade war with China. Many people agree there are important issues with China that need to be addressed, but think the tariffs Trump has imposed are the wrong way to address them. Then at the G20 conference in Argentina last week, Trump announced on Twitter that a new trade deal has been reached.
“Yet another self-inflicted wound seems to have taken place in the aftermath of the G-20 summit in Argentina,” Ritholtz writes. “Trump announced a ceasefire in the trade dispute with China. The truce turned out to be nonexistent. Bloomberg News showed a side-by-side comparison of statements by Trump and by the Chinese government on the supposed deal, which was never reduced to writing. It isn’t just that Trump overstated the terms of the agreement; there was no deal.
“The president sandbagged Wall Street. Despite his well-known casual relationship with the truth, traders naively assumed the president wouldn’t mislead about something as crucial as the resolution of an expanding trade war. By the time the president declared ‘I am a Tariff Man,’ he had lost the trust of traders.”
The Huawei Mess
Trump has shot himself in the foot again with the arrest of Meng Wanzhou, CFO of Chinese tech giant Huawei in Vancouver last week. The Los Angeles Times reports that action may poison US-China trade relations for years. That’s bad enough, but it could have other consequences as well.
“An unintended result could be to bolster China’s global rise by pushing the country to increase subsidies and protection of its tech companies, according to analysts. That would be the polar opposite of what the Trump administration is demanding in its trade war with China,” the LA Times says.
“Meng’s arrest and U.S. action against another Chinese tech company, ZTE, earlier this year posed an existential threat to Chinese interests — and sent a stark message to Beijing that major Chinese companies reliant on U.S. components could be toppled should the U.S. ban supplies to them. It proved how vulnerable China’s top national companies are if they rely on American components such as chips and superconductors.
“The result is that China will do whatever it takes to become self-reliant in key high technologies and to phase out American components as soon as it can, according to analysts, although that will take years. China’s determination to reduce its vulnerability may end up cutting U.S. tech firms’ access to China’s massive market.”
Richard McGregor, an analyst on East Asia at the Lowy Institute in Sydney, tells the LA Times, “The ZTE case and now Huawei in a different way basically will propel China to do all the things that America wants them to stop doing — that is subsidizing state and private companies to give them technological independence. It will make them try even harder to do what America wants them to stop doing.”
Yesterday, the Chinese government summoned the US ambassador to lodge a strenuous protest against the arrest of Meng. Things are likely to go quickly downhill if the US does not reverse course and release Meng from custody. Even if it does, the insult to China is likely to have long term negative consequences for the relationship between the two countries.
The Smocking Gun
Yesterday, Donald Trump took to Twitter to proclaim special prosecutor Robert Mueller had found no evidence of collusion with Russia prior to and during the last presidential campaign. But in so doing, he has raised concerns that he may be barely literate, which could explain why he almost never reads any of the briefing papers prepared for him on a daily basis.
Last year The Donald gave the world a new word — covfefe. This time around he has added a new phrase — the smocking gun. Trump apologists say it was just a harmless typo, but the fact that he repeated it and capitalized it both times suggests the man simply does not speak English much beyond the third grade level. That could explain a lot of the foibles and fantasies of the alleged president.
“Democrats can’t find a Smocking Gun tying the Trump campaign to Russia after James Comey’s testimony. No Smocking Gun…No Collusion.” @FoxNews That’s because there was NO COLLUSION. So now the Dems go to a simple private transaction, wrongly call it a campaign contribution,…
— Donald J. Trump (@realDonaldTrump) December 10, 2018
This is the man America has chosen to make it a great nation? Good luck with that, Lady Liberty.