You may have seen President Trump’s tweets early Monday morning, Australian time.
25% tariffs will be implemented on $200b of Chinese imports this Friday, (from 10% previously) and $325b of currently untaxed Chinese imports will be hit by 25% tariffs ‘shortly’.
Financial markets had factored in a resolution to the US-China trade war but today’s tweet suggests very few are able to predict the Great Disruptor.
Not the economists, the fund managers, trade negotiators, and think-tanks, and perhaps not even all the president’s men (and women).
As discussed at my recent Western Sydney seminar, and alluded to in my January 2019 newsletter, there are economic and geopolitical similarities between Trump today and Reagan in 1981 to 1989 against the then rising Japan and the ‘evil empire’ USSR.
Reagan had similarly low voter polling as Trump at the same 2-year milestone of their presidencies, yet Reagan went on to win a second term. Reagan too was a great disrupter.
With the Mueller Report out of the way, and the US economy growing strongly, Trump has China in his sights.
His negotiators has had 5 months to test the limits, and to uncover more about China’s true economic and financial state during the cut and thrust of negotiations.
This new information on China is more valuable to the US side than new US insights to Chinese negotiators, since insights on China is harder to obtain relative to the more transparent US market.
To Trump, its win-win, whatever the outcome. A good deal for the US or no deal where China’s economy will likely weaken more, relative to the US.
How will China react? My co-speaker Tim Cheung, co-founder of a China-focussed hedge fund and I will be discussing this at our next China investment angle seminars Brisbane 10 May and Perth 22 May, sponsored by Deloitte.