The trade war with China shows absolutely no sign of cooling down, and the longer it lasts and the wider it becomes, the less likely it looks that China will back down.
Experts are now openly suggesting President Trump may have let his ego and lack of understanding of the Chinese culture escalate this confrontation out of control without having an exit route should China just simply refuse to capitulate.
Yes, the trade war is already starting to hit U.S. exporters, importers, farmers, and manufacturers hard, but if this conflict becomes a full blown trade war, the economic damage to red states in particular is going to be catastrophic. Farmers, for example, can be wiped out by just one bad season.
White House economic adviser, Larry Kudlow, comments blaming Chinese President Xi Jinping for a lack of progress over U.S-China trade talks, and warning that U.S. President Donald Trump was "not going to let go" of the issue, further shows the incredible lack of understanding of the Chinese…
"The problem here is Xi. He doesn’t want to move, and they’ve offered the U.S. absolutely ... no options regarding the issue of (intellectual property) theft and forced technology transfer,"
What Kudlow and Trump apparently do not understand is China’s President Xi is now all powerful in China after consolidating power following the country’s last election. Xi is now effectively the President of China for life, and under China’s authoritative system, isn’t under the kind of political pressure President Trump finds himself under to negotiate an end to the escalating trade war. Which means all the Trump tweets of bravado, threats, and demands are not going to budge Xi to either capitulate or negotiate. The Chinese President, in fact, will let Trump rot rather than allow himself to lose face in front of the Chinese people. Xi will just not bend to the U.S. President. Instead, Xi is going to make this trade war as painful for Trump as possible and use it to fortify his bond with the Chinese people.
President Xi is and will continue to counter U.S. tariffs with Chinese tariffs pinpointed to crush Trump’s political base. Xi knows that Trump may be fatally wounded by the Russian probe, which will only get even worse as the summer drags on. Xi is also fully aware of the myriad of other scandals dogging his swamp administration.
This means undermining Trump’s political support is the spear head of Xi’s trade war strategy. If this trade ware continues right into the November midterm elections, Xi knows Trump and the GOP will likely lose control of both the House of Representatives and the U.S. Senate to the Democrats - and the political landscape in Washington will change dramatically, including virtually guaranteeing incredibly divisive public impeachment hearings. With that kind of chaos, Xi has to believe Trump would be forced to cave. Defeating the U.S. trade war would entrench Xi as a Chinese hero.
Xi will also likely employ a nationalist card by publically rallying the Chinese people to boycott U.S. products, vacations, and services. Xi will almost certainly stoke anti-American sentiment in both China and around the world by using the narrative that Trump is nothing more than an evil American bully. This kind of domestic nationalism and worldwide campaign could quickly include openly menacing Taiwan by using China’s increasing naval forces.
WallStreetRebel.com believes President Trump is way over his head. His unwillingness to listen to competent advisors and to continue to rely on his “gut” will likely lead to some real ugliness in the financial markets around the world, so be careful!