Now that President Trump has sidestepped his first two years of domestic turmoil in one piece, China always the pragmatic strategist sees the timing to put the United States-China trade war to rest by opening the negotiations to trade concessions.
By James Dale Davidson
Trump’s claim of exoneration of the always far-fetched charges that he was a pawn of Vladimir Putin may not have raised Trump’s credibility with the editorial board of the New York Times or the talking heads on CNN, But… Trump’s stock in Beijing seems to have risen.
Reports from CNBC, CBS The Wall Street Journal and elsewhere indicate that the Chinese reaction to Mueller’s report will involve trade concessions on intellectual property protection, auto tariffs and foreign cloud storage (that would permit foreign providers to own data storage centers) among other issues.
Before the report was ﬁled, some Chinese observers of the US thought that President Trump faced impeachment, or at any rate, stood little chance of re-election. With that in mind, they were in no hurry to schedule a Xi-Trump summit and signing ceremony to ink a US-China trade pact. They were prepared to wait out a one-term Trump presidency and seek a better trade deal with an incoming Democrat.
Now, their calculus has changed.
With Deep State efforts to oust Trump thwarted, for the time being, the Chinese seem to have decided that their best hope for protecting their fragile economy is to defuse the trade War immediately. With that in mind, you can expect an early resolution to bring the Chinese and English texts of the draft trade truce into harmony, plus Chinese concessions as outlined above.
These expectations are reﬂected in the week-long rally in shares of iShares China Large-Cap ETF (FXI). I continue to doubt that the Chinese economy will prove to be as robust as most observers believe. The sharp drop in the China-US trade surplus already recorded so far this year will tighten liquidity in the Chinese market, probably with adverse follow-on effects for the global economy, as the most credit-intensive boom in history winds down.