No No, The Trade War Is Awesome It'll All Be Fine!

I've got your trade war hangin'!

Sorry to interrupt this very happy day, but it looks like we may be in for a wee smidge of economic turbulence. Yesterday morning, President Arty McDeals played Game of Sycophants while dribbling onto a giant poster of himself emblazoned with the words, "Sanctions Are Coming." Just hours later, Apple halted trading of its shares to announce that its first quarter expected profits will be down substantially. Seems that sanctions are already here, and they're taking a huge bite out of the American economy. Trade wars are good and easy to win! 

Despite Donald Trump's constant insistence that the Chinese are paying when we sanction their imports, here on Planet Earth, it is actually American importers coughing up the cash and then passing the additional cost on to consumers. Do you see Xi Jin Ping ranting about American farmers paying for a new Great Wall through the yuuuuge soybean tariffs enacted by his government in response to American levies? No, you don't! Because President Xi is not A IDIOT. And also because Chinese pig producers can simply buy their soybeans from Brazil instead, leaving North Dakota farmers with silos full of rotting legumes. 

But since the Chinese economy is heavily dependent on exports to America, Chinese consumers currently have a lot less money to spend buying iPhones. Or as Tim Cook puts it, 

China's economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China's smartphone market has been particularly sharp.

Since Apple halted trading yesterday, its shares are down more than 10%. Turns out that undermining the Chinese economy and calling them a bunch of rapacious thieves is a bad way to get them to buy more of our stuff. Who knew!

Never fear, because White House Council of Economic Advisers Chairman Kevin Hassett is here to reassure the markets with a promise that the losses will be spread across all major sectors. So cheer up, Apple!

With the Dow down 500+ points...A major warning about corporate earnings from @WhiteHouseCEA who just told me “a he… https: //t.co/NtPQuHlrNb

— Poppy Harlow (@Poppy Harlow) 1546531009.0 

It's not going to be just Apple. I think that there are a heck of a lot of US companies that have a lot of sales in China that are basically going to be watching their earnings being downgraded next year until we get a deal with China. And that puts a lot of pressure on China to make a deal.

ARE YOU NOT REASSURED?

Hassett's argument goes something like this: America is the indispensable market, and if we can just crash the Chinese economy, they'll eventually knuckle under and start buying cars from us while simultaneously accepting slave wages to assemble the cheap electronics we've come to love. Then Apple and Ford's share prices will soar, and Americans can still buy infinity shit without forcing corporations to increase wages. Hooray!

Let's see, if you multiply A by the square root of B and carry the one you get ... a great, steaming pile of BULLSHIT! 

Leaving aside the implicit assumption that China will remain the world's workshop for all eternity, Hassett's gleeful predictions that the American bull market will go on forever under Donald Trump's wise and temperate guidance (LOL) are already provable bullshit. GDP growth continues to slow as we get over the sugar rush from the Republican tax boondoggle. No WALL will exempt us from the global slowdown, and no matter how much the MAGA loons refuse to believe it, the law of gravity still applies in US America. 

 Politico reports, as the Chinese and American economies soften, they each run out of ammo to fight.

"I think personally that the trade war is coming to an end and there is really nothing Trump can do about it," Jim Paulsen, chief investment strategist at The Leuthold Group, said in the latest edition of the POLITICO Money podcast . "If you have the United States and China both with very weak economies, the negotiation around trade just evaporates. Neither party has any negotiating power left. They both have to stop what they are doing."

We're not immune from a global recession, and unlike China, our farmers can vote. The Chinese Communist Party can withstand a lot of economic pain, but two more years of moderate economic slowdown will tank the GOP in 2020. And no amount of insane grinning from Kevin Hassett can change that.

Okay, that's enough economy talk for one day. Please to enjoy the obligatory Trade War Happy Face picture of Commerce Secretary Wilbur Ross pretending to enjoy his regular lunch of canned soup and domestic beer from a Capitol Hill bodega.

Nothing to fear, kids, we're in good hands!

[ Apple Letter / NYT / Politico ]

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