Stock Market Sick Of Winning
How many times during the 2016 election did Donald Trump promise that he would solve every complex, intractable problem very quickly with his bigly masculine hands? From the Israeli-Palestinian conflict to healthcare, from urban violence to Afghanistan, President Arty McDeals swore that he alone could fix it. Generations of presidents had failed because they were weak, but he was strong and virile, so world leaders would cower before him, and America would be respected again.
Only it didn't work out that way, because hard problems are actually hard. And nowhere was Trump's bombast more ridiculous than his vow to wipe out our trade deficit with China. Because Xi Jinping isn't some concrete contractor from Canarsie who's going to take an 80 percent haircut on his bill because he doesn't have a choice. He's the leader of the most populous country on the planet, which is the US's largest trading partner, and happens to own $1.2 trillion of US debt. He's got an iron grip on China's economy and its media. And there's no way on Mao's red earth that he's going to roll over because some orange-haired loon offers him "the most beautiful chocolate cake" at Mar-a-Lago while simultaneously threatening to destroy the Chinese economy.
The problem is, Donald Trump only has the one play. All he knows how to do is act like the craziest bastard in the room and keep upping the ante in hopes the other guy folds. Which is how we find ourselves here, with the stock market posting its worst day of the year yesterday after China devalued its currency and vowed to halt all American agricultural imports. And, okay, the stock market isn't a perfect heuristic for the wider economy, but a 767-point drop in the Dow is a pretty bad sign.
So, what exactly are we looking at here? Well ...
Who Pays Those Tariffs Anyway?
That was a joke. As we all know damn well, Americans are paying the stupid border taxes Trump started slapping on Chinese imports in March of 2018 to punish the country for not buying more American goods. That dipshit can point to the Chinese stock market drop as proof that China is paying our tariffs, but that's bullshit.
We note that he's not describing the US market decline yesterday as "paying" for the retaliatory tariffs China has been levying on American goods for the past 16 months. But what can you expect from a stable genius who thinks we "lose" money because we buy more $2 socks from China than they buy $35,000 Buicks from us. Why can't Chinese factory workers making $5 per day buy American cars, that's what Donald Trump wants to know!
He's Always Bluffing
Donald Trump talks a lot of shit. He promises that "trade wars are good and easy to win." He says that consumers won't even notice prices going up a couple of pennies to offset the tariffs. He fantasizes about factories coming back home to make everything from iPhones to T-shirts in the US.
But he's lying his flabby ass off, and the money guys know it.
Because trade wars are economically disastrous, which is why Fed Chair Jerome Powell finally blinked and decreased interest rates last week, citing the economic risk of President Impulse Control tweeting us into a trade-fueled economic meltdown. So Trump's advisors have spent the past year and a half assuring the stock market that a deal was just around the corner. Trump was tweeting out threats weekly, but any second now Steven Mnuchin and Larry Kudlow would emerge from behind the curtain with a wonderful Chinese trade deal, and everyone would make so much money.
Shit, Kudlow's still at it this morning, promising a deal is just over the horizon and lying that the tariff cost "is falling almost 100% on China."
Spoiler Alert: There's No Deal
Last week, approximately five minutes after Mnuchin and US Trade Rep Robert Lighthizer got off the plane from Shanghai where they'd failed to negotiate a deal with their Chinese counterparts, Trump tweeted out that the $300 billion of Chinese imports which were not already under tariff would be hit with a new 10 percent levy starting September 1.
China vowed to retaliate, and Trump arglebargled some nonsense about America being so much richer if we stopped buying from China altogether.
Trump says this about China, which is the US's largest trading partner by a significant margin: "If they don't want… https://t.co/uLFAYJ111m— Aaron Rupar (@Aaron Rupar) 1564690932.0
Surprise! He's lying. And by the by, the US trade deficit with China hit $900 billion in March, a new record. So much winning!
China Retaliates By Devaluing Its Currency
Yesterday, the Chinese government allowed the value of the renminbi (AKA the yuan) to drop below seven per dollar. A "cheaper" renminbi makes American goods that much more "expensive" for the Chinese consumer, exacerbating the trade deficit even more. Ditto for European goods, which is why the European markets closed down sharply yesterday as well.
But this is all fine, according to Trump, because we've got the Chinese right where we want them.
But even that dumbass fake economist Stephen Moore knows the game is up, telling the Washington Post, "We're learning that maybe China has a higher pain threshold than we thought here ... They don't seem to care that this is having extreme negative effects on their economy. It's kind of a mutually assured destruction game right now."
Blind squirrel, meet nut!
Let's Call China a Currency Manipulator, That'll Show 'Em!
Yesterday Trump tweeted out his intention to label China a "currency manipulator," which was followed by Treasury Secretary Mnuchin's official declaration to that effect. And, yeah, no shit China manipulates its currency. We count on them to prop up the value of the renminbi so that their citizens can afford to buy our stuff!
"It's not coincidental in my mind that the currency has moved from approximately 6.30 to 6.90" to the dollar, Mnuchin said in June at the Group of 20 meeting in Fukuoka, Japan. We're effectively accusing the Chinese government of manipulating their currency by letting it float against the dollar a little bit.
Although their "manipulation" probably doesn't rise to the technical definition laid out by the US Treasury itself, as Cornell University economist Eswar Prasad, a veteran of the the International Monetary Fund's China division, told the Straits Times: "Treasury has made what seems like an arbitrary determination of currency manipulation since China hardly meets all of the relevant criteria and despite the dilution of those criteria over time."
On its own, the namecalling doesn't mean much. We've effectively kneecapped the World Trade Organization by refusing to let it name any judges to arbitration panels, so we could hardly seek redress there even if we had a good case. Which we don't. And here in the US, the manipulator designation boxes China out of eligibility for US government contracts, a business they're not in anyway.
The real danger arises because the label gives Donald Trump the authority to ramp his trade war up into high gear, enacting punitive tariffs and possibly barring the importation of Chinese goods altogether. God only knows what insanity that idiot is going to tweet us into.
Over to You, China!
Oh, China is going to ban all imports of American agricultural products? GREAT. It really doesn't seem like they're about to buckle under here.
And That Asshole is already out there waving the American taxpayers' checkbook at red state voters promising to make good on their losses if they'll just stick with him through next November.
How Bad Could This Get?
Well ... BAD. It could get really, really bad. Freezing up markets with round after round of retaliatory tariffs and tit-for-tat currency devaluation is how you wind up in a recession. Or worse. As Cornell economist Stephen Charles Kyle told the Washington Post:
We don't want to be even on the first step of this path. This is EXACTLY what happened as the Great Depression really got going in the 1930s: Everyone erected high tariff barriers and tried to out-compete their trading partners in devaluing (depreciating) their currencies ... A few years of that and world trade ground to a near total halt.
[MSN / WaPo / WaPo, again / CNBC / Straits Times]
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Liz Dye lives in Baltimore with her wonderful husband and a houseful of teenagers. When she isn't being mad about a thing on the internet, she's hiding in plain sight in the carpool line. She's the one wearing yoga pants glaring at her phone.