The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Good Job, Mr. President

01/03/2019

I agree with the President’s new Acting Chief of Staff, Mick Mulvaney, who famously said “Trump is a terrible human being.”  However, the devil does deserve his due.

For decades, China has abused trading relationships with everybody, not just the U.S.  Being reasonable men, Presidents Reagan, Bush, Clinton, Bush II, and Obama  assumed that China was also reasonable.  They forgot that history molds the future, and the history of China has been one of exploitation for foreign nations.  They feel they have broken free from all that exploitation and are determined “never again.”  Any request from a foreign nation is just another effort to continue that exploitation.

As the U.S. played reasonable, China stalled and continued to do so for decades.  Former leader Deng encouraged future leaders of China to “hide your strength and be patient.”  Now that President Trump has stopped being reasonable or patient or diplomatic, China is forced to deal with its own historic paranoia at a time when their economy is weakening and their stock market is plummeting.  Apple’s announcement that its sales in China are also plummeting may be indicative of just how weak the Chinese economy has become.

Unless Trump forgets the concept of face in Chinese culture and says something really stupid, I’m confident that the U.S. will “win” this trade war.  My primary concern is how long this will take and then what will happen to the Chinese debt market.  The total amount of Chinese debt is unknown but must be huge.  Already, consumer debt is being restricted amid rising defaults and state-owned enterprises are  showing signs of weakness.  Because so little is known, the potential for defaults to spillover internationally is worrisome.  (This must be watched.)

Kudos Mr. President!  Thank you for being unreasonable and impatient.

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