The Wall Street Journal asks Has Trump Inflicted Enough Pain on China Yet?
How much economic pressure is enough to persuade China’s communist dictator Xi Jinping to change his business model? So far his trade dispute with the U.S. is inflicting more financial pain than he’ll admit but not enough to force economic liberalization. This means that to maintain a strong U.S. economy and get re-elected, Donald Trump needs a plan B for trade expansion if Beijing disappoints him again at the bargaining table. Cutting a soft bargain with the rest of the world would drive a resurgence in U.S. business investment. Slashing U.S. tariffs on goods coming from places other than China would also exert even more competitive pressure on Beijing.
The article accurately point out many ways China is suffering.
It also notes "The U.S. is also suffering from the trade fight."
It is the second point that matters most.
I discussed China four days ago in China's Growth Much Worse Than Reported, What About the US?
Recall that for over a year Trump insisted that China work out a comprehensive deal.
Guess who caved. It was not China.
A Fox News Poll shows Trump Nine Points Behind Biden in Wisconsin, a key swing state.
The same is happening elsewhere.
Manufacturing Alarm Bells
On Thursday, I posted Manufacturing Alarm Bells Ring on Unexpected Weakness
Not One Thing
- Boeing: This isn't new news, but it is reflective of Boeing's 737 MAX problems. The WSJ reports Airbus is Set to Overtake Boeing to become the world’s largest plane maker by deliveries.
- GM: On Day 38 of the strike, the WSJ reports UAW Workers Are Tilting in Favor of New Contract With GM 46,000 GM workers who have gone without a company paycheck for six weeks. GM promised sweeteners such as plant investments and escalated pay. But what if sales flounder?
- Ford: There was no strike at Ford. But yesterday, the Detroit Free Press reported Ford Earnings Dip 57%. The company blamed warranty costs, China, and incentives. CNBC reported Ford’s Shares Slide on Lower Year-End Guidance, Weak Demand in China.
- Caterpillar: CNBC reports Caterpillar Earnings Badly Miss the Street, Cuts Forecast Again
- China: Trump's trade war with china is taking a toll. Every company above is impacted in some way. So is Apple and many other manufactures.
- EU: Trump is also feuding with the EU and threatens tariffs on German cars. Meanwhile, the EU and UK still have not sorted out Brexit.
Plenty of Blame
The slowdown is not just one thing. There's plenty of blame to spread around.
GM and Ford are both rated Junk by one rating agency. A further slip will force investment grade bond funds to sell.
With elections pending, China can be patient, Trump can't, but he has dickered around so long now, whatever he does may just be too little too late.
I am not trying to pin this all on Trump, but he certainly didn't help.
Trump desperately needs a trade deal with China, more so than the other way around.
The WSJ asked the wrong question.
Mike "Mish" Shedlock