Clear back in June I made the following easy prediction about Trump’s negotiations with the Chinese leader whose face can only be improved by a caricature:
The market finally fell in May after months of rising because it started to become clear there will be no Chinese trade deal in the near future. (It was always clear here, but most of the market willingly believed the president’s every tweet because it wanted to believe.) Prior to May, the market had been rising for months on Trump’s hot air about the Chinese deal coming soon because it had little other reason to rise.
Half a year and a lot of hot air later, we still have almost nothing just as I said this would turn out:
China will trump Trump…. The Chinese would far rather wait out Trump for a year and half than capitulate and get stuck for decades with a far worse economic situation than it has had…. The war has been waged, and its not going away.
China, I’ve stated, will outlast Trump because it has no election to worry about; it’s used to being long-suffering; so, China’s strategy is longterm gain over short-term pain. That is what unfolded this past week as I will lay that out for you clearly below.
In another article back in June about Trump’s G-20 summit with Xi, I described the best-case outcome for that meeting, which has turned out to be the outcome we finally got to this past week:
Here was the best-case scenario: Xi and Trump agree to come out of their meeting sounding like there is hope for a future agreement soon (albeit with nothing specific that has been agreed upon)…. The best hope is they come out with Trump talking (again) like a deal is imminent and, therefore, he’ll hold off on his tariff increases a little longer. The market feels relief and breaks resoundingly through its eighteen-month ceiling…. [but ]Trump will be back to threatening higher tariffs on China.
Watching the endless promised trade deals has been like watching the movie Groundhog Day — same scenario over and over with small variances. Groundhog Day eventually gets somewhere worthwhile. So far, we have not.
By August, I started fuming over how so much reportage talked as though a trade deal was finally falling into place in spite all the times reporters and commentators had been duped before:
I cannot even imagine how anyone thought the US/China Trade War — or, as I call it, the Trump Trade War — was ever coming together. It could not possibly have “fallen out of place,” [as one article claimed] because it has never for one second been in place. It has been astounding to watch how people can month-after-month for over a year continue to chase the belief that the Trump Trade War is starting to fall into place (let alone “has fallen into place”)
… NO progress has been made at any point along the line! So, again, why would anyone think that is going to happen? There has not been one single PERMANENT thing Trump has asked for from China that has been agreed to that we know of. All we have seen are piecemeal temporary measures agreed to that have been poorly followed through. There has never been any reason to believe Trump when he has said a deal was imminent — not any reason based in hard facts.…
The Chinese trade hope is a mirage. We are on the far side of the Gobi Desert from any prospect of “the pieces of the economy falling together.”
A real trade deal is still a mirage. With the election year about to begin, Trump needed to close this out in a hurry. As I have reiterated throughout the past year, the best we could hope for is that Trump would come out with something he could claim is a far bigger victory than it is, and that is where we wound up this past week.
Read the rest here: The Great Recession