Over the weekend Beijing “asked” state-owned companies to cease purchasing U.S. farm products; which is consistent with how their approach to the trade war has evolved in recent weeks. And, to exacerbate matters, the PBOC, which “fixes” each day the range in which they allow the yuan to trade against the dollar, is as I type allowing an exchange rate of north of the psychologically-important 7. This has global currency markets freaking out, and the President tweeting “currency manipulation!”
As for the President, while he has a phenomenally loyal base, it’s safe to say that his credibility in terms of the trade war – given last week’s threats to up the newly-proposed tariffs if China doesn’t play ball – virtually demands that a further market-crushing announcement is imminent.
That last sentence said, who knows, perhaps the market-crushing potential will stay his hand for the moment.
Another interesting bit of news out over the weekend was that Trump’s decision to throw in the rest of the kitchen sink and apply a 10% tariff to it was aggressively opposed by all but one (Navarro [the grossly least-qualified and most-conflicted of the crew] of course) of the President’s own trade team. Clearly, Mnuchin and Lighthizer sensed China’s newfound willingness to toss in their own kitchen sink if Trump indeed went to the next level.
Right from the get-go of the Trump Administration, friends and colleagues who fielded my concerns over his protectionist threats constantly told me not to worry, he won’t go there; he’ll surround himself with smart people who’ll know better.
Well, okay, but what if he doesn’t listen to them???
The Dow future contract is down 380 as I type…