Trump’s China policies are working a treat

Say what you like about Donald Trump’s rhetoric on trade. The MSM is in a constant meltdown over it. But the fact is he is engineering the fastest reboot of the US/China imbalance that anyone can remember without having to fire much more than a beebee gun. China response has been to let the yuan roar higher:

Of course, China may also be happy to see the yuan rise to push forward its rebalancing. Especially since the last time it tried in 2015, the yuan crashed and threatened to take down the global economy. This time, the higher yuan is giving consumers greater purchasing power as it works against industrial over-capacity while capital outflow has been contained.

It will add to pressure on US yields but that may be offset by other benefiting surplus nations, like Japan:

But it will also exacerbate the Chinese macro-level slowdown this year if it does not stimulate more domestically. We are already seeing such in the PMI with new export orders leading the growth fade despite “global synchronised growth”:

In commodities it is not all bad news. It means less Chinese production versus imports, though for bulks that is likely to be carrion comfort given China is also steadily slowing credit and building will most assuredly follow:

It suggests a few things for the year ahead:

  • it would be downright bad manners for Trump to not ease up on the protectionist push in response (not rhetorically);
  • “global synchronised growth” is going to morph this year into global synchronised growth ex-China, and
  • if you think Australia is about to join the global boom then I have a bridge to sell you.

Maybe fighting back against a currency-pegging, excess saving mercantilist is not so bad for your country.

Comments

  1. “..Maybe fighting back against a currency-pegging, excess saving mercantilist is not so bad for your country….”

    That anyone thought and still thinks otherwise is the real mystery.

    Naturally, the free capital flow obsessives in Australia will be the last to know – especially all those reflexively opposing everything Trump says or does.

    We will be reading moronic paens to the wonders of unregulated capital flows for years to come even as the rest of the world abandons the idea explicitly……their pursuit of ZIRP was the implicit rejection.

    Only fools allow unproductive and predatory capital inflows to manipulate trade and that is the Australian policy class to a T.

    That twit Stevie Ciobo is still going hard on making it even easier for the mercantalist trade manipulators via even more Free Unproductive Capital Flow agreements.

  2. St JacquesMEMBER

    Maybe behind all the bluster he is not so silly after all. In this respect he has been consistent, apparently since the 1980s he has damned America’s international trade policy which he always regarded as damaging to the American economy. Wel, you’d have to admit that he has been far wiser than the economists, politicians and bureaucrats who’ve effectively gutted working middle America and its industrial base to enrich the 0.1% Having a quick look at his background, the fellow studied economics and anthropology at a pretty decent college. Hmmm,.

    • He certainly seems to understand that international trade as a “free market” is a myth.

      It has always been highly political.

      Mercantalism works via the capital account. Exporting capital is essential to manipulating FX.

      Allowing foreign countries to manipulate FX rates by buying unlimited US real and financial assets is the core of the problem.

      Fix that and you fix the ‘trade’ problem.

      If Trump starts placing restrictions on unproductive capital flows into the US we will know he is serious.

      Slapping a few tariffs on here and there is mostly show but if the trade manipulators think he is serious they may change their strategies.

      What does that mean for Australia?.

      They will shift to exporting more capital to still soft targets like Australia. Naturally our idiots like Ciobo will applaud those capital inflows as they will allow us to continue to fund our lifestyle by selling off our kids futures.

      • Globalisation was sold to the masses as helping poor countries to lift themselves from poverty while moving some older industries from the developed countries over. Idea was to also pay those workers above average (for those poor countries) wages in order to lift the living standards of those citizens. This approach would have prevented mass exodus of many companies from developed countries to developing countries as savings or margins would not have been too big.
        However, it appears, globalisation was all about keeping the slavery alive as all multinationals that moved their operations to these poor countries only paid/paying minimal wage. Same with companies that subcontracts manufacturing to local operators in these countries- people working for minimum wage and minimum wage in unregulated countries means $1 per day in some cases.
        In short globalisation is to help many companies find poor cheap labour they can exploit without having to pay high penalties for not providing safe working environment. In many countries these companies don’t even care to apply any environmental measures and more or less pollute and destroy living environment and the life’s of many communities that live downstream from the manufacturing or mining operation.

      • Nicola – you said “globalisation was all about keeping the slavery alive as all multinationals that moved their operations to these poor countries only paid/paying minimal wage”

        I’m not sure about that. The hundreds of thousands of Chinese peasants who escaped into Hong Kong and the millions more who flooded into places like Shanghai and Shenzhen did not do so on the offer of servitude and minimal wages, but rather on the incentive of earning in a month in the factories what they could not earn in a year back on the farm. Sure for many of them it was a dire dysfunctional life but no-one was forcing them to stay and actually for those who moved to Hong Kong and the early movers to the coastal cities it was the key to living a dream.

        The model started to malfunction when instead of 5 million Honkies and 20 million Taiwanese and 50 million Koreans all attempting to hitch a ride to prosperity you had a rush of 600 million Chinese all flooding into factories. Too much supply, insufficient demand.

      • triage,

        What do you mean by this “The hundreds of thousands of Chinese peasants who escaped into Hong Kong .” Are you referring to after the takeover? If so that is not correct, borders were not open to mainlanders and still aren’t, unless on a tourist visa.

      • Dennis – actually Hong Kong’s population has increased by about 25% since the 1997 change of ownership, though most of those incomers would have been wealthy mainlanders and Hong Kong is no longer chockers with thousands of factories.

        http://www.scmp.com/news/hong-kong/politics/article/2095081/hong-kongs-25-cent-population-growth-1997-shows-success

        But no, I was talking about the post WW2 period where in each decade the territory’s population increased by about a million, due mainly to a high birth rate and also due to hundreds of thousands of peasants escaping the mainland for a better life (population in 1951 was about 2 million, population in 1981 was about 5 million). Those were the times when just about every second thing you picked up in a store had Made in Hong Kong on it and was actually made in Hong Kong.

    • Protectionism = bad policy. Any policy that stymies free trade is bad policy, for all parties concerned.

      Trade Deficits with individual countries are irrelevant — China produces most of the goods consumed in America so of course there’s a going to be a deficit. Once you aggregate America’s trade balances with ALL countries globally it balances out, by definition. If another large country rose to become even more competitive than China the trade deficit would reduce – it’s that simple. Railing against deficits is economic ignorance.

      • No point responding with the facts to an illiterate. You are clueless.

        How does it make sense to count up exactly the same amount of goods in value terms in order to trade so that the balance is equal, FFS. LMAO

  3. reusachtigeMEMBER

    Trump is a ledgend, he really is! The best president America has had in a long time. He has demonstrated that America had become soft and too politically correct and that nations need a strong-man to be successful. Someone who can slice up the poisonous weak. He also demonstrates that property tycoons really do sit at the top of the food chain! Love him, he’s friggin awesome. I hope we get a proper leader like him one day. Maybe Harry Triguboff. We can only hope!

    • As an American I dont like everything he says or the way he acts on twitter but the guy didnt become a billionaire by being an idiot. What cracks me up is reading people and the media comments that he is an idiot. He wasnt going to get the nomination or become President. I was one of them that doubted it too. I live over here in the US and have a recruiting company and let me tell you its booming. I got companies calling me everywhere looking for people not just professional jobs either. You can keep reading ABC, CNN, NBC, CBS, Wall Street Journal etc and believe all that garbage you want but things are booming over here. Wages are definitely going up there are more jobs than people in alot of sectors. I see it every week when I lose people because they got a higher offers elsewhere. Right now companies are spending tons of money on how to retain their people been to all kinds of HR conferences over here. The biggest thing I hear is HR people offering more money to there workers so they dont lose them.

  4. This is the most maked shift in MB views so far.

    I wonder if the bastard might win a lot more over over the next few years?

    I’ve said for a while that he’s an asshole but I’m not convinced he’s not the right asshole for the job.

    Personally, my measure is simple.

    Number of wars started. If starts none and ends with fewer than he started with, he’ll literally be the best US president in my lifetime.

  5. It is the ONLY thing I approve of Trump doing.
    Pretty much every problem with the world economy can be traced back to the decision to let China into the WTO.
    The US (and everyone else) got lulled into the ‘China fantasy’ and in doing so got China 100% wrong.

    In the end, I think Xi Jinping’s is doing us all a big favor with his absurd geopolitical over reach by waking the world up from the China fantasy.

  6. On the topic of the USA:

    https://eand.co/why-were-underestimating-american-collapse-be04d9e55235

    When we take a hard look at US collapse, we see a number of social pathologies on the rise. Not just any kind. Not even troubling, worrying, and dangerous ones. But strange and bizarre ones. Unique ones. Singular and gruesomely weird ones I’ve never really seen before, and outside of a dystopia written by Dickens and Orwell, nor have you, and neither has history.

    We’re watching the end game now. The damage is done, I believe, and I hope we can learn from their mistakes so we don’t go the same way. Ha!

    • He says these pathologies are seen nowhere else, but I would argue they are clearly visible in less developed forms throughout the Anglosphere, if not most of the western world.

      They’ve hardly developed overnight, either. The bleeding heart lefties have been banging the drums about this stuff for decades.

    • Shh, MB treats USD the same as gold, they don’t understand it’s all relative, i.e. it’s USD going down, rather than other currencies going up. In addition to getting housing price wrong, you still remember MB’s call on Aussie going to 40 cents against USD?

  7. Trump’s trade advisor Peter Navarro has been saying this stuff for decades while getting widely ridiculed as a crackpot. The worm is turning

  8. Trump also got 30 out of 30 in his Alzheimer’s, Parkinson’s, and dementia test a couple of weeks ago.

    We got prime ministers who struggled to talk (Abbott and Gillard).