More Trump China Bashing Will Lead to Talks Cancellation

The week was full of mixed signals on China, with President Donald Trump concerned enough about the newest tariffs and the order to withdraw business from China that he began the week by telling of phone calls from Chinese officials. Unfortunately, neither the Chinese nor his own staff could confirm this communication.

The Chinese did respond to the apparent softer Trump rhetoric by agreeing not to immediately retaliate against the last round of tariffs and left open the possibility of sending representatives to Washington, D.C., to negotiate in September. However, in my view any additional China bashing by the President will lead to the Chinese cancelling this next round of trade negotiations.

The President’s political team remains concerned about Michigan, Pennsylvania and Wisconsin and implications for trade policy in these states could be critical for China trade talks over the next few weeks. (For more on this see this week’s Signal From Noise, “Soybeans Won’t Cost Trump in 2020, but Auto Tariffs Might,” Aug. 29)

From the Democrat’s side, the 2020 presidential race was whittled down to ten candidates who qualified for the next debate September 12. This could get higher viewership and give greater focus to the issues. Perhaps the candidates will realize they are running against Donald Trump and not Barack Obama.

Congress returns next week and will only have three weeks to pass a budget bill by the October 1 deadline. The likely outcome is a short-term Continuing Resolution (CR) to avoid a government shutdown.

It was a somewhat bizarre week for FOMC Federal Funds rate speculation with former NY Fed President Bill Dudley arguing that the Fed should fight Trump and take 2020 politics into consideration when formulating interest rate policy. (For more on this see page 6.) The irony is that Dudley’s opinion piece probably eliminates any chance that the Fed wouldn’t cut the funds rate, though the cut likely remains at 25 basis points.

Meanwhile, Trump still covets Greenland.

More Trump China Bashing Will Lead to Talks Cancellation
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