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The Upcoming Trade War Between The U.S. And China Will Be The Biggest In The History Of The Planet March 20, 2017

Globe At Night - Public DomainThe United States and China are the two largest economies in the world by far, and the upcoming trade war that is about to erupt will be cataclysmic for both sides.  The Trump administration and the Chinese government are both gearing up for a prolonged trade war, and this is going to have very severe implications for the entire global economy.  During the campaign, Donald Trump repeatedly stated that we “can’t continue to allow China to rape our country”, and he was quite correct about that.  Over the past ten years, the U.S. has run a trade deficit of over $2 trillion with China, and as a result of imbalanced trade we have lost tens of thousands of manufacturing businesses, millions of good paying jobs, and hundreds of billions of dollars of tax revenue.

So clearly something needs to be done to balance our trade with China and other countries.  But the situation must also be handled delicately, because trade disruptions could bring substantial short-term economic pain.

Prior to winning the election, Trump threatened to unilaterally impose a 45 percent tariff on Chinese exports.  Unfortunately, China is not just going to sit there and take whatever Trump throws at them.  Every single time the U.S. has imposed tariffs on Chinese goods in the past, China has responded by slapping tariffs on U.S. goods.

And this time around, the Chinese are already preparing a very harsh response even though Trump has not officially made his move yet…

The policy advisers believe the Trump administration is most likely to impose higher tariffs on targeted sectors where China has a big surplus with the United States, such as steel and furniture, or on state-owned firms.

China could respond with actions such as finding alternative suppliers of agriculture products or machinery and manufactured goods, while cutting its exports of consumer staples such as mobile phones or laptops, they said.

Other options include imposing tax or other restrictions on big U.S. firms operating in China, or limiting their access to China’s fast-growing services sector, they added.

When this coming trade war erupts, economic activity will be reduced significantly.  And considering the fact that U.S. economic growth is projected to be about one percent in the first quarter of 2017, that could be more than enough to push us into a deep recession.

Some of the biggest U.S. exports to China include airplanes, autos and agricultural products, and the Chinese are ready to attack on all of those fronts.  The following comes from CNN

Here’s what Global Times, a newspaper backed by the Communist Party, had to say about how Beijing would respond to tariffs of 45%:

“A batch of Boeing orders will be replaced by Airbus,” the paper said Monday. “U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted.”

But once again, something must be done for the long-term good of our country.  We have been allowing the Chinese to flood our shores with super cheap goods, but meanwhile they have already been hitting our products with ridiculously high tariffs.  Here is just one example

U.S.-made cars exported to China face tariffs of at least 25 percent, including American-made Cadillacs. The American-made Jeep Grand Cherokee costs $27,490 at U.S. dealerships and cost at least $85,000 in China.

What we have with China today is very far from “free trade”, and if they want to trade with us they need to do so on a level playing field.

But China will never allow that to happen.  As Donald Trump has correctly stated, they have been “raping” us for years, and they are going to fight very hard to keep anything from upsetting the status quo.

Trump has got to do something for the long-term good of the U.S. economy, but he has also got to try to find a way to avoid a major trade war, because a major trade war would be exceedingly painful for both countries.

Most Americans don’t realize this, but more iPhones are actually sold in China than in the United States.  And it is being projected that Boeing will sell nearly 7,000 airplanes to China over the next decade…

By the end of 2015, Chinese consumers bought 131 million iPhones. The total sales to U.S. customers during the same period stood at only 110 million. And iPhones are only a small part of U.S. exports. Boeing, which employs 150,000 workers in the U.S., estimates that China will buy some 6,810 airplanes over the next 20 years, and that market alone will be worth more than $1 trillion.

So what happens if all or part of that economic activity goes away?

According to one study, in the short-term millions of U.S. jobs could potentially be at risk if a major trade war happens…

“Millions of American jobs that appear unconnected to international trade—disproportionately lower-skilled and lower-wage jobs—would be at risk,” according to the PIIE study.

And of course a major trade war would hit American consumers very hard as well.

Just think about it.  When you go into a Wal-Mart or a dollar store, are more of the products made in the United States or in China?

A trade war would hit all of us in the wallet as the cost of living goes up.  And considering the fact that about two-thirds of the country is essentially living paycheck to paycheck, that would not be a good thing.

So yes, our trading relationship with China definitely needs to be rebalanced, but Trump needs to find a way to make this transition as minimally disruptive as possible.

A major trade war is just one of the “black swans” that could push us into the kind of economic nightmare scenario that I have been warning about for a very long time.  And sometimes a trade war can serve as a prelude to a real war.  The South China Sea has become a major sticking point between the U.S. and China, and the Chinese are getting ready to cross one of the “red lines” that Barack Obama established while he was still in office…

Beijing has plans to start construction on the disputed Scarborough Shoal this year.

China has reclaimed land in both the Spratly and Paracel Islands and constructed military outposts, but it has been hesitant to start construction on the Scarborough Shoal. Xiao Jie, the mayor of Sansha — an administrative base for China’s South China Sea activities masquerading as a city — said this week that China intends to construct environmental monitoring stations on a number of territories in the South China Sea, including the Scarborough Shoal.

So how will Trump respond when construction on Scarborough Shoal actually begins?

It will be very interesting to watch how that plays out.

The relationship between the United States and China was starting to deteriorate badly even before Donald Trump was elected, and it is very easy to see how it could totally break down in the months ahead.

And considering how interconnected the global economy is today, the United States and China could easily end up dragging down everyone else along with them.

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Trump’s Approval Rating Is Supposedly Only 37 Percent, But Small Business Optimism Just Hit The Highest Level In 12 Years January 10, 2017

donald-trump-and-mike-pence-public-domainA Quinnipiac University Poll that was released on Tuesday says that Donald Trump only has an approval rating of 37 percent.  Meanwhile, that same survey found that Barack Obama currently has an approval rating of 55 percent.  Of course considering the fact that Quinnipiac polls showed Hillary Clinton winning the election in November easily, perhaps we should not put too much stock in these results.  But other polling organizations have come up with similar results.  In fact, an average of nine recent polls indicates that Trump’s approval rating is somewhere around 42 percent.  So without a doubt there are a whole lot of people out there that do not like Donald Trump.

But the business community sure seems thrilled with him.  We just witnessed one of the greatest post-election stock market rallies in American history, numerous corporations have already announced that they will be bringing jobs back to the United States, and Bloomberg is reporting that small business optimism has hit the highest level that we have seen since the end of 2004…

Optimism among America’s small businesses soared in December by the most since 1980 as expectations about the economy’s prospects improved dramatically in the aftermath of the presidential election.

The National Federation of Independent Business’s index jumped 7.4 points last month to 105.8, the highest since the end of 2004, from 98.4. While seven of the 10 components increased in December, 73 percent of the monthly advance was due to more upbeat views about the outlook for sales and the economy, the Washington-based group said.

On the surface, all of these numbers appear to be contradictory.  If the American people are not feeling good about our new president, then it doesn’t make a whole lot of sense that the small business community would be so optimistic.

But of course the American people are not a single monolithic entity in 2017.  We are a deeply, deeply divided nation, and Donald Trump is the single most polarizing political figure to come along in generations.

Those that love Trump tend to really love Trump, and most of those people are quite optimistic about the future.

And those that hate Trump tend to really hate Trump.  Yesterday, I explained that the radical left wants to transform Inauguration Day into an epic riot, and many of his opponents are planning to spend the next four years doing whatever they can to destroy him.

Just look at what happened today.  The top story on CNN was about how the Russians supposedly have “compromising personal and financial information” on Donald Trump that they can use to blackmail him…

Classified documents presented last week to President Obama and President-elect Trump included allegations that Russian operatives claim to have compromising personal and financial information about Mr. Trump, multiple US officials with direct knowledge of the briefings tell CNN.

The allegations were presented in a two-page synopsis that was appended to a report on Russian interference in the 2016 election. The allegations came, in part, from memos compiled by a former British intelligence operative, whose past work US intelligence officials consider credible. The FBI is investigating the credibility and accuracy of these allegations, which are based primarily on information from Russian sources, but has not confirmed many essential details in the memos about Mr. Trump.

If you want to read the full 35 page report, you can do so right here.  Some of the things in the report are so absolutely laughable that I don’t know how anyone could possibly take them seriously.  And one particularly absurd section of the report was reportedly originally fabricated by some pranksters on the Internet, but you probably won’t hear that in the mainstream media.  CNN is standing by the legitimacy of these documents, and apparently U.S. Senator John McCain thought so much of them that he handed copies of them over to FBI Director James Comey on December 9th

CNN has also learned that on December 9, Senator John McCain gave a full copy of the memos — dated from June through December, 2016 — to FBI Director James Comey. McCain became aware of the memos from a former British diplomat who had been posted in Moscow. But the FBI had already been given a set of the memos compiled up to August 2016, when the former MI6 agent presented them to an FBI official in Rome, according to national security officials.

The raw memos on which the synopsis is based were prepared by the former MI6 agent, who was posted in Russia in the 1990s and now runs a private intelligence gathering firm. His investigations related to Mr. Trump were initially funded by groups and donors supporting Republican opponents of Mr. Trump during the GOP primaries, multiple sources confirmed to CNN. Those sources also said that once Mr. Trump became the nominee, further investigation was funded by groups and donors supporting Hillary Clinton.

According to this report, the Russian government has been “cultivating, supporting and assisting” Donald Trump “for at least five years”.

So has Donald Trump really been a super secret Russian agent all this time?

Of course not.  The mainstream media has decided to peddle Internet hoaxes, rampant speculation and fake news as legitimate journalism, and it is absolutely disgraceful.

But we are going to see much more of this.  The goal is to destroy Donald Trump, and this is a game that will be played daily now for the next four years.

We are a nation that is bitterly divided, and after everything that has already been said and done I don’t know if Donald Trump could bring us back together even if he wanted to do so.

The protests against Trump in Washington D.C. start in just four days.  I think that the period of time immediately surrounding Inauguration Day is going to set the tone for how Trump’s first year is going to play out.

I am definitely hoping for the best, but I also know that there is a large portion of the population that considers him to be the personification of everything that is wrong with America, and they have absolutely no intention of following his leadership.

It has been said that a house divided against itself will surely fall, and America is a deeply, deeply divided nation in early 2017.

Perhaps Trump can prove the naysayers wrong and bring us all together in unity, but at this point I am not optimistic that any president will be able to do this ever again.

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Trumphoria: Americans Are More Optimistic About The Economy Than They Have Been Since Obama’s Win In 2008 December 10, 2016

donald-trump-accepts-the-nomination-public-domainOptimism about the future of the U.S. economy has not been this strong since Barack Obama’s first presidential election victory in 2008. Donald Trump promised us an economic resurgence, and what is not to like so far? As I discussed earlier this week, stocks are soaring, businesses are already announcing that they are bringing jobs back to the United States, and the U.S. dollar has been lifted to levels that we haven’t seen in many years. Many are referring to this post-election surge as “Trumphoria”, and I think that is quite appropriate. Personally, I couldn’t imagine financial markets behaving this way if Hillary Clinton had won the election. Right now tens of millions of Americans are feeling deeply optimistic about the future for the first time in a very long time, and this is clearly reflected in the results of the most recent CNBC All-America Economic Survey

The CNBC All-America Economic Survey for the fourth quarter found that the percentage of Americans who believe the economy will get better in the next year jumped an unprecedented 17 points to 42 percent, compared with before the election. It’s the highest level since President Barack Obama was first elected in 2008.

The surge was powered by Republicans and independents reversing their outlooks. Republicans swung from deeply pessimistic, with just 15 percent saying the economy would improve in the next year, to strongly optimistic, with 74 percent believing in an economic upswing. Optimism among independents doubled but it fell by more than half for Democrats. Just 16 percent think the economy will improve.

It is funny how our political perspectives so greatly shape our view of the future. Because Trump won, Democrats now have an extremely dismal opinion of where the economy is heading, while Republicans suddenly believe that happy days are here again.

Of course the truth is that the president has far less power to influence the economy than the Federal Reserve does, and so most Americans greatly overestimate what a president can do to alter our economic trajectory.

But for now most Americans (excluding Democrats) are feeling really good about where things are headed. In fact, we just learned that the University of Michigan consumer confidence survey has soared to the highest level that we have seen since 2005.

And of course the financial markets continued to roll onward and upward on Friday. The Dow was up another 142 points, and it is now less than 250 points away from the magic number of 20,000.

I never thought that we would actually get to 20,000, but thanks to “Trumphoria” we may actually get there before the wheels start coming off.

This post-election run has really been unprecedented. The following comes from CNBC

All major indexes have been hitting record highs since the election. In fact, the Dow has notched 14 record closes since then and gains in 20 of the past 24 sessions.

The Dow, S&P 500, and Nasdaq also did something they haven’t done in more than five years: all three rose each day of this trading week. The last time all three rose every day during the same trading week was September 2011.

Wouldn’t it be great if every month during Trump’s presidency was like the last 30 days?

Trump promised that we would start winning so much that we would actually start getting tired of winning, and so far we are off to a tremendous start.

As I discussed yesterday, some of the biggest winners from “Trumphoria” have been the big banks

The shares of Wells Fargo, the most hated bank in America these days, soared 28% over the past 30 days, Citigroup 25%, JP Morgan 26%, Goldman Sachs, which is successfully placing its people inside the Trump administration, 37%.

But is this momentum in the financial markets sustainable?

Of course not.

There are signs of emerging economic trouble all around us. For instance, Sears just announced that it lost 748 million dollars last quarter and that it plans to liquidate even more stores.

How in the world do you lose three-quarters of a billion dollars in a single quarter? If you had employees in every store literally flushing dollar bills down the toilet all day I don’t think you could lose money that quickly.

And the moment that Trump takes office, he may immediately be faced with a major financial crisis in Europe which has been sparked by the meltdown of large Italian banks. The following comes from a Forbes article entitled “Italy’s Banking Crisis Is Nearly Upon Us“…

There is a high degree of probability (approaching 90%, I’d say) that Italy will experience a severe banking crisis in the next few quarters. Perhaps they can stave off the problem for a year, but something will have to be done about the banks.

Unfortunately, it looks like things are about to get very real for Italian banking giant Monte dei Paschi di Siena. According to Reuters, the European Central Bank has turned down their request for more time to raise needed capital…

The European Central Bank has rejected a request by Italy’s Monte dei Paschi di Siena (BMPS.MI) for more time to raise capital, a source said on Friday, a decision that piles pressure on the Rome government to bail out the lender.

Italy’s third-largest bank, and the world’s oldest, had asked for a three-week extension until January 20 to try to wrap up a privately funded, 5 billion euro ($5.3 billion) rescue plan in the face of fresh political uncertainty.

The ECB’s supervisory board turned down the request at a meeting on Friday on the grounds that a delay would be of little use and that it was time for Rome to step in, the source said.

But most Americans have no idea what is unfolding in Europe right now.

As Americans, we tend to be largely oblivious to what is going on in the rest of the world, and at this moment “Trumphoria” has gripped our nation.

It is certainly not wrong to celebrate the fact that we are getting Donald Trump instead of Hillary Clinton, but let us also not lose sight of the fact that we are likely to be facing some tremendous challenges very early in 2017.

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