How’s Trump Doing?

It’s going to drive liberal Trump haters insane to hear that the president is scoring huge victories in spite of his frightful attitude and undiplomatic demeanor. The biggest issue, relating to the election, is the surging US economy.

The stock market hit new highs on Friday. There are competing influences impacting the markets, but generally there’s a lot of positive momentum. However, Federal Reserve Chief, Jerome Powell, said the following “. . . trade tension and a weaker global economy [are] weighing on the outlook and [he] said the Fed was prepared to act.”

Some economists think Powell is intentionally ignoring the strong jobs report and the potential ‘trade truce’ with China. Currently most are expecting a move by the Fed at its next meeting. Critics of such an action say it is an accommodation to Trump. Others point out that problems in Europe, including Brexit, and an economic slowdown in China justify some loosening by the Fed. Who says the Fed is apolitical?

In the meantime inflation is not a pressing problem and consumers are spending at a rapid clip. The former gives license to the Fed to keep interest rates down.

The old adage, “It’s the economy, stupid” is apropos. Trump is going to get a boost in the election if the economy continues to improve, unemployment stays under control and wages for the middle class increase.

Making it more disheartening for Trump naysayers is the possibility that the president may actually negotiate a favorable trade deal with the Chinese. I’ve been saying all along that the US can have a great impact on the Chinese economy. Tariffs are one way to exert this advantage. The US buys far more products from China than China from the US. Tariffs will decrease the current trade imbalance, and this will increase worker furloughs and bankruptcies in China.

One of the most important issues for Xi Jinping is keeping Chinese industry running at full speed and keeping workers on the job. Frankly it’s more important for Xi, personally, to smooth relations with the US regarding trade than any other area of disagreement between the countries.

What can the US gain from negotiations with the Chinese? One thing is respect. US economic strength is far more influential than military might, although America is still, by far, the most powerful nation in the world. China needs favorable economic conditions. Many of its industries are highly leveraged, especially banks, which cannot deal with large credit losses.

Moving to other areas, Trump is going to make a deal with Kim Jung-un. In fact, it wouldn’t surprise anyone if a nuclear disarmament treaty is indirectly a part of a US trade deal with China. If I were Trump I would make a NOKO accommodation a required element of the trade negotiations.

Kim is in a position to solidify his regime for decades but he needs desperately to end economic sanctions and to have US become a trading partner. This can only happen if Kim gives up the nukes. If he walks away, economic sanctions will eventually be his downfall. Once again the US’s economic might can ultimately be more powerful and be less expensive than going to war.

The ayatollahs of Iran are on a road to oblivion. By continuing to threaten commerce in the Straits of Hormuz and stoking terror elsewhere in the Middle East, Iran is losing support of the European Union, especially Great Britain. Attacking oil tankers is a stupid and unproductive strategy that my earn Iran a few hundred cruise missiles as a warning. Similar to other countries mentioned above, US economic sanctions are disseminating Iran.

Trump was absolutely justified in abrogating the Iran nuclear deal. Most importantly it gave Iran a pathway to nuclear arms in about a decade.

Domestically, the majority of Americans are not enamored by the actions of Trump. In fact so many despise him that they will not give him credit for his successes. And further, too many Americans would be happy to see the president fail even if the country suffers. This group includes the liberal press.

But Trump presses forward with aggressive comments and distortion of the truth. He seems to relish opportunities to slam his opponents in fiery rallies and on social media. These are unproductive, but Trump says he must defend himself from fake news and unfair treatment by his opponents.

All this is a sideshow to the main attraction, the 2020 elections. Trump looks like a winner mostly because Democrats have moved too far left. A socialist will not be elected in America, at least not yet. Also, Americas will grow to understand that every entitlement can’t be free. The country cannot provide new entitlements without cutting critical services elsewhere, no matter how much they increase taxes. American voters will understand this problem as the debates and the political rhetoric continues to ramp up.

China Is Not Yet Overtaking The US Economically

A short time ago I suggested on this blog that the US had a distinct advantage in the escalating trade war with China. This was based upon the extreme imbalance of trade that I believed favored America.

For the past several years it seemed like everyone was convinced that China was on the verge of overtaking the US economically. I don’t believe this is necessarily true.

Xi Jinping celebrated all this by making himself the leader of the country for the rest of his life. Maybe his elation has been a bit premature.

On the dark domestic side, China was making a mockery of free trade by supporting its homegrown industries with oversized tariffs, and stealing trade secrets from any foreign company that did business on main land China.

Further, bank lending mandated by the government to bolster the domestic economy has now come home to roost. Banks are leveraged to the hilt and many financial experts are concerned about their solvency and the number of defaults popping up every day.

Yet Sinophiles still think China is going to overwhelm the US. Even thought the Chinese government falsifies its economic performance, it has become obvious that its economic growth is declining. The auto industry for example has reported that sales were down over 16% in 2018 after many years of positive results.

The Chinese government is sanctioning work leaves and sending millions of workers home without pay. This could have huge ramifications should it continue. Workers are complaining publicly that they are not able to work enough hours to support their families.

A few months ago nobody was reading the tealeaves in their haste to criticize Trump’s trade onslaught. In 2018, through October, China sold $447 billion of merchandise to the US, and the US sold $102 billion to China. This imbalance gives Trump the upper hand in an economic showdown.

If Trump continues to increase tariffs on Chinese goods, it will devastate the Chinese economy. In fact this is exactly what is happen to an extent, and the president has a lot more tariff opportunities if China refuse to negotiate in good faith.

The US is China’s largest trading partner. By decreasing orders because China’s products are noncompetitive with tariffs, Trump can effectively create unemployment in China, even if the latter calls it temporary work furloughs. How will the Chinese feel about their leader when the country has workers on unemployment lines? This could become an existential threat to the Xi regime.

It should be noted that the Chinese, who are always concerned about saving face, are suddenly becoming more amenable to negotiating a settlement with the US. In a nutshell Trump’s tough stance with China is beginning to bare fruit.

Economic strength is proving to the newest weapon of mass destruction being wielded by the US.