To everyone even remotely wired into the financial and economic landscape over the past 18 months, the notion of whether or not the use of tariffs in the China Trade War has been economic “chemotherapy” — a solution to a big problem that nonetheless hurts the body it purports to be saving — has been an easy issue to understand: of course tariffs hurt everyone, and President Trump, along with his off-color band of misfits standing in the wind of the cabinet’s revolving door, have been engaged in a game of credibility-eroding talking points to contend otherwise.

For those with even a tiny foothold on financial and economic reality, the Trump administration has been engaged in a basic falsehood that Mr. Trump and his team no doubt have known from the start to be such: tariffs are chemo and Chinese international economic strategy is a malignant tumor. But the folks from 1600 Pennsylvania Ave have tried very hard to pretend otherwise because, clearly, they believe the ends justify the means. That’s it. Period.

So, it should be understood as the end of the viability of this strategy last week when the White House announced that they would be delaying implementation on a misleadingly large amount of the newly threatened tranche of $300 billion in Chinese imported goods previously scheduled to kick-in on September 1.

The “blink” was the delaying of a sub-tranche of $80 billion to not go into effect until December 15, leaving a purported $220 billion to go into effect on Sep 1.

The key here is in both 1. the official communication that the delay for the smaller portion was to “help US consumers with their holiday shopping”, as messaged by the White House in conjunction with the delay; and 2. an analysis that shows that the delayed tranche is actually a much bigger portion of the new tariffs than would seem apparent at first glance.

On this second point, the so-called smaller tranche (the “$80 billion” tranche) is on goods — such as consumer electronics, holiday gift favorites, and mobile devices — that are massively seasonally skewed toward sales that occur between Sep 1 and Dec 15.

Hence, if we postulate that, say, 85% of the sales of these goods fall into the next three months of the calendar year, while, say, only 25% of the sales of the larger non-delayed tranche fall into the next three months (ie, are not notably seasonally skewed), then the actual ratio means that the delay covers the majority of imported goods from China from now until year-end.

Plainly stated, this is a huge retreat from the White House on its threat in terms of how it will hit Chinese economic production.

There are two conclusions to draw from this deeper analysis. First, the likelihood that the new threat will actually cause Chinese leadership to fold and give in to the White House for fear of its own crumbling economy is basically zero. And second, it reveals for all the world to see that the Trump administration does not at all believe that the tariffs are harmless to the US consumer and economy.

Mark this event as the day that the Trump administration’s basic strategy for demonstrating how easy Trade Wars are to win finally failed.

It’s over.

By the time December 15 rolls around, there will not be an agreement, and Trump will be entering an election year where his chances of re-election appear now to be somewhat remote according to polls, while Chinese leaders will be facing no coming elections and will have most likely been able to quite easily manage a narrative that they are doing the “good patriotic work” of fending off a hostile economic adversary (the US), thus amplifying the popularity of the top brass currently in Beijing no matter whether or not recession looms in China.

At that point, it will have become a lost cause for the White House: the mounted head of the Chinese threat will not be displayed on its walls into the election.

Naturally, there never really was a chance of this working out well. The US system is not built for games of chicken in a politically divisive context. We have too much democracy going on. A command economy will win against such a strategy.

Meanwhile, China is perfectly built for this sort of thing. They made Xi Jinping “Leader for Life” in 2017, removing political risk and enabling a different level of committed hardball than we could ever play. China also retains a much more powerful propaganda machine to dictate domestic perception as events unfold.

At the end of the day, the most important point to make here is this: all of these factors were known in advance to the White House team. Like their tactics on so many issues to date, knowledge simply doesn’t have a consistent relationship with strategy because it has to climb the insurmountable heft of Mr. Trump’s gut.


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