What do we make of the two-week delay in the next round of tariff hikes the U.S. will slap on China?
Despite the president calling his own move a "goodwill gesture" to the Chinese at the behest of Vice Premier Liu He, I don't think it matters much. Nor do I think it is that important that the Chinese this morning are trying to limit negotiations to only trade matters, according to the Wall Street Journal.
That's because the debate in the mainstream media always seems to miss the point: There are no "just trade" matters. The president's negotiations long since left the soybean stage. The farmers may be angry at him, but he knows they aren't going to vote for Elizabeth Warren, the acknowledged second front-runner ahead of Thursday night's debate. So what's the point of appeasing those who will already vote for you?
The 15-day delay, though, is symptomatic of Trump's biggest problem in these trade negotiations. The Chinese have multiple levers of good will. They could agree to allow, say, Nvidia (NVDA) to buy Mellanox (MLNX) , a deal that is being held up right now but is crucial for Nvidia's growth. They could sanction Huawei for stealing secrets and demand a new board. They could arrest -- and most likely execute -- those who push fentanyl that has killed U.S. citizens. They could approve the long languishing request from American Express (AXP) that they be allowed to issue cards in China.
They could stop the severe censorship of U.S. movies that has made this once-vibrant market a severe disappointment for entertainment companies. They could punish some company, any company, for stealing intellectual property. They could sanction an acquisition of U.S. base station equipment for 5G, something like allowing big orders to Xilinx (XLNX) or Marvell (MRVL) . They could scrap plans for a new aircraft carrier or stand down in the South China Sea. They could tell the Hong Kong exchange to drop its $37 billion bid for the LSE.
Or, let's face it, they could invite Apple's (AAPL) Tim Cook over for a dinner with Xi, for heaven's sakes.
Us? All we have is this one darned lever with two variables: the date and the size. That's it. We have one gigantic blunt instrument. I have said over and over again that while I don't like tariffs, what the heck else do we have? They are so deeply integrated into our fabric and they have the run of the joint. We are nowhere, relatively, when it comes to selling the Chinese much beyond coffee, cellphones, fried chicken and sneakers.
So, yes, it's terrific for the market that there's a two-week extension. But, remember, the president is sitting there waiting for something concrete to happen in relation to this two week hiatus.
If the Chinese don't pull one of those levers, though, what will the disappointment be?
It will be palpable, as it should be -- because, to date, the Chinese haven't given in on anything, and they have the most to lose, not us. Our companies just keep running to Vietnam or Indonesia or India or to other parts unknown as companies that know how to handle logistics increasingly take over the process and make a transition out of China a much smoother enterprise than anyone would have thought as recently as one year ago.
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