Here's the issue: We simply have no consensus on the data from China, no consensus about what it means, how weak they are, how strong they are. Wednesday morning, we got an April export number out of China and it was a total doozy: minus 2.7% when the street was looking for 3%.
Now that should be total panic mode. That should be an amazing wake-up call to the Chinese, correct? Coming on the heels of the collapse of the Chinese stock market, from 3270 to 2880 in just four weeks' time, that's what I would call a "wrong direction" number. Given that imports were plus 4%, again much more than we were looking for, you have an economy that is importing more raw goods -- never forget that China is very short both LNG and oil -- but not exporting enough of them.
This is a country based on world trade, and unless you think the stimulus is still working, then the country's stalling out fast. That stimulus is incredibly necessary, given the big spike in bond defaults that Bloomberg wrote about last night -- $5.8 billion in domestic bonds in the first four months of the year, 3.4x the same number last year.
But we immediately hear that we do not have to pay any attention to those numbers because President Xi is there for life and the Chinese play a 200-year game.
You know what's amusing? When the Soviets did the lion's share of lifting during World War II, something our textbooks leave out about the Great Patriotic War, we had a sense that this second-rate country had become more than a first one, it was a rival.
The Soviet Union quickly consolidated its gains and then proceeded to try to take over all of Europe using threats, military, whatever it took. We, on the other hand, proceeded to have the quickest demilitarization in the history of the world and slashed the defense budget to a level where President Truman proposed disbanding the Marines.
You know what happened then. The Soviet Union embarked on a massive program, one of many, to build up domestic strength.
Looking back, it was a gigantic failure, if not a fraud, but I know that even as late as the 1970s if you wrote that the Soviet Union was weaker than we are, you were ridiculed as an idiot. Plus, the Communists didn't just say they would rule the Soviet Union for a 1000 whatever years, but they were going to take over our country in the end.
We believed them!
Now I hear that when the Chinese report weak numbers like last night, they are meaningless and all that matters are the strong ones and the 2025 "world domination" initiative, or the "Belt and Road," and they are laughing at Trump's bluster because they have dozens of War Rooms plotting their next move, trade tariffs be damned.
Which is why this moment is so fraught. Tuesday night's numbers should have signaled that China MUST come to the table, lest its market keeps plummeting, more people are out of work and more bonds default. Instead, we are being fed invincibility versus our pumped-up-on-steroids 3.6% unemployment and 3.2% GDP growth.
They are the strong ones in the mainstream media's eyes. We are the weak ones.
Which brings us to 12:01 a.m ET Friday -- and tariffs. These numbers indicated there could be some sort of compromise, a delay or a possible repeal until we start collecting the tariff, or something more gradual as an answer to more time for trade talks to continue.
It makes sense for the Chinese to do it.
The problem is that if China wants to maintain face and its aura of invincibility, it has to dismiss the idea that 25% tariffs can even hurt them or that it will matter in the grand scheme of things.
But you know what? I remember learning from my father that Stalin, Khruschev and Brezhnev, Patriotic War heroes all, were so tough that they didn't care, they were still going to try to destroy us and take over the world, militarily or otherwise.
My only question to the defeatists out there: How did that work out? Where is the Soviet Union on the map? I can't find it. Can you?