Photo by FABRICE COFFRINI/AFP via Getty Images
In the end both sides blinked, and that is a good thing.
No “Art of the Deal” came out of Team Trump in their trade negotiations with China, which gave a little as well.
For both sides it was a strategic retreat to square one and a deal to keep talking.
And yet, you can make a case that capitulation coupled with dialogue is a good thing, which is why the markets soared on the news.
Capitulation for us meant avoiding the following: Small businesses were about to get walloped because so many of them source their material from overseas including China.
Big business — everything from big auto to retailers — were about to hand down massive price increases and start planning for possible layoffs. Inflation and recession were looming
And China was about to lose access to US markets, a prime driver of its economy.
Not coincidentally, all of the above was set to begin around this week, which is why I gather this weekend’s talk went so smoothly between Trump’s lead trade negotiator, Treasury Secretary Scott Bessent, and Chinese Vice Premier He Lifeng.
They called a truce, kicked the can down the road, 90 days to be exact, and hopefully will officially agree on something that looks like what was just announced: A tariff regime that is essentially the same as what it was before Liberation Day of April 2, plus a recognition that China can’t keep playing dirty on trade practices.
Was it all worth it? Tough to tell.
China has not yet made any concessions on currency manipulation or how they tax US exports, maybe the worse part of its trade practices.
Yet the contretemps brought China to the table. Who knows what Trump may get out of the Chinese, but you can say this: Joe Biden didn’t even try.
The real lesson of the last six weeks is that we are all globalists in the end.
A US economy teetering and markets in turmoil because of a self-inflicted trade war is why Bessent has been basically capitulating every day after we were liberated, first to craft deals with the world, and then to open a dialogue with China.
China, for better or probably worse, is our most important trading partner given how intertwined our economies have become. Bringing manufacturing back to the US through brute force with our most important trading partner may yield long term benefits but as one prominent economist once said, “in the long run, we’re all dead.”
China, meanwhile, needs us to buy their cheap goods, and we need them to supply us with cheap goods, buy our farm products and importantly our debt that keeps our $30 trillion economy from falling off the fiscal cliff until we can start cutting back on spending.
It reminds me of the 1970s when the US and the old Soviet Union achieved a degree of peace through mutually assured destruction.
Fast forward some 40 years, and a prolonged trade war would have destroyed the world’s two largest economies, which also wouldn’t have been pretty.
To that I say: “Yay globalism!”