Trade war resolution on Trump's to-do list

A Peek at Trump’s To-Do List

As the leader of the free world, you have to imagine that US President Donald Trump keeps a collection of to-do lists.

His daily list would likely include items like: check Twitter; denounce socialist Democrats; fume over lack of border wall funding.

But it’s three items on his international to-do list we want to bring to your attention.

As the Commander in Chief, Trump is responsible for US security. This gives him a lot more room to manoeuvre on the international stage without Congressional oversight than he has domestically.

Imagine if you were able to peek through the window of the Oval Office. The top three items on Trump’s international to-do list would likely be these:

  • Sign off on great new trade deal with China.
  • Get Kim Jong-un moving on denuclearising North Korea. (Nobel Peace Prize, here I come!)
  • Forge new treaties with Vladimir Putin. Bring Russia back into the fold.

Now let’s look at these in reverse order…

Putin has been doing some sabre rattling of late. That’s assuming you count announcing the rising threat of nuclear armageddon as sabre rattling.

Anything the US can do, Russia can do better?

Putin has also promised to match the US in any arms build-up. And he’s moving more military personnel and hardware to Russia’s western border. Ukraine, Poland, and most of Europe are rightfully losing sleep over these moves.

But here’s the thing.

Russia’s economy is just a tiny fraction of the US’. Indeed, Russia’s GDP is less than Australia’s. Russia simply can’t compete with the US in a new arms race. This is largely what bankrupted the much larger USSR back in the 1980s.

Trump and Putin both know this. And we believe the sabre rattling is all part of a neatly choreographed script. One the two men may have agreed on in handwritten and hand-delivered letters.

Why?

Because for the world to accept and even cheer Trump’s overtures to Putin — and to welcome Russia as an equal partner — people first need to be properly frightened. Hence the military build-up and talk of nuclear holocaust.

So expect to see a few feints in this direction in 2019, just to test the waters. But the real moves — the new treaties and lifting of sanctions — probably won’t eventuate until 2020. That way Trump’s success will be fresh in US voters’ minds as they head back to the polling booths in November.

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That’s item three. Item two, believe it or not, could be a lot simpler. Kim Jong-un has already halted nuclear testing. And his relationship with Trump remains warm.

But for the US to be able to properly pressure North Korea into full, verifiable denuclearisation, they need China’s unreserved backing. With China’s continued support of rigid sanctions alongside guarantees to support Kim’s regime, Kim is far more likely to capitulate.

We believe we’ll see significant moves in this direction by mid-2019.

This brings us to item one. Sign off on a great new trade deal with China.

While there’s plenty of mainstream media driven angst about what will happen if the trade talks fall through — which, of course, they could — the factors pushing both sides towards reaching a deal remain in play. And both Xi and Trump have tremendous incentives to make it happen.

China’s economy, for example, continues to struggle.

From Bloomberg:

On Friday, China’s central bank announced another cut to the amount of cash lenders must hold as reserves in a move to release a net 800 billion yuan ($117 billion) of liquidity and offset a funding squeeze ahead of the Chinese New Year. After the move, UBS Group AG said it expects additional easing as growth slows, including tax cuts and increased fiscal spending.’ 

Trade war nearing a resolution

Trump himself is signalling confidence that the end is in sight. Last Friday he said, ‘I think we will make a deal with China. I really think they want to. I think they sort of have to.’

On Monday, US Commerce Secretary Wilbur Ross echoed the President’s positive outlook. In an interview with CNBC Ross stated, ‘I think there’s a very good chance that we will get a reasonable settlement that China can live with, that we can live with and that addresses all of the key issues.

As for the Chinese side, Reuters quotes China’s Foreign Ministry spokesman Lu Kang as saying:

From the beginning we have believed that China-US trade friction is not a positive situation for either country or the world economy. China has the good faith, on the basis of mutual respect and equality, to resolve the bilateral trade frictions.

And this week’s two-day, mid-level trade negotiations in Beijing — the first new negotiations since Trump and Xi met over dinner in Buenos Aires — were extended for a third in a promising sign of fresh progress.

And while the meetings were only intended for less senior officials, Reuters reports that:

Chinese Vice Premier Liu He, who has led trade negotiations with the US and is a top economic adviser to Xi, made an unexpected appearance at the meetings on Monday, according to a person familiar with the discussions.’

Don’t discount the importance of that unexpected appearance. It’s not like Liu He just happened to be in the neighbourhood and had some time to kill.

Now the trade war won’t end with this week. Nor will it end at the World Economic Forum in Davos, Switzerland during 22–25 January. That’s when senior US officials are likely to meet with Chinese Vice President Wang Qishan on the sidelines for further negotiations.

But end it will. And that could happen as soon as 1 March, when the US is meant to press ahead with higher tariffs that were suspended by Trump in December.

If it plays out as we suspect, that will be good news for Australian and global markets alike.

PS: In a brand new The Australian Tribune report, Phil Anderson reveals a rather odd way to boost national wealth WITHOUT hiking taxes…click here to learn more.

Bernd Struben

Bernd Struben

Bernd Struben is the lead editor at The Australian Tribune. Bernd makes use of his extensive network to bring you the top stories you need to know about each day. Stories the mainstream may miss. Or bury somewhere you’re unlikely to ever read them. Bernd studied aerospace engineering and journalism at the University of Michigan, before graduating with a degree in economics. Over the past two decades he’s worked in media, management, and finance in the US, the Caribbean, Europe, and Australia. His other role, as the editor of the Port Phillip Insider, puts him in a unique position to read Australia’s most exclusive financial advice. Some of which he shares with readers of The Australian Tribune for free.
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