Why Traders Shouldn’t Expect US-China Progress Anytime Soon
The tumultuous trade war between the United States and China has led to the market furor that’s incredibly hard to keep track of. As a result of the ever-growing uncertainty looming over global markets, investors everywhere are frustrated and ready for an end to the ongoing geopolitical feud, which leads them to overreact anytime a news development hints that the ongoing trade war could be coming to an end soon.
It’s time for investors to stop playing the fool, put aside the baseless fiction, and realize the geopolitical situation we’re in. Here’s why traders shouldn’t expect meaningful US-China progress anytime soon.
Have you been fooled?
President Trump’s trade war was destined to start the moment he was elected; during his campaign, he made it clear that he was no friend of the Chinese, while simultaneously making it clear that he didn’t understand basic finance. Claiming that he would simultaneously eliminate America’s trade deficit with China, eradicate all public debt held by the US, generate a slew of jobs in portable storage containers, and negotiate better deals than ever before, he flew into the office while investors cheered in the background all the while. Once his administration began to settle in, however, traders and investors everywhere began to voice their loud lament with the president’s belief that trade wars are “good and easy to win.”
It’s worth asking yourself if you’ve been fooled by announcements that the president has reached an excellent deal with China; if you have been, don’t fret, because most of the market has been fooled, too. Every single time the White House signals that there could be a development in the negotiations with China, the DOW jumps upwards, and investors gain newfound confidence. Then, usually within a week, it becomes clear that such an announcement had no evidence backing it up, was based on nothing more than an off-hand comment by an administration official, and won’t actually materialize in reality anytime soon.
Finding that hard to believe? Then consider the news articles which are literally well over a year old talking about the trade war, and note that there’s literally no difference between contemporary reporting and reporting from 2017 and 2018 when it comes to the trade war. Whether it was in the immediate aftermath of President Trump’s 2016 victory, halfway through 2017, most of the way through 2018, or where we are right now in 2019, all of the news has been the same; progress is coming….soon…eventually…perhaps.
Understand the geopolitics at play
You may think that the ongoing trade war is a result of the American trade deficit with China, but the situation is truthfully far more complicated than that. President Trump is interested in waging this trade war not only because of the trade deficit, but also as a means of changing the dollar’s valuation and, most important of all, of riling up his political supporters. By appearing to fight for their interest by “sticking it to the Chinese,” the president gains political points with the base he needs to remain in power.
That’s bad news for investors because it means that the trade conflict won’t end at any point while Donald Trump remains in the oval office. The president has claimed that very same tariffs which frustrate consumers, companies, and investors are actually good for the American economy; he seems to literally believe that tariffs paid for by American consumers and companies are actually taxes levied on the Chinese. This isn’t a speculative claim; the president has literally claimed that tariffs aren’t paid for by Americans so often that his economic advisor had to acknowledge on television that this wasn’t actually the truth.
Investors need to wise up and realize that geopolitics is slightly more important than the whims of the market; thus, the political incentives President Trump derives from bashing the Chinese and escalating his feud with them and other trading partners aren’t likely to abate anytime soon. The American dollar is going to keep suffering as a result of this uncertainty and other news sources must be regularly consulted for financial updates, but you need to keep your eyes on the political press if you really want to know what’s going on. Don’t be fooled by political propaganda that stems from a wide variety of sources for a huge number of reasons; when people claim without evidence that the trade war is about to end, remind them that this has been claimed for well over a year and a half now, and that even a broken clock is right twice a day. More importantly, remember the broader politics at play here, and understand that both Chinese and American leaders will face immense political consequences if they back down in the face of pressure from the other side. Traders should thus expect the ongoing feud to endure for some time yet.