China Includes a Nuclear Option during the Trade War

 China Includes a Nuclear Option during the Trade War

Today’s Agenda

  • China vs. the U.S.
  • Trump vs. immigrant families
  • Central banks vs. democracy
  • Recession signals

Bringing a Trade Knife towards a Trade Gun Fight

(Bloomberg Opinion) — You want to trade war when using the trade weapons you’ve, not the trade weapons you may want or wish for at another time.

When Donald Rumsfeld said an alternative with this last 2004, he was telling American troops to stop complaining about about to Iraq with inadequate gear. Today the U.S. is blustering towards a different of war, a trade war with China, and it’s ambiguous it has the right weapons due to this one, either.

Trade wars are dumb and hurt everybody, but when you must launch one, the trick is to be certain you don’t hurt yourself over you hurt the opponent, points out David Fickling. Thus far in the past of your war President Donald Trump seems keen to prosecute, U.S. tariffs have was able to target solutions that won’t raise prices for American consumers/voters. But considering the fact that consumables make-up so much of what we import from China, the pain point isn’t distant, David warns:

Jacking up consumer prices just prior to an election – when gas charges are already rising as a consequence of Trump’s dismantling with the Iran nuclear agreement – could politically damage him and Republicans up for reelection. It’s another demonstration of how his strong-arm tactics, which may have worked in Ny real estate, backfire in politics, writes Jonathan Bernstein. Meanwhile, a common voter President-for-Life Xi Jinping fears is the Grim Reaper.

Because China includes a big trade surplus with all the U.S., it can’t nearly match the American tariffs. But it really can hurt U.S. companies doing business there. And possesses a doomsday weapon, notes Brian Chappatta: It could possibly just stop buying U.S. Treasury debt. China is a world’s biggest Treasury investor, keeping U.S. borrowing costs low, helping us buy more stuff from China. Ending this symbiotic relationship just when U.S. budget deficits are soaring would devastate the U.S. economy – even so it could inflatable China’s too.

A mix off politics and economics should pull all parties back from mutually assured destruction – assuming both parties want to avoid that. With Trump, that’s not entirely clear.

Separation Anxiety

As we discussed yesterday, Trump’s new “zero tolerance” illegal immigration policy that could be tearing apart families is cruel, immoral and will only bring on worse consequeqnces the longer it continues. It’s going to cause it to harder to generate a decent compromise on immigration, write Bloomberg’s editors. Like with trade, though, it’s ambiguous Trump wants that either.

What is evident is that Trump is utilizing his standard M.O. in reply to your public-relations crisis of 1000s of traumatized children in the border: He’s lying, deflecting blame and confusing his followers via social networking, notes Tim O’Brien. It’s the hottest test of whether “Trump’s con game has the better of institutions and basic decency,” he writes.

If Trump really wanted to, it will be very simple for him to finish the traumatization of kids without delay, writes Ramesh Ponnuru. Canceling the “zero tolerance” policy would be the fastest way. He could also tell the Republicans that control Congress to post a law letting him utilize policy and keeping families together. It’s nearly as if he and advisers like Stephen Miller and Jeff Sessions see splitting up families to be a feature, not really a bug.

Democracy Death Watch

During the financial meltdown, politicians in big democratic countries floundered, and in many cases actively made an effort to limit the political response. That left the responsibility to save the globe over the shoulders of central banks. These unelected technocrats did save the day. But this dynamic also undermined democracy if you take power from the hands of people, writes Ferdinando Giugliano. It’s part three of Bloomberg Opinion’s series on economics and democracy.

Inverted Yield Curve Watch

One almost sure-fire manifestation of an economic downturn is really an “inverted yield curve” – when short-term loan rates are on top of long-term ones. In U.S. yields that hasn’t happened yet – though these are narrowest since 2007, the final halfway decent year prior to heck broke loose. But Robert Burgess clearly shows the bend for those global bonds has inverted already – an ominous sign for any global economy.

As for any U.S. yield curve, Brian Chappatta writes that heavy pension-fund consideration in longer-dated Treasury bonds may very well be artificially flattening the yield curve. Which means the recession signal associated with an inversion aren’t as clear mainly because it is frequently. Still, “it’s different this time” are famous last words.

Chart Attack

As Facebook (NASDAQ:FB) shrinks in importance into the youngs, a couple of seconds seems sensible for Facebook to jam more ads where the youngs gather, writes Shira Ovide.

Too several smartest students have a tendency into banking and consulting, writes Noah Smith:

Speed Round

OPEC carries a Bakken shale dilemma. – Liam Denning

The Shah of Iran’s son wants a democratic revolution. – Eli Lake

Trump hasn’t quite destroyed the post-war world order yet. – Hal Brands

Did Wilbur Ross front-run an adverse news story about him by shorting stock he employed to own? Maybe, maybe not. Would the process be shady? Maybe, not. Would the process be impressive? Definitely. – Matt Levine

New York’s taxi bubble couldn’t last forever. – Joe Nocera

Why does New york city have less crime than London? Maybe given that it has more cops. – Justin Fox

ICYMI

Stocks started to worry about trade wars. The U.S. is pulling out with the UN Human Rights Council. Elon Musk wants Tesla (NASDAQ:TSLA) employees to remain more paranoid.

Kickers

Sea-level rise threatens more than 300,000 U.S. homes.

Adult Swim, which brought us such nightmares as So many Cooks, is turning business-themed stock footage into horror films.

The deaths of XXXTentacion and Lil Peep are reminders that rap is troubled with a generational crisis.

Trump really loves the flag.

Note: Please send stock footage, suggestions and kicker guidelines to Mark Gongloff at mgongloff1@bloomberg.net.

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