Trade And Trust Are Both Toast!

The most important element of achieving a comprehensive trade deal with China is trust and President Trump’s actions over the past several months have given President Jinping a front row seat to an overdose of ineffective promises, quickly followed by reversals. Somehow, advisors have not been able to get President Trump to understand the broad scope of his responsibilities and interconnections. Further, that China and the United States are not isolated businesses, but rather interconnected operations under a global roof. In another global trade matter, President Jinping saw President Trump sign a new trade deal with Mexico and shortly thereafter threaten to put tariffs on Mexican goods over immigration issues, ‘unrelated’ to trade. A huge mistake, especially considering that President Trump just blacklisted 28 Chinese companies over alleged human rights violations also ‘explained’ as ‘unrelated.’ There is nothing about the interaction between any two counties that qualifies as ‘unrelated.’

Even a truly unrelated brouhaha can mushroom into an international incident. A case and point is the recent tweet by Houston Rockets General Manager Daryl Morey. Seven words that may become the most troublesome tweet in corporate America this year, even though it was only an opinion expressed buy an individual American citizen, not meant to represent the opinion of the NBA or anyone else, and through a communication medium that couldn’t even be seen in China where Twitter is banned. Nevertheless, the inevitable interconnection cannot be discounted or ignored and the NBA has its hands full trying to clean up the mess, which of course spills over to trade discussions. Unbeknown to most, the NBA has been pouring money into China, in the form of free broadcasting rights, building basketball facilities, and bringing Chinese stars to America for preseason games. It’s been estimated that 10% of the leagues revenue comes from China and that number is expected to go to 20% by 2030. Every interaction is related.

We tend to take freedom of speech for granted here in the U.S., but other U.S. companies operating in, or doing business with, China are going to have to learn to balance that country’s laws with U.S. ideals and freedoms. The tweet’s been deleted, but the damage has been done. The market was up 180 points today on hopes of a quick and comprehensive trade agreement, but a snowball in hell probably has a better chance. Jinping doesn’t trust Trump and for good reason. However, I’m sure China doesn’t want to rush to an agreement, only to have Trump renege, or be impeached, or voted out and replaced in 2020. If China really wants a deal, it seems the biggest reason to come to terms before the 2020 election is because achieving an agreement would strengthen Trump’s reelection chances and Biden or Warren are probably seen by China as someone who would be far less cooperative finding a way to trade off or even tolerate human rights violations, for any reason.

No matter how you slice it, nothing moving forward is going to be easy. The global economy is slowing, the number of countries resorting to negative interest rates continues to grow, and the tit-for-tat US/China trade war to this point has already been damaging to both sides and completely unproductive. It’s time for investors to take matters into their own hands, with the world’s only true universal currency, physical precious metals. Call the experts at American Bullion now, at (800) 653-GOLD (4653).