This was a funny tweet from Trump late yesterday in light of the $100 rally in gold today to a record high but it underscores part of the US negotiating strategy worth dwelling on.
Yes, we know the US is much richer than China and that may or may not be a problem for China, which I think can tolerate much more pain than the US.
Where it may be more important is in the rest of the world. Part of the US negotiating strategy appears to be an appeal to trading partners that they need to block out China from trade in some way in order to get relief from tariffs. It’s a something of a re-making of the Trans Pacific Partnership that Trump derided in his campaign against Hilary Clinton.
Meanwhile, China is on a charm offensive to try and shore up alliances, particularly in Asia. Today we learned that China isn’t just planning to use charm though as a statement from the Chinese Ministry of Commerce said that:
“China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will not accept it and will resolutely take reciprocal countermeasures.”
That could be seen as a threat.
In a worst-case scenario there is a scramble for every country to join one sphere of influence. That would put many countries in a bind as they would rather trade with both. Given US relationships and military might, most countries would be inclined to trade with the US but Trump’s antagonism and bullying could make that a hard sell domestically.
It’s really hard to say how this will play out and Trump’s frequent policy and messaging switches make it nearly impossible to game out.
This gave me a chuckle:
This article was written by Adam Button at www.forexlive.com.