LNG macro analysis, page-1988

"Sounds like President Xi is pretty keen to make it happen"

Guess it Depends on what side of the 'Pancake' you're looking at atm MW

If we 'Flip the Pancake' the Plot Thickens, with

Why the toughest part of a U.S.-China trade deal still lies ahead

I applaud President Trump for trying to wring trade concessions out of China. For years—decades—the United States has been far too kind to Beijing, and they have taken full advantage. Kudos to the president for trying to do something about it.

But I question the administration’s competence and strategy in dealing with the ever crafty and long-term thinking Chinese. As an example, let’s follow the soybeans:

In 2017, the United States sold more than 31.7 million metric tons of soybeans to China.

In 2018, after the president began his trade war with Beijing, that figure plummeted 74%.

By November 2018: China was buying zero soybeans—a costly blow to American farmers who spent years developing trade relationships that have gone up in smoke.

To compensate those farmers for losing all this business, the administration has tried to buy them off with billions in assistance—courtesy of the U.S. taxpayer.

Now, as part of a trade deal that the press reports say is 90% done, the White House brags that China could buy about one-third of the soybeans that it used to buy, with more purchases possible down the road.

The agriculture secretary in February bragged about the negotiating prowess.

BREAKING: In Oval Office meeting today, the Chinese committed to buy an additional 10 million metric tons of U.S. soybeans. Hats off to @POTUS for bringing China to the table. Strategy is working. Show of good faith by the Chinese. Also indications of more good news to come.

— Sec. Sonny Perdue (@SecretarySonny) February 22, 2019
Let me get this straight: Blow up a key export market, get a fraction of it back (maybe), gouge taxpayers along the way and then say “strategy is working?”

So let’s be skeptical when the administration says a trade deal is nearly done and it’ll be great. I hope they’re right. But if they’re handling far bigger matters—cyber theft, forced technology transfers and all the rest—like they’ve handled soybeans, watch out.

The problem when the press reports that a trade deal is 90% done, it sounds like a deal is imminent, helping U.S. stocks DJIA, +0.64% SPX, +0.21% .

But the remaining 10% are the thorniest issues that have kept both sides at loggerheads for months. It’s one reason why a Mar-A-Lago summit between Trump and Chinese President Xi Jinping that had been tentatively scheduled for a few weeks ago was scrubbed.

Those issues, writes Steven Myrow of Beacon Advisors in a client note, are big ones, including “foreign access to Chinese markets, China’s protections (or lack thereof) of intellectual property, and restrictions on market access to foreign firms.”

But the biggest dispute remains enforcement mechanisms. U.S. trade hawks like Trump’s trade chief Robert Lighthizer wants Washington to have the ability to stick Beijing with new and unilateral tariffs against Chinese imports if it is determined that Beijing isn’t keeping to its end of any deal. Myrow notes that China sees this as an infringement upon its sovereignty, and is “disinclined to give on this issue.”

This last point is one that many American analysts, who perhaps don’t know as much about China as they think, may be missing:

Xi is under enormous pressure at home not to be seen as caving in to the Americans.

China has advanced to the point where it can be seen as the one true geopolitical rival of the United States; it is no longer the supplicant.

Xi will never allow himself to be seen as anything less than the president’s equal. Giving in on that which China has defined as critical to its own sovereignty may be a non-starter.

I think Xi also has one eye on the calendar.

He’ll be around come January 2021, but there’s a reasonable chance that Trump won’t.

In football terms, Trump’s term is midway through the third quarter. Xi could stall on the big things mentioned above, offering Trump agreements on things that aren’t so crucial while waiting to see who’ll be on the other side of the negotiating table two years from now.

Trump’s analysis seems flawed in that he thinks China’s economic troubles are all because of him and his tariffs. He says billions are pouring into the U.S. Treasury because of those tariffs, but for the umpteenth time, importers pay tariffs when goods cross the border—not China—and those costs are almost always passed in to consumers.

A member of President Ronald Reagan’s Council of Economic Advisers, Steve Hanke, now a professor economic at Johns Hopkins, put it bluntly in a tweet: “Tariffs on Chinese imports are paid by Americans, not by the Chinese or their government. The President’s tariffs are simply a #tax on American consumers.”

It’s also worth reminding folks of things that Trump thinks are good but in fact have (or have the potential to) hurt the U.S. while helping China.

Here are two examples that will be seen over the long run as strategic blunders.

First was pulling out of the eleven-nation Trans-Pacific Partnership, or TPP. China was excluded from TPP, but Trump’s withdrawal has given Beijing an opening that it previously lacked. And while you might not think that the following has anything to do with China, it does: the president’s announcement last week that he wants to cut aid to El Salvador, Guatemala and Honduras gives China the opportunity to offer aid instead—thus giving our Asian rival an opportunity to strengthen its hand right in America’s backyard, with countries he doesn’t care about.

China is connecting the dots and thinking long term on such matters —is the president?


www.marketwatch.com


Food for Thought, Soybeans mostly

Something to Chew on over the Weekend Folks No doubt






GLTAH

Cheers

Frank + Ted