Trump's Asian Bluff May Have Just Been Called

Trade War Update: Cutting Through the BS

Forget Stocks, Trump’s Bluff May Have Just Been Called

Last week saw stocks rally, bonds stabilize, and Gold drop significantly from fresh all time highs. These events gave reason for players to ask, is this the beginning of the trade war’s end? As we shall see, the reality is far from that. The key to truly comprehending Asian trade negotiation progress is in watching how US counter-party nations are acting.

Worth noting is that Trump’s (by now) well known approach of starting as bad cap and ending as good cop may have worked on Canada and Mexico as detailed in this space before; But for Japan and Korea, the cultural and more importantly geo-economic risks make that aggressive negotiation approach less likely to work in Asia. Worse, Trump’s popularity is lower now than when he debated US North Ameican allies.

Whereas Canada and Mexico are stuck with the US geo-economically, Japan and South Korea have to live with China as their neighbor. As such, while Trump’s Stick/Carrot approach may work, the “stick” part may have to be dialed down very soon. China knows that slow play is rewarding play for their interests now. They know that as Trump’s popularity wanes, so will GOP party support, and with it his ability to project negotiating strength. The clock is being run out now.

With all that in mind, here are some fresh insights potentially answering the question as to who will call Trump’s bluff? and if their pushback will work.

Trade War Updates: Cutting Through the BS

Authored by Mavs for GoldFix [Subtitles added]

Risk assets seem to have to love the mainstream fake news to find a bid.

Let’s begin with a savvy [and revealing] quote from a high Asian official: Trump began his negotiations by treating us worse than dogs, it didn’t work, so he tried again by treating us slightly better than dogs (lower tariffs, softer tones). This is downright naivete. Trump’s random compromises are only as good as a sub-30 VIX.¹