{"id":79396,"date":"2017-09-27T00:30:42","date_gmt":"2017-09-27T07:30:42","guid":{"rendered":"https:\/\/www.globaltrademag.com\/?p=79396"},"modified":"2017-09-26T04:26:50","modified_gmt":"2017-09-26T11:26:50","slug":"the-china-syndrome","status":"publish","type":"post","link":"https:\/\/www.globaltrademag.com\/the-china-syndrome\/","title":{"rendered":"THE CHINA SYNDROME"},"content":{"rendered":"
When negotiating, when do you know if someone is bluffing or not?<\/strong><\/span> Do their facial expressions give it away? The tone of their voice? How about in the measured use of their words? I am referring to the startling announcement by Treasury Secretary Steven Mnuchin, who said, \u201cI have an executive order prepared, that’s ready to go to the president that will authorize to stop doing trade and put sanctions on anybody that does trade with North Korea<\/a><\/span>.\u201d When asked if that includes China, he replied, \u201cStopping trade with anybody. Nobody would be off the table.\u201d<\/span><\/p>\n I watched the interview and I have to say that Secretary Mnuchin\u2019s delivery was believable. If you were playing hearts with him, you would have no idea if he was shooting the moon until he picked up the Queen of Spades. The man has a natural poker face. But really? Stopping trade with China? Think for a moment what that would do to U.S. manufacturing, where China has become so integral to our global supply chain. There are thousands of U.S. manufactured products where at least some components are made in China. Shut that down and don\u2019t you also shut down U.S. manufacturing? At the very least it would be a major interruption where U.S. manufacturers would have to scramble to find other suppliers for those parts either at home or abroad. And then they would no doubt need to make modifications to accommodate the slight variances in the replacement parts from other suppliers, which could take months or longer. <\/span><\/p>\n Shutting down trade with China would almost be unthinkable. Almost. And that\u2019s where China blinked. Well, sort of. China\u2019s Central Bank told Chinese banks to wind down existing loans and to not make new loans to new North Korea customers. But what does that really mean? And more importantly, how transparent will any of that really be considering you are dealing with two Communist regimes? <\/span><\/p>\n That the U.S. would say it would consider stopping trade with China is drama enough, but the other side to that coin, of course, is that you have North Korea now saying that a strike against the U.S. is inevitable\u2014and the country is threatening to test a hydrogen bomb. Never have the stakes seemingly been higher in the geopolitical trade arena than they are right now. We will be reading about this moment in history books as it has all the drama of the Cuban Missile Crisis. Yet, I defer to my original commentary a few issues back, which is: North Korea is misbehaving with China\u2019s consent so that China can appear to reel them back in\u2014in exchange for trade concessions from the U.S. As payment for their part in the charade, North Korea gets food and other essential trade items from China.<\/span><\/p>\n British PM Theresa May<\/a><\/span> gets high marks for navigating her Brexit strategy thus far, albeit it is a work in progress.<\/span><\/strong><\/span> She is saying all the right things like, “No deal is better than a bad deal” and favoring a gradual implementation rather than “the cliff’s edge.” All of this, of course, is to calm markets. But the Scots, Irish and British have always found ways to thrive in uncertainty. In fact, they view it as \u2026 well, sporting, old boy. So don’t expect any fall off in Britain’s economy, despite threats and tantrums by EU ministers who are still fit to be tied that this is all happening. In fact, look for Britain’s economy to pick up steam as it sheds EU regulatory burdens.<\/span><\/span><\/p>\n