The Choreographed Trade War

The list is out.  So China will put tariffs on American fruit, wine, and pork.

Clearly, China is showing some real restraint here. If they really wanted to go after agriculture (a major American export), they would have went after corn and soybeans. Instead we have:

• Fruit and wine. These are major California produces. California is clearly on Trump’s shit list, so China is almost doing Trump a favor.
• As for pork, a Chinese company WH Group owns America’s largest exporter in Smithfield. So this is China offering to tax themselves.

It's starting to look like Trump and Xi had some sort of handshake deal, because this is looking very much choreographed. Talk tough, slap some non-punitive tariff on each other, then take some victory laps with political constituents.

Ironically, Emporer Xi’s total grip on power allows him more flexibility to extend concessions in the face of US demands. “Xi for life” is bad for democracy, but so far good for U.S. commercial interest.

If Trump is smart, he will take this olive branch from China, claim victory and call it a day.

The best case for markets is if Trump keeps his strategy of speaking loudly and carrying a small stick. The economy would hum along with little damage.  Meanwhile, the Fed can use this trade war thing as an excuse to get dovish and delay rate hikes.