by Greg Valliere, AGF Management Ltd.
September 19, 2019
WASHINGTON IS BUZZING about the curious lead story in the Washington Post this morning, alleging that an official in the U.S. intelligence community has issued a “whistleblower” complaint against Donald Trump that alleges the President has compromised U.S. intelligence in making improper promises to an un-named foreign leader. Speculation focuses on Vladimir Putin and Kim Jung Un.THIS WILL REV UP THE DEMOCRATS, who have failed to gain much traction on impeachment. It will intensify Trump’s suspicion that his own intelligence community is against him. It will give the media a field day, because this is right out of a spy novel. Congressional hearings are scheduled for next week.
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TRADE TALKS RESUME TODAY: Mid-level Chinese and U.S. delegations will meet in Washington, ostensibly to lay the groundwork for a major new round of talks that will resume in early October. Our assessment is as follows: ratification of a sweeping deal this fall still looks unlikely; there simply isn’t enough time to resolve all the issues. But a piecemeal strategy has promise.BOTH SIDES COULD AGREE QUICKLY on shipping more U.S. agricultural products to China, which is a key issue for Trump, whose support in the U.S. farm belt looks shaky. And China could open up enterprise zones for U.S. businesses in many parts of the country. In exchange, Trump could agree to further delay the imposition of new tariffs.
A PARTIAL DEAL NOW, with both sides making progress that could please financial markets and domestic critics, would be better than nothing — so we can envision a modest deal later this fall, followed by intense talks during the winter. The key: does Trump realize that it’s trade uncertainty — not an uncooperative Federal Reserve — that has sent the U.S. manufacturing sector into a deep slump?
WHEN IT COMES TO THE 2020 ELECTION, our premise is that Trump will do virtually anything to get re-elected, so we think he’s prepared to sign off on a final deal by the end of the winter. Regardless of whether it’s dramatic, he will spin it as a great victory. The wild card is whether the Chinese might prefer to wait until the U.S. election, hoping that Joe Biden would be easier to deal with. Elizabeth Warren, a trade hawk, would be nearly as difficult to deal with as Trump.
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KICKING THE CAN DOWN THE ROAD: You know it’s autumn in Washington when the politicians kick the can on a final budget, and sure enough — a short term extension (called a “continuing resolution”) is coming into focus on Capitol Hill. It would last through Nov. 21, when still another CR probably will delay a final deal until mid-December.
MORE SPENDING HAS ALREADY HAS BEEN LOCKED IN by this summer’s budget pig-out, but precise details are controversial — especially funding for the wall on the Mexican border. Neither party has any desire for another government shutdown, although Trump is eager to inflame this issue once again to rally his base. We’ll get a final deal a week before Christmas, with some modest funding for the wall and generous spending hikes elsewhere.
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JUSTIN TRUDEAU IS IN DEEP TROUBLE: When we return from trips to Canada and tell friends that Justin Trudeau is in serious trouble, they seem surprised — the charismatic Trudeau is considered a rock star in the U.S. But Americans don’t realize that for many Canadians, the bloom of off the rose — Trudeau is considered a disappointment, just another flawed politician.
THE LATEST BLOCKBUSTER — pictures of Trudeau dressed in blackface — will surely hurt him in Quebec and Ontario, two provinces where he needs big margins among liberals and minorities. He’s already trailing badly in the west, especially in Alberta, where his energy policies are very unpopular.
MUCH CAN CHANGE between now and the Oct. 21 election, but this latest fiasco, on the heels of an embarrassing scandal earlier this year, makes us think Trudeau is now the underdog against Conservative Andrew Scheer.
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This post was first published at the AGF Perspectives Blog.
