by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
October 14, 2019
THE USUAL TRUMP HYPERBOLE over a “tremendous” piecemeal trade deal began to fizzle even before the stock market closed on Friday. Three major take-aways:
First, The Oval Office announcement of a “phase one” trade deal was “contingent on it being written,” Trump said, with no apparent irony.
A big agriculture deal, long expected, will help the president in the Midwest, but there was less than met the eye — no lifting of sanctions that are already in place, and no agreement on big issues like technology transfers. An agreement in principle on intellectual property theft was vague, hardly an agreement in fact.
China trade hawks scoffed at the deal. Even if there’s a “phase one” agreement by winter, no one we talked with on Friday anticipates a “phase two” deal until well into 2020, if then.
Second, the tentative trade agreement was pushed to the back pages almost instantly as the worst crisis in Trump’s presidency gripped this city. A “who’s who” of Republicans blasted his abandonment of the Kurds and the message this sends to allies and adversaries.
Usually docile Republicans immediately demanded harsh sanctions on Turkey, which should win approval in Congress within a week. But the damage has been done; the Mideast has been re-arranged, with Turkey and Russia the big winners.
The political impact in Washington was clear — Republicans realized they could harshly criticize Trump with little blow-back. Even Lindsey Graham and Kevin McCarthy ripped the president. In private, the criticism was scathing from the Pentagon and demoralized troops in the field.
The GOP now faces an enormous rift, with foreign policy hawks pitted against isolationists like Trump, Sen. Rand Paul and commentator Tucker Carlson. Trump reads public opinion brilliantly, and he thinks voters want to get out of the Mideast immediately, regardless of the consequences. So once again, it’s Trump against the GOP establishment.
Third, the Ukrainian hearings will heat up this week, with potentially explosive testimony from former EU ambassador Gordon Sondland, a major Trump campaign donor, who reportedly will concede that there was a quid pro quo with Ukraine on probing Joe Biden’s son in exchange for military aid.
House impeachment is now very likely, and Trump is furious — but his profane threats to sue members of Congress or impeach them are toothless. The Democrats, meanwhile, have made this all about Rudy Giuliani, and virtually every Republican we’ve talked with in recent days thinks Giuliani is un-hinged, inflicting tremendous damage on Trump.
BOTTOM LINE: We’ll stick with our call that there’s a 25% chance the Senate could convict Trump, but that number may creep higher — there are widening cracks in his support from Republicans. They’re willing to overlook Trump’s telephone calls to Ukraine, but they’re not willing to overlook his abdication in the Mideast.
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This post was first published at the AGF Perspectives Blog.
