by Greg Valliere, AGF Management Ltd.
THERE ARE MORE INTERESTING STORIES THIS MORNING than the impeachment snooze-fest; the real excitement comes next week, when there’s a chance that the Senate will agree to hear witnesses (amid speculation that the Democrats might agree to take testimony from Joe or Hunter Biden as part of a deal).
OTHER STORIES ARE PERCOLATING — Donald Trump’s ruthless intimidation of Western European countries on trade, which has already prompted France to cave; and the growing rift among Democrats — the long knives are out for Bernie Sanders.
TRADE: Facing a potential 100% tariff on wine exports, Emmanuel Macron agreed to defer higher taxes on U.S. tech firms for the rest of this year, apparently in exchange for a delay in any new U.S. tariffs on luxury goods such as wine. But Italy, England and others are not on board, as “tariff man” Trump pushes hard for concessions.
THE WINE WINNERS appear to be Bordeaux, Burgundy and other French classics, while Brunello, Barolo and other Italian superstars are in limbo until there’s some type of deal.
TRUMP’S WILLINGNESS TO USE TARIFFS as a political club will persist, and our sense is that U.S. tech giants will be major winners as tax hikes are delayed. With economies barely growing in Europe, we think the EU will reluctantly compromise. Trump knows this, and will use tariffs to win political concessions, not just trade victories.
POLITICS: As the great satirist Will Rogers once joked, “I’m not a member of an organized political party, I’m a Democrat.” With the Iowa caucuses less than two weeks away, the feuding Democrats seem to be coalescing around a goal of blocking Bernie Sanders, whose unpopularity with the party’s establishment is legendary.
“NO ONE LIKES HIM,” Hillary Clinton said in a scathing interview that mocked his inability to get anything done in Congress. Here are four reasons why the Vermont socialist generates such antipathy:
1. He’s not a Democrat, has never been a Democrat, and is not exactly a team player.
2. He and his inner circle have long been viewed within the party as dismissive of women, and Elizabeth Warren has stoked anger over this.
3. His support for Hillary Clinton was tepid in 2016 and she privately blames him for low turnout among young activists (Clinton’s terrible campaign obviously was a factor as well).
4. Sanders has taken off the gloves in Iowa, raising an issue that could hurt Joe Biden in the general election — the former Vice President’s hints, 20 years ago, that he could embrace a “Grand Compromise” on deficit reduction that would include a freeze on Social Security benefits. This is a hot stove — the proverbial third rail — that no politician dares to touch, and Sanders is using it against Biden.
NEVERTHELESS, THE INCREASINGLY BITTER IOWA IN-FIGHTING may benefit Biden, who has risen in polls in recent days. Biden could keep this fractious party together, which cannot be said of Sanders or Mike Bloomberg. As polls shift daily, Warren may rise at Sanders’ expense as all the candidates’ vulnerabilities are exposed — to Donald Trump’s advantage.
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THE GREAT WILD CARD: Amid all of these stories, there’s one wild card that could have a significant impact on global economic growth — the coronavirus, which is far from peaking, as U.S. airports begin to take precautions. This is the last thing China needs — still another reason why its economic growth could continue to slide.
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This post was first published at the AGF Perspectives Blog.
