An Embarrassment in Washington; Anti-China Mood Intensifies

by Greg Valliere, AGF Management Ltd.

Insights and Market Perspectives

Author: Greg Valliere

April 14, 2020

WHERE TO BEGIN AFTER LAST NIGHT? After an exceptionally confrontational press conference, it appears that Washington is more concerned with presidential powers, states rights, the January-February narrative, Dr. Anthony Fauci’s fate, and Congress’ inability to act.

BUSINESS AS USUAL, seemingly overlooking the pandemic’s human toll; it has infected nearly 2 million people worldwide and killed over 23,000 Americans. Frankly, yesterday was embarrassing:

A FEROCIOUS DEBATE is about to begin on presidential authority. President Trump asserted last night that he has “total” powers to end the lockdown, but he doesn’t. Governors in the Northeast and the West Coast have formed alliances, and they will decide how and when to end restrictions.

THE ULTIMATE AUTHORITY SHOULD BE THE SCIENTISTS, but Dr. Anthony Fauci is under withering assault from Trump’s political base, which contends that he’s part of a “deep state” conspiracy to deny the president a second term.

THIS CONFLICT WITH GOVERNORS AND SCIENTISTS almost certainly will lead to a confusing patchwork throughout the country, with some states opening up by May 1 and others waiting until June 1. Trump can say whatever he wants, but the governors will call the shots, and they have overwhelming public support.

TRUMP, MEANWHILE, IS ENRAGED that he gets little credit for shutting down flights from China in late January, but he did virtually nothing in February, which the “gotcha” press will re-litigate constantly. The cringe-inducing press conferences aren’t helping the president; his polls are sinking fast, especially in the pro-Trump Rasmussen survey, which now shows his disapproval at 56%.

AND TO COMPOUND THE DYSFUNCTION, Congress is totally gridlocked, unable to even pass a “clean” funding bill for small businesses, which will run out of emergency funding next week. In addition to businesses, state and local governments — especially revenue-starved small cities and counties — desperately need aid, but it’s not forthcoming any time soon.

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ONE THING WASHINGTON DOES WELL is finding villains to blame, and there’s no doubt that there’s an increasingly juicy target — China, which covered up the extent of the virus during the winter and punished doctors who spoke out. Beijing has lost all credibility in Washington.

MANY MEMBERS OF CONGRESS want to wean the U.S. off its reliance on Chinese medical supplies — especially pharmaceuticals — while confronting China’s human rights abuses. The legislative battle is led by Sens. Marco Rubio and Elizabeth Warren, an unlikely pairing that reflects a bipartisan anger toward China.

LEGISLATION WOULD REQUIRE MANUFACTURERS to use more components made in the U.S. while offering subsidies to do so, and a Rubio bill would raise the threat of export controls.Trump, who has vacillated on his relations with Chairman Xi Jinping, once again is calling the pandemic the “Wuhan flu,” a sign that Trump may be on board with Chinese sanctions.

THIS GROWING DESIRE to alter the supply chains could be a major negative for China’s sputtering economy, and could be a source of manufacturing growth in the U.S. later this decade. As for a Phase II in China trade talks, that’s not happening this year; even compliance with Phase I is far from certain.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

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This post was first published at the AGF Perspectives Blog.

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