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.
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This post was first published at the AGF Perspectives Blog.