by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
November 11, 2020
THE DEEP FREEZE IN RELATIONS between the U.S. and China is unlikely to thaw any time soon, as President-elect Biden bows to members of his own party, most of whom are leery of dealing with Beijing. The most to expect in 2021, a trade expert told us yesterday, is a more civil tone from Washington, not focusing on Covid-19.
BIDEN HAS A LONG HISTORY of favoring free trade, but Democrats like Chuck Schumer and Bernie Sanders actually praised Donald Trump’s crackdown on China. These Democrats won’t suddenly shift once Biden is inaugurated; they are deeply suspicious of China, our trade expert said.
EVEN IF BIDEN, A PRAGMATIST ON TRADE, seeks to re-enter the Trans-Pacific Partnership, it’s unlikely that Congress would approve such a move. China would have to change its treatment of dissidents, end its hacking of U.S. firms, reduce its state-controlled subsidies to manufacturers, and modify its desire for hegemony in the South Pacific Sea.
WE WOULD EXPECT MOST OF THE PROVISIONS contained in Phase I of the trade deal signed by President Trump to remain in effect, including massive Chinese purchases of U.S. agricultural products like soybeans. Progress on a Phase II isn’t likely any time soon.
IT’S NOTABLE THAT CHINA is one of the few nations (Russia is another) that have not congratulated Biden. The former vice president amped up his anti-Beijing rhetoric during the campaign, calling President Xi Jinping a “thug.” And China’s treatment of Hong Kong dissidents overnight hardly will improve Beijing’s image.
U.S. RELATIONS WILL IMPROVE with a wide range of allies — Canada, Mexico, Western Europe, etc. And the widespread use of tariffs by Trump will end. But Biden will hang tough with China; he may prevail with legislation designed to bring manufacturing jobs back to the U.S. from China.
SO THE BEST SCENARIO for the next year is for relations between Washington and Beijing to shift from a deep freeze so an uneasy thaw; the temperature between the two countries will be reduced. But Biden knows he doesn’t have the political support to do much more; both parties in Washington distrust the Chinese government.
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IT’S SINKING IN: There’s a growing realization in President Trump’s inner circle that even if he wins a handful of court challenges, that would not change enough votes to flip states like Pennsylvania or Arizona. Yet it’s entirely possible that Trump — who loathes losing — will never concede.
THE INEVITABILITY OF A BIDEN PRESIDENCY is increasingly conceded by Trump aides, who now have to convince Trump that he can exert enormous influence on the national discourse as a tweeting President in Exile. But everyone we talked with yesterday, in both parties, agreed that the election outcome will not change.
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A SOLEMN ANNIVERSARY: On the 11th hour of the 11th day of the11th month of 1918 the Great War ended. Millions of lives were shattered; our grandparents and their parents were never the same. All of us pause to remember this enormous sacrifice.
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