U.S.-China Thaw Is Not Imminent; Stimulus Progress; Trump is Running Again

by Greg Valliere, AGF Management Ltd.

THE MOOD IN THIS CITY toward China is still leery at best, hostile at worst. Any chance that a Washington-Beijing thaw is coming was dismissed this week by President-elect Joe Biden, who clearly will go slow on any warm-up.

WE CONSISTENTLY POINT OUT that the U.S. antipathy toward China is bipartisan; it’s not just a Donald Trump crusade. Most Democrats, including Bernie Sanders and Chuck Schumer, are China hawks — which is a major reason why Biden will go slow. His own party would not support a trade liberalization.

IN A MUST-READ INTERVIEW with Tom Friedman in the New York Times, Biden made it clear this week that he will seek a global consensus on how to deal with China before taking any action; the Trump tariffs will remain. And Biden stressed that the U.S. will ramp up industrial policy to encourage U.S. production of goods that are now made in China.

THE U.S. NEEDS “LEVERAGE” over China, Biden said — sounding a little like Trump. The president-elect condemned China’s stealing of intellectual property, dumping products, illegal subsidies to corporations and forcing “tech transfers” from American companies to their Chinese counterparts.

BIDEN ADDED: “I want to make sure we’re going to fight like hell by investing in America first.” He cited energy, biotech, advanced materials and artificial intelligence as areas where he will support major government investment in research. “I’m not going to enter any new trade agreement with anybody until we have made major investments here at home and in our workers,” he told Friedman.

IN ANOTHER SIGN OF CHILLY RELATIONS, the House voted yesterday — unanimously — to eventually bar Chinese firms from listing their stocks on U.S. exchanges unless there’s transparency. The measure would require stock exchange auditors to examine the business practices of listed Chinese firms, which could face expulsion from exchanges if they don’t cooperate.
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STIMULUS PROGRESS: More Senate moderates are signing on to a package of pandemic relief, even though congressional leaders still disagree on key points. Mitch McConnell wants no more than $500 billion, with liability protection for firms that face covid-19 lawsuits, while Nancy Pelosi wants more than $1 trillion, with generous aid to state and local governments.

BUT THE DIFFERENCES ARE NARROWING, with members of both parties strongly asserting that they can’t leave town without doing something, as Covid deaths surge.

CONGRESS MAY GET AN EXTRA WEEK: The mammoth budget deal that would be the vehicle for pandemic relief may not get finished by the deadline of midnight on Dec. 12. This entire process then would be extended for several more days.
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DONALD TRUMP, RUNNING FOR PRESIDENT: There can be no logical explanation for Trump’s extraordinary 46-minute rant yesterday — other than the growing likelihood that he’s fine-tuning his narrative for a 2024 presidential run.

VIRTUALLY EVERY CLAIM TRUMP MADE has been debunked; his assertions of massive fraud have been laughed out of several courts (by judges he appointed), and Attorney General Bill Barr faces dismissal for his assertion that there was no widespread fraud.

BUT A WIDE MAJORITIY OF REPUBLICAN VOTERS believe that the election was stolen from Trump, and they would enthusiastically support him in 2024 (if Trump gets indicted in the Southern District of New York in the next year, that would simply make his base more adamant that there’s a witch hunt against him).

OUR SENSE IS THAT 90% OF REPUBLICAN members of Congress agree that Trump lost the election, but only about a third of them will say that in public, despite getting cover from Barr. A four-year campaign now looms, with dozens of angry tweets a day from the president in exile.

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This post was first published at the AGF Perspectives Blog.