For the past several weeks China has been hoping to divide the trade dispute into two tracks thereby separating trade issues related to U.S. national security.  Beijing wants, heck needs, the simple agricultural trade because they are food dependent and need that uninterrupted.  However, they are strongly opposed to a comprehensive trade reset.
Beijing wants to wait-out President Trump on the more substantive issues surrounding: intellectual property rights; forced transfer of IP and manufacturing secrets; non tariff barriers including limited access to China’s controlled markets; and state run company subsidies that lead to market dumping and saturation.
Along with avoiding legal compliance issues, China wants to carve-out the complex stuff from a simple trade agreement.
However, when asked today about the possibility of carving out a partial deal President Trump emphatically said: “NO”.  During a press conference with Australian Prime Minister Scott Morrison, President Trump said:

“We’re looking for a complete deal, I’m not looking for a partial deal.  China has been starting to buy our agricultural product; if you noticed over the last week, and actually some very big purchases. But that’s not what I’m looking for, we’re looking for the big deal.

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Michael Pillsbury traveled to Hong Kong recently to help explain the goals and objectives of President Trump’s U.S-China trade position.  During an interview, Mr. Pillsbury warns Beijing interests not to interpret the current U.S. position as aggressive, because the dragon has yet to see the severe side to Trump’s position.

During an interview with the South China Morning Post, Pillsbury points out there are a great many more ways that President Trump is prepared to respond if the combative trade position from China remains hostile to any concessions.  This first option was their best option.  However, should they choose further trade conflict, President Trump will happily oblige.
CTH research on Trump’s outlook, vis-a-vis China, has led us to believe there is no upper limit to the economic weapons President Trump is willing to deploy; and considering that Pillsbury can be relied upon to deliver honest, accurate and deliberate remarks about the White House position, these warnings from a close advisor to the President should be weighted accordingly.

(South China Morning Post) – The United States is set to ramp up the pressure on China if a trade deal is not agreed soon, a key White House adviser said, adding that Washington has so far imposed only “low level tariffs” on the Asian giant.

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The dance with the dragon is a complex geopolitical relationship between two large economies. China’s view within the dynamic is shaped by their own internal ideology and outlook.  The panda mask dynamic was/is strategic and has served them well for decades; but now President Trump -while engaging a structural confrontation- has used the panda strategy against Beiing’s interests.  China is flummoxed.

Each of President Trump’s trade team members have a specific role; each member also has a specific opponent within the dance:
♦Peter Navarro is the blue-collar hawk. He focuses on the the administration’s Wall Street adversaries; and the U.S. multinationals -American companies- who have aligned their interests with Beijing.  Navarro’s focus is internal to U.S. interests.  Navarro confronts  U.S. corporations, Wall Street interests, who are working against Main Street.
♦Treasury Secretary Steven Mnuchin carries the economic financial weapons (represents the dollar), and he faces toward global adversaries (IMF, World Bank, European Central Bank etc.) who have also aligned their interests with Beijing and the status quo.
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Former WH strategist, Steve Bannon, appears in DC at a “Clear and Present Danger China” event to discuss China.
The first half of the Bannon’s presentation reflects why he had to leave the white house; reactionary, influenced by media, vulnerable to fake news, and lacking stability.  However, the second half of the video reflects why Mr. Bannon was a valuable strategist.
[Video prompted to 06:26 – just hit play]

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In a quiet admission of food dependency, China purchased 600,000 tonnes of soybeans yesterday (link), and simultaneously announced that U.S. pork and soybean imports would be exempt from further tariff increases.
The surface message Beijing is selling, surrounds their magnanimous panda narrative of reaching out to diminish trade friction.  However, below the surface everyone knows China cannot feed itself,and if food prices keep rising they could likely have growing unrest.

Beijing’s decision to not enhance tariffs of pork and soybeans is very self serving; particularly because China owns Smithfield foods, the largest producer of U.S. pork.  In essence China has lessened tariffs against their own company.

(SCMP) China has announced that it will exclude imports of US soybeans, pork and other farm goods from additional trade war tariffs, opening the door for significant purchases of agricultural products.
The official Xinhua News Agency reported on Friday that China’s National Development and Reform Commission and the Ministry of Commerce made the exemption in response to the US’ decision of postpone an increase in the tariff rate on $250 billion of Chinese goods from October 1 to October 15.

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Fox News host Neil Cavuto is well known for broadcasting an hour long infomercial for the U.S. Chamber of Commerce and Wall Street daily.  White House manufacturing and trade advisor Peter Navarro interrupts Cavuto’s multinational talking points to explain a Pro-U.S. trade initiative that will help level the playing field.  Things go downhill….

Amid new reports of U.S. companies initiating a rapid exodus from China, President Trump has announced the delay of the next round of tariff increases on Chinese goods from October 1st to October 15th.

U.S. Company Survey – More than a quarter of the respondents – or 26.5% – said that in the past year, they have redirected investments originally planned for China to other regions. That’s an increase of 6.9 percentage points from last year, the AmCham report said, noting that technology, hardware, software and services industries had the highest level of changes in investment destination (read more)

President Trump apparently senses the diminishing position of Chairman Xi.  The status quo, U.S. disinvestment, has put Beijing into a weakening position.  As the president noted today during remarks from the oval office, Xi’s belt-and-road (aka ‘bribe and loan’) supply chain program is collapsing.
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Treasury Secretary Steven Mnuchin appears for an interview with Maria Bartiromo to discuss the Trump administration’s efforts to return privatization to Fannie Mae and Freddie Mac, the state of the U.S. economy, U.S. trade talks with China, USMCA and government spending.
Ms. Bartiromo is very concerned about retaining the wealth position for her friends on Wall Street and the Asian investment needs of U.S. multinational corporations.

As if, on cue:

Boy howdy if ever there was an article that showed the layers and ramifications of President Trump’s global trade reset, this is a good one.   The multinational media do not want American voters to understand the dynamic, because if we did people would catch-on to how the global economy was structured upon removal of U.S. wealth…

(Tweet Link)

Reuters is reporting on a significant drop in German industrial orders, and they specifically point to diminished orders from the U.K (small part) and China (big part) as the cause.  However, the analysis stops at the part where China’s lack of industrial orders is the leading contribution to retraction in the German export sector.
What the financial analysis does not approach (ie. the third rail of multinational corporate admission that must never be outlined), is the reason why Chinese orders for German industrial goods have dropped.
The problem for China, and ultimately for Germany, is that Trump’s trade reset has stopped a big amount of U.S. wealth from arriving in Beijing. Simultaneously, Beijing is countering Trump’s tariffs by devaluing their currency.  The rebound economic impact is doubled. China has: (1) less income; and (2) less value within their own currency.
Where does this dynamic show up?…. Anytime China is going to buy something.
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