By Vincent J. Truglia
There is little doubt that the Trump tariff war is aimed directly at China. Yes, the US plans on significantly reducing its trade deficit with the rest of the world. However, it would still make sense for the US to aim its trade policy towards China, a country which basically survives on exporting to the US.
As past observers of my comments know, I believe Trump is a master at multidimensional chess. Policies often have twists and turns which belie their true intent. I believe cutting off Chinese exports from the US market may turn out to be a brilliant geopolitical policy.
It is quite obvious that the Xi regime intends on taking Taiwan by force in the near future. What cutting off China from the US market does is prepare the US for a cut-off of Chinese exports, which such a military adventure would imply before any military adventure takes place. Americans are quickly learning what such a cutoff looks like. In other words, we are preparing ourselves for a potential Chinese invasion of Taiwan.
Covid showed us how dependent the US has been on Chinese imports of even the most basic items. What better way to prepare the economy for such potential trade actions by the Chinese than by stopping US-China trade before any military events occur.
It is not surprising that semiconductors are being placed in a special category by the US. This allows for at least a little extra time for the US to prepare for export controls on semiconductors from Taiwan when the PLO invades Taiwan.
Preparations by the US to aid Taiwan to maintain its internet connections as China targets Taiwan’s undersea cable connections with the rest of the world is telling.
Are all these developments part of Trump’s grand plan? I don’t know. However, even if this wasn’t his intention, preparing us for an invasion of Taiwan by China certainly is the result.
The fact that the Chinese economy is imploding as unemployment rises at record rates, with the housing sector collapse affecting provincial finances through the loss of revenue from land sales for new construction puts Xi, who is already under enormous domestic political pressure, at a greater risk of a military coup.
I interpret the decline in long-term US treasuries to be nothing more than an attempt by China to destabilize the US. However, for anyone who understands finance will know, when push comes to shove, the Fed can always take on the burden of Chinese attempts at financial sabotage aimed at the Treasury market.
As always, Clear and Candid.