This could be a defining moment for President Trump. Everything comes down to how he manages a difficult trade negotiation with China. As I wrote yesterday, this could be one of the hardest deals to make. The consequences of not making a deal could be enormous. Most Presidents stay away from boom or bust deals. Not this President - he thrives on them. He has hung his political hat on the stock market and the economy. Both could sink if this goes south. Why? Everyone loses in a trade war. It could be the ultimate negotiation.
The sentiment in China is much more dire than the President's twitter account would positively suggest. President Trump, in doing what he does best, has been controlling the optics. He has been overly optimistic with the market hanging on his every word. If that is not true and reading Chinese news outlets suggest that it is not, we have a major problem. Here are some of the headlines from today's South China Morning Post (www.scmp.com):
"Washington refuses to accept verbal assurances but China is reluctant to make further structural reforms"
"Some government advisors in Beijing believe it would be better to accept higher tariffs than make ‘suicidal’ changes to country’s economic model"
"Internet users see trade war as challenge to a Chinese sovereignty that has grown strong in the two decades since journalists perished in US-led strike on Belgrade"
As you can see, this is more than a trade war. This is the pride of a sovereign country. Once again, CNBC will tell you to not pay attention to daily news events. If this falls apart, the market could be vulnerable to a big decline.
The good news is that President Trump is leading the charge. Regardless of what you think of him, there is no one better than the Art of the Deal (which happens to be the title of one of the books he wrote in the 90's). The Chinese have something on their side that we don't have. They have time on their side. President Trump has a ticking time bomb on his side - the election cycle which cranks up this summer.
Know your risk level!