Donald Trump likes to negotiate. And by that I mean that he likes to argue.
But you’ve probably already figured that out during the first two years of his presidency.
This is a special week for the president, who is scheduled to host a dinner Saturday with China’s President Xi Jinping after the Group of 20 summit in Argentina. It’s a “meeting plus dinner,” according to a White House description.
The first time I met Trump was back in the late 1980s. I was doing a story for another newspaper on putting deals together. I was sitting in Trump’s office while he was gleefully negotiating the terms with contractors for a parking garage that would be attached to his Taj Mahal casino.
I can’t prove that there really was anyone on the other side of the call. But I could tell that Trump was enjoying himself and putting on a great performance for me.
What’s going to happen Saturday is obviously a lot more important. And hopefully for all the companies that trade with China and for the nervous financial markets, this “meeting plus dinner” on Saturday will have better results than Trump’s foray into gaming.
There is a whole lot of reasons why Wall Street has had a very bad couple of months. I went through them before the equities carnage commenced in October.
But I’m going to list the financial markets’ problems again because we are getting to a very crucial time of the year — when stocks want to climb but are being prevented from doing so by what are known as fundamental events.
Here are the fundamental events.
- Trade disputes. Our president prides himself on being able to negotiate a good deal. And, so far, he has successfully worked out — or is working out — trade deals with Mexico, Canada and European countries. China, however, is the big leagues. The US had a $375 billion trade deficit with China last year that Trump contends — and I agree — is because of Beijing’s unfair business practices. And Trump has been playing hardball, even heading into the meeting with Xi by threatening China with a load of new tariffs. The US advantage is that China’s economy is stumbling. China’s advantage is that it holds more than $1 trillion in US government bonds and could disrupt our economy by simply threatening to sell them. The financial markets will be very happy if Trump and Xi get along this week. But a picture of the two men smiling together just won’t do it. The joy from even a good meeting between the two will be short- lived because of all the other things happening in the US.
- Interest rates. The Federal Reserve, to the disgust of Trump, will almost certainly raise borrowing costs again next month. As I told you recently, the US economy is slowing. And that slowdown in growth will make it harder for Trump to brag about the effectiveness of his broad tax cuts. What’s happening was inevitable, although the politicians didn’t see it coming. Because of the huge amount of money that the federal government spends — leading to massive Washington debt and an unsustainable annual budget deficit near $1 trillion — the Fed is being forced to jam on the economy’s brakes by raising interest rates. As I’ve been saying for years, the economy wasn’t just unhealthy. It was broken, and traditional monetary policy (controlled by the Fed) and fiscal policy (controlled by Congress and the White House) weren’t going to work.
- Politics. Those first two items — trade and interest rates — are obvious stumbling blocks for the markets in the months ahead. And there are other things that I don’t have space to mention. But what’s going on politically in Washington will, I think, turn out to be very important for Wall Street. There are a number of investigations, including the probe led by special counsel Robert Mueller, that could prove to be especially disruptive. And once the results of these investigations — by House and Senate Republicans plus the Justice Department’s Office of the Inspector General — become public, the tensions in Washington could escalate into an all-out political war.
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