Wrong-footed, wrong-headed
The US, China, the EU, Germany, and Iran.
The five things you need to know today:
UNITED STATES. Trump’s pivot is less strategy than surrender.
CHINA. Xi won’t respond to threats, nor will he need to.
EUROPE. The EU has been saved by consensus.
GERMANY. The centre holds as the hard-right grumbles.
IRAN. Rhetoric hardens before the talks begin.
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UNITED STATES. Blind luck
Trump’s pivot is less strategy than surrender.
Equities soared Wednesday after Chinese duties were lifted to 125% but reduced for others to 10% for a 90-day “pause”. In explaining the U-turn, Donald Trump said markets had gotten “yippy”. Ten-year Treasury yields fell by 20 basis points.
INTELLIGENCE. Yields are still yippy, but Trump has claimed victory. It’s likely to be pyrrhic. He may have wrong-footed China, but he was wrong-footed in turn by the bond market. And with US debt now treated like a frontier asset, he can no longer count on the exorbitant privileges of cheap borrowing and reserve currency status – a greater loss than any trade barrier. Further, if he makes one wrong move over the next 90 days, the bond vigilantes will be back.
FOR BUSINESS. Real markets exist to trade, not play poker. Equities may have become a simulacrum of their intended purpose, but the sellers of sovereign debt and goods are no less comforted by the turn of events. Short-term traders may see a rebound; long-term investors will only see the volatility. And amid that volatility lies risk of corporate and investor default, not to mention further policy errors. A superpower’s status derives from predictability not spectacle.
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CHINA. Face off
Xi won’t respond to threats, nor will he need to.
China was joined by 46 WTO members voicing “grave concerns” over US tariffs, lifted to 125% after China raised levies to 84%. The WTO estimated bilateral trade could fall 80%. China’s commerce minister spoke with the EU and ASEAN.
INTELLIGENCE. Xi Jinping will feel he holds the high ground. And irrespective, he can’t afford to kowtow after losing