A Prisoner of Trade War

Both sides of the American-Chinese trade war are now declaring a temporary cease-fire and trying to calm the global stock markets, but the arrest of someone named Meng Wanzhou, who is the chief financial officer of some Chinese company called Huawai, seems likely to complicate the armistice negotiations.

We’re embarrassed to admit that we’d not previously heard of of Huawai, which has only a tiny share of America’s lucrative “smart phone” market, but it’s apparently such a major player in the even more lucrative global market that it’s often called “China’s Apple.” Of course we’d also not previously heard of Meng, but apparently she’s the daughter of the Huawai’s founder and its presumptive next chief executive officer, so her arrest on charges of violating export controls and sanctions on Iran and other countries is being likened to China locking up Steve Jobs’ daughter and the presumptive CEO of Apple, which we figure would be a pretty big deal here.

Meng was arrested by Canadian authorities while on business in that country, but it was at the request of American authorities, and her extradition to this jurisdiction will likely be quickly expedited, so the metaphorical ball is now literally in America’s courts. So far as we can tell the charges meet the prima facie standard for an indictment, but most of our allies and President Donald Trump himself also stand credibly accused of playing fast and loose with international sanctions, so we’ll hold to faint hope that America’s judicial branch properly sorts out all the legal issues.

As for the geopolitical and international economic implications, those seem too complex to calculate and too much to hope for. Meng might prove such a formidable bargaining chip that the Chinese fold, to borrow a poker metaphor, but it’s also possible those inscrutable Chinamen will gladly sacrifice a mere daughter to save face, to borrow a grotesquely racist stereotype yet undeniably plausible outcome. Chinese dictator Xi Jinping doesn’t have to worry much about a pesky free press and an independent judiciary and public opinion, and perhaps cares even less about some capitalist pig dog’s daughter, while Trump can only wish for such freedom from constitutional restraints. All of Trump’s casinos went bankrupt despite house odds, and this Xi fellow seems an inscrutably wily Chinaman, if you’ll forgive the poker and racist metaphors, and we don’t expect this Meng woman’s fate to figure too significantly in the outcome.

The American stock markets dropped alarmingly on Tuesday, then took a day off on Wednesday to honor the funeral of President George H.W. Bush and his bygone era of American greatness, and then dipped deeply again on Thursday after the news of Meng’s arrest. By the end of the day the stock markets were reassured by some carefully reassuring language about the generally healthy economy from both XI and Trump and the heads of the Federal Reserve Board and the International Monetary Fund and the rest of the globalist financial establishment, and two of the major indices were largely unchanged and the third was ever so slightly up, so for now the smart money is holding out hope.

We’re holding out hope that things will muddle along, too, but we don’t expect that anyone ever will claim a complete victory.

— Bud Norman

The Avoidable and Inevitable Stock Market Swoon

Monday was another down day on Wall Street, and so far as we can tell there are several reasons for the recent stock market swoons. Part of it just the usual economics, but so far as we can tell the worst of it is some unusually stupid politics.

The seemingly biggest reason is that the Chinese have predictably imposed steep tariffs on many American products in retaliation for President Donald Trump’s unilaterally imposed tariffs on many Chinese products, and it seems a trade war has begun. At the same time, though, Trump is also waging war on some major American businesses, another heavy hitter has come under congressional scrutiny, and the usual economic disruptions are at play.

Trump has “tweeted” that “trade wars are good and easily won,” but the smart money on Wall Street and most sane observers elsewhere strenuously disagree. Trump has also retreated from some of his “tweeted” threats, which has always prompted stock markets rallies, but then he “tweets” another threat, such global economic powers as the European and Union and our neighbors to the north and sound issue retaliatory threats and the stock markets once again swoon. If the cycle continues until the rest of the world meekly accedes to Trump’s demand for American dominance of the global marketplace, we expect it will take a while.

In the meantime, one of the most dynamic sectors of the American economy is facing political problems, which are the worst kind of problems these days. Some of the biggest players in the high-tech industry that keeps coming up with all sorts of world-changing gizmos and gadgets and thingamajigs are now being “tweeted” about and summoned to congressional committees, which is not good for business, and the tech-heavy NASDAQ stock exchange has taken the worst hit lately in the recent downturn.

The on-line retailer Amazon.com has recently surpassed Wal-Mart as the world’s biggest store, and Trump has recently been “tweeting” that it’s a tax cheat which drives Main Street stores out of business and is bankrupting the United States Postal System. Much of that is entirely untrue and the rest quite debatable, but it’s been an undeniable drag on the drag on the company’s stock price, and given its enormous size there’s a big drag on the overall averages. For now there’s not much Trump can do about Amazon or its owner’s other notable property, The Washington Post, other “tweet” about it, what with those pesky constitutional prohibitions against bills of attainder and infringements of freedom of the press, but at least Trump is inflicting quantifiable financial pain on his even-richer nemesis.

The on-line social media giant Facebook has its own similar political problems, but for very different reasons. A web site that became extraordinarily profitable and powerful by allowing people to share videos of their cats and cell phone pictures of the taco they were about to eat and whatever else they had on their minds also wound up disseminating political propaganda from Russian-based “troll farms” through a firm tied to the Trump campaign during the last presidential election, and the resulting headlines have not been good for the company’s once red-hot stock price. All the propaganda was apparently pro-Trump, so Trump hasn’t “tweeted” anything about it, but the Democrats on those pesky congressional investigative committees have at least managed to inflict some quantifiable financial pain of their own. Facebook ended Monday down 16 percent from its recent high, and given its outsized influence that also accounted for much of that broader decline.

The computer chip-making giant Intel also took a huge on news that Apple Computers, another outsized company tech-sector and one of Intel’s biggest customers, is considering making its own computer chips. That’s the sort of business page news you’d expect on any day in the fast-moving and nerve-wrackingly dynamic high tech sector, though, and we’re the sort of red-in-tooth-and-claw capitalists and old-fashioned Republicans who are content to let the marketplace sort that out. As much as we love that old corner store that Mom and Pop once built out of brick and mortar, we equally hate bills of attainder and infringements on a free press, and we’ll let Amazon do whatever the state legislatures and the marketplace allows it do, and we’ll stay on Facebook just to keep apprised about which of our friends have recently divorced, so as to avoid any awkward comments.

Although we’re rapidly growing too old for such economic disruptions, we’ve long since learned to accept them as part of the ebb and flow toward something like progress. As rock-ribbed Republicans and red-in-tooth-and-claw capitalists we’ve long believed that all those sorry-assed consumers at the pay line could choose more wisely than the politicians, and we still resent those darned Democrats for presuming to make better picks of the winners and losers.

Nowadays, though, that seems to make us “Republicans in Name Only” or “cuckservatives” or “globalists,” as both parties have chosen their winners and losers. Steel and aluminum companies seem a good stock bet at the moment, but car makers and beer brewers and any other industries that use steel or aluminum look risky. If you have a stake in any of the several industries China is now slapping tariffs on, you might want to talk to your financial advisor about that. The Democrats can try to deprive all the social media-addled youth of Facebook, but we’d advise them that most of the political content from our friends is annoyingly liberal.

Oddly enough, yet another reason for the current nervousness on Wall Street is that the unemployment rate is currently low by historical standards and the overall economy seems to be doing well, so there’s the ever-present danger that the Federal Reserve Board will raise interest on loans past the virtually free-money rates that have sustained the whole enterprise since that last big crash. Such adjustments are another one of those disquieting disruptions we’ve learned to accept, but otherwise we’d prefer politics just stay out of it.

— Bud Norman