President Trump has been known as a counter puncher when it comes to domestic politics, but when it comes to foreign policy and trade, his strategy seems more akin to punch first --- hard --- and negotiate later.
There are two kinds of people that HATE this sort of approach:
1. Those who follow the stock market and
2. Those who follow foreign policy.
The biggest reason for this is the fear of the unpredictable. If stock brokers and money managers can’t predict the future, you end up seeing what’s currently happening to the Dow.
One day it’s down 700 points, the next day it’s back up 600, and yesterday it went back down over 300. Much of this has to do with Trump’s new trade policy. Is he pushing tariffs, is he using it as some kind of negotiating tactic? What’s he doing? No one seems to know and the markets are reacting accordingly.
BUT, the same questions are now being asked between nation states and men and women in foreign policy circles. For the first time in, oh... decades, really, the world has absolutely no idea what we’re doing in Asia. The once PREDICTABLE United States has suddenly become UNPREDICTABLE, and that’s scaring the crap out of countries like China, South Korea, Japan and --- most of all --- North Korea.
Fear has both China and North Korea wondering what the heck they’re going to do next.
If you happen to be in a boat right now cruising across the Pacific, go out on the top deck. If the wind is coming from the West, that smell you might be smelling can only be described as one thing... fear. Fear has both China and North Korea wondering what the heck they’re going to do next.
On Monday an armored train left the North Korean capital. It was granted unprecedented entry into China on its way to Beijing. A military and police escort accompanied it the entire way. At the same time, all news regarding North Korea was immediately censored on Chinese news and the internet. It was a total blackout. What was going on?
As the train pulled out of Beijing yesterday, the news leaked that Kim Jong Un himself had crept out of his hermit hole and made his first foreign visit... EVER. Since becoming dictator, he’s NEVER made a foreign visit.
What made him do it now in such a dramatic and secretive fashion? What made the President of China accept this highly unprecedented visit at this point in time?
One word. Fear.
Fear of the unknown. Fear of what comes next is causing some seriously dramatic changes in Asia. North Korea has agreed to meet the US President for the first time EVER. They have no idea whether we’re coming or going, and --- at the same time --- sanctions are crippling the country.
China is realizing they’re being put on the sidelines of a potential US/North Korea agreement, and they’re getting freaked out. At the same time, you can bet your britches Trump’s tariffs are being used to corner China into some kind of agreement they don’t like.
This is the equivalent of dunking on your opponent, shattering the backboard, and then landing on top of the guy you just dunked on.
While all this was going down, the US finalized a trade deal with South Korea that keeps a South Korean tariff on steel in place and upholds a standing tariff on South Korean trucks. Plus, it opened the auto market into the country for Ford and General Motors. In sports terms, this is the equivalent of dunking on your opponent, shattering the backboard, and then landing on top of the guy you just dunked on.
Criticise the President when he’s wrong --- and there’s been plenty to criticise --- BUT acknowledge the times when he’s doing things that are working. So far the “punch first, negotiate later” strategy appears to be working.
Let’s see how long it lasts.
Morningstar via Investopedia