Saturday, November 02, 2019

Chumps: China Is Playing Trump and His Trade Team

If we put ourselves in the shoes of the Chinese negotiators, we realize there's no need to sign a deal at all.
The world's worst negotiating strategy is to give the other side everything they want in exchange for worthless empty promises, yet this is exactly what Trump and his trade team are doing. All the Chinese trade team has to do to get rid of tariffs and other U.S. bargaining chips is mutter some empty phrase about "agreeing in principle" and the U.S. surrenders all its bargaining chips.
If the other side are such naive chumps that they give you everything you want without actually committing to anything remotely consequential, why bother with a formal agreement? Just play the other side for the chumps they are: if they threaten to reinstate tariffs, just issue another worthless press release about "progress has been made."
The other guaranteed losing strategy in negotiation is advertise your own fatal weakness, which in Trump's case is his obsession with pushing the U.S. stock market to new highs. There is no greater gift he could hand the Chinese trade team than this monumental weakness, for all they have to do is talk tough and the U.S. stock market promptly tanks, sending the Trump Team into a panic of appeasement and empty claims of "progress."
The Chinese team has gotten their way for a year by playing Trump's team as chumps and patsies, so why stop now? The Chinese know they can get way without giving anything away by continuing to play the American patsies and using the president's obsession with keeping U.S. stocks lofting higher to their advantage: declare the talks stalled, U.S. stocks crater, the American team panics and rushes to remove anything that might have enforcement teeth, reducing any "trade deal" to nothing but empty promises.
Given their success at playing America's team, why do a deal at all? Just play the chumps for another year, and maybe Trump will be gone and a new set of even more naive patsies enter the White House.
If we put ourselves in the shoes of the Chinese negotiators, we realize there's no need to sign a deal at all: the Trump team has gone out of its way to make it needless for China to agree to anything remotely enforceable. All the Chinese have to do is issue some stern talk that crushes U.S. stocks and the Trump Team scurries back, desperate to appease so another rumor of a "trade deal" can be issued to send U.S. stocks higher.
It would be pathetic if it wasn't so foolish and consequential.



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