Kim Miscalculates — and there are Implications for China Trade Talks
Author: Greg Valliere
February 28, 2019
THE ART OF NO DEAL: A key feature of Donald Trump’s negotiating playbook is to walk out, as he did early this morning in Hanoi. We were wrong; we thought Trump so needed a victory that he would agree to virtually anything — at the least, the establishment of a consulates in both countries.
BUT KIM JONG UN MISCALCULATED, thinking he could get all U.S. sanctions lifted in exchange for shutting only one North Korean nuclear site — hardly a denuclearization. We suspect Trump’s hawkish aides told him this wasn’t a deal worth pursuing, and to his credit, Trump walked. (Not to his credit — hastily scheduling a summit without first laying the groundwork).
SO WE HAVE TO WONDER — WHAT DOES THIS MEAN for the China trade talks? Trump has sent a message to Beijing that he’s willing to reject an unsatisfactory deal, which makes us think the ongoing talks may not be resolved as quickly as the markets expect. We still think there will be a trade pact this spring, but with teeth on issues like verification, a major plus in our opinion.
COULD TRUMP BOLT THE CHINA TRADE TALKS? Can’t rule this out; there are at least a dozen unresolved issues. The implicit message from Hanoi is that Trump could walk out on the Chinese as well, and that might prompt concessions; Beijing needs a deal just as much as Trump does, perhaps more considering the decelerating economy in China.
SO THIS COULD CHANGE THE DYNAMICS of the China trade talks. Yes, Trump needs a victory, but he won’t embrace a deal at any cost; that’s the clear message this morning.
THE COHEN HEARINGS: At least we got that one right — yesterday’s circus had virtually no impact on the markets and changed very little. Yes, Trump is an unsavory character, but that’s hardly news. The hush money to women is a serious matter, probably criminal, and we suspect former Trump CEO Allen Weisselberg has added fresh details in his interrogation by Robert Mueller’s staff.
TRUMP IS HARDLY FREE AND CLEAR — pit bulls in the Southern District of New York have plenty of leads to follow — but we still don’t think there are enough votes in the Senate to convict Trump, even if the House impeaches him (still a 55% chance of the latter). Republicans won’t turn on the president, which was abundantly clear yesterday.
JUSTIN TRUDEAU, IN REAL TROUBLE: Finally this morning, a sign that political dysfunction is not confined to the U.S. or the U.K. The Trudeau administration was rocked yesterday by testimony from a former justice minister, who said she was aggressively pressured by Trudeau aides to drop her corruption probe of the big Quebec engineering and constriction firm, SNC-Lavalin, which allegedly concealed details involving bribery in its dealings with Libya.
WE’LL DEFER TO OUR COLLEAGUES in Toronto on whether Trudeau’s plunging poll numbers can recover before this fall’s elections; he has denied any impropriety and a compromise could emerge with SNC Lavalin. But with opposition leaders calling for his resignation and an ethics probe now taking shape, our sense is that Trudeau is now the underdog in October.
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