The vibes are good in Asia, as President Trump’s tour is yielding significant trade deals and national security relationships. The stock market loves it as the Trump boom continues, and markets are almost in melt-up mode. Profits are key to the market, but peaceful trade deals are helpful. And when the dust clears, it may be to the effect of a United States tariff rate something around 15 percent, which is a good low number to help profits and no trade war retaliation, at least in Asia.
Here’s a key point: deals with Vietnam, Malaysia, Cambodia, and Thailand include trans-shipment provisions. This is designed to stop Communist China from routing their cheap exports through these countries in order to hide their unfair trading practices.
In Japan, Mr. Trump seems to be getting along swimmingly with the new prime minister, Sanae Takaichi, who has nominated him for a Nobel Peace Prize. Japan is going to buy a lot of Ford F-150 trucks and help America produce rare earths. And it appears that the $550 billion Japanese investment into the United States will take place in some shape or form over some period of time.
And then there’s China. So far, the China story looks to be a kind of return to the future. By that I mean Secretary Scott Bessent’s so-called “framework” includes a suspension of China’s rare earth moratorium, perhaps for a year, in which case Mr. Trump presumably will suspend his 100 percent tariff surcharge. We don’t know this for sure, but that seems to be in the cards.
China will resume buying soybeans, whose market price has suddenly jumped to $11 a bushel. And some kind of new deal on fentanyl is being reported, but Beijing was supposed to crack down on the export of precursor chemicals that produce fentanyl seven years ago.
I was there at the G-20 bilateral dinner at Buenos Aires, Argentina when Mr. Trump raised the fentanyl issue with President Xi Jinping as the very first order of business. Mr. Xi’s been saying yes to stopping fentanyl, when the reality is he never stops fentanyl. And we’re going to believe him now? Mr. Xi thinks he has leverage with rare earths, but America has leverage as the largest economy in the world. The United States has more leverage because we just obliterated Iran and knocked China out of the Middle East game.
The United States has even more leverage because the Chinese are being stopped in places like Venezuela, Argentina, and elsewhere in South America. For some reason, Mr. Xi thinks Mr. Trump is going to renege on the independence of the Republic of China on Taiwan, but don’t bet on that one. Mr. Trump expects China to stop buying Russian oil which is financing the Ukraine war. If they don’t, then presumably secondary sanctions will take all of Chinese commerce out of the dollar system. And I guess TikTok’s going to be sold, though it’s surely not my favorite sale because I see it as one big Chinese spying algorithm.
And then finally, America is going to launch an investigation of the original United States-China Phase One Deal. Plenty to investigate there, because Beijing essentially didn’t abide by any of it. That deal was signed almost six years ago. I was there for that one too. Can anyone ever trust or believe the Chinese Communist Party? Just asking.
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