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Donald Trump’s weekend comments on trade war escalation – regrets, retractions, and reversals

US President Trump had comments on Saturday morning on his regrets. Later reversed.

Let’s try to plot a timeline and get some sort of order, bolding mine:
1.
During a breakfast with British Prime Minister Boris Johnson on the sidelines of the Group of Seven meeting … a reporter asked Trump whether he had any “second thoughts” about his escalating trade war with China. 
Trump responded, “Yeah, sure. Why not. Might as well,” he said. “Might as well. I have second thoughts about everything.”
2.
Trump then claimed that talks were going well with China and that he planned to back away from some of his recent threats, such as seeking to force companies to leave China.
3.
The White House weighed in later, said Trump’s suggestion that he regretted escalating the trade war with China was “misinterpreted” and that what he regrets is not raising tariffs higher.
On the back down over ordering US companies out of China:
  • On Friday, Trump had said that “I hereby order” U.S. companies to prepare to stop doing business with China,
  • on Sunday Trump reversed this also, said he had no plans to invoke this law “I have no plans right now,” Trump said. “Actually, we’re getting along very well with China right now.”
While Trump can be criticised on a policy level, he is very active on policy setting, on a personal level it does appear he deserves some sympathy with respect to his declining faculties. I hope he can find help and wish him well.
US President Trump had comments on Saturday morning on his regrets. Later reversed.

South Korea begins military drills around disputed island amid feud with Japan

South Korea’s military will conduct two days of drills around a tiny island also claimed by Japan, Yonhap news agency reported on Sunday, just days after Seoul decided to scrap an intelligence-sharing pact with Tokyo amid worsening relations.

Tokyo and Seoul have long been at loggerheads over the sovereignty of the group of islets called Takeshima in Japanese and Dokdo in Korean, which lie about halfway between the East Asian neighbours in the Sea of Japan, which Seoul refers to as the East Sea.

The military drills were scheduled to begin on Sunday, Yonhap reported, and could exacerbate tensions between the two neighbours.

South Koreas on Thursday had announced the scrapping of the intelligence-sharing pact with Japan, drawing a swift protest from Tokyo and deepening a decades-old dispute over history that has hit trade and undercut security cooperation over North Korea.

Relations between South Korea and Japan began to deteriorate late last year following a diplomatic row over compensation for wartime forced labourers during Japan’s occupation of Korea.

They soured further when Japan tightened its curbs on exports of high-tech materials needed by South Korea’s chip industry, and again this month when Tokyo said it would remove South Korea’s fast-track export status.

The disputed islands have long been one of the most sensitive areas of contention for South Korea and Japan. Recently, South Korea and Japan traded words over the way the islands were described on a website for the 2020 Tokyo Summer Olympics.

The islands were at the centre of a more serious clash in July, when both South Korea and Japan responded to what they saw as a violation of their air space near the islands by a Russian military plane.

Chinese media takes a victory lap after US climbs down on tariffs

China has its spin working

There’s the trade war and there’s the domestic propaganda war. Both sides continually claim victory at all times. Xinhua is highlighting how it was the US who called China, which is a soft way to highlight that it was the US that blinked.
The Global Times is taking a more festive approach.
China has its spin working
Trump hates more than anything to be ‘seen’ as a loser in negotiations. In the past, China let him have his victories but now they seem to be priming the domestic audience for a fight.

Former (Trump) White House communications director says Trump may need to be replaced for 2020

LOL @ The Mooch. Anthony Scaramucci was President Trump’s communications director for 11 days

Says Republicans may need to pick a different candidate in 2020
Axios reports on Sunday comment from The Mooch:
  • compared Trump to a melting nuclear reactor
  • said he may support a Republican challenger to Trump
  • “We are now in the early episodes of ‘Chernobyl’ on HBO, where the reactor is melting down and the apparatchiks are trying to figure out whether to cover it up or start the clean-up process”
    “A couple more weeks like this and ‘country over party’ is going to require the Republicans to replace the top of the ticket in 2020.”
Dunno if this is what is moving yen higher. But politics is seemingly outweighing everything else lately!
LOL @ The Mooch. Anthony Scaramucci was President Trump's communications director for 11 days

North Korea have fired off more missiles (Saturday morning)

North Korea have fired off another round of ballistic missile tests Saturday morning NK time.

  • at least two short range missiles fired into the sea
  • off the NK east coast, Hamhung area
North Korea tested ballistic missiles earlier this week also. North Korea have been firing them quite regularly ever since the June 30 meeting between North Korean dictator Kim Jong Un and US President Trump.
North Korea have fired off another round of ballistic missile tests Saturday morning NK time.
While this is a yen positive (rising geopolitical tensions prompt flows to liquidity) the market has become a bit jaded with the regular tests.

US Treasury Secretary Mnuchin says China is a currency manipulator

US Treasury Secretary Mnuchin has said China is a currency manipulator. Via an official Treasury statement.

Mnuchin adds:
  • will engage with the IMF to eliminate unfair competitive advantage by China’s actions
  • says China’s actions are a violation of China’s G20 commitments to refrain from competitive devaluation
  • Says continues to urge China to enhance the transparency of its exhange rate and reserve management operations and goals
President Trump has been wanting China names as a currency manipulator and he finally gets his wish granted by Treasury
Mnuchin finally doing what the boss tells him to do. Oh, the Prez, not his wife.
US Treasury Secretary Mnuchin has said China is a currency manipulator. Via an official Treasury statement. 

Almost all of Trump’s advisors tried to talk him out of fresh China tariffs – report

Trump overruled advisors after ‘heated’ exchange

The Wall Street Journal reports that Trump unilaterally decided that tariffs were needed after a failed round of trade talks last week.
Trump was frustrated after a briefing with Mnuchin and Lighthizer where he said neither could relay promises from Beijing to buy more agricultural goods.

“Tariffs,” Mr. Trump said to his team, one of the people said. Those present included his national-security adviser John Bolton, top economic adviser Lawrence Kudlow, China adviser Peter Navarro and acting chief of staff Mick Mulvaney.

All of them, save Mr. Navarro, a China hawk, adamantly objected to the tariffs, the people said. That spurred a debate lasting nearly two hours, one of the people said.

Trump told them his patience had worn thin.
In terms of what it means for the market this is a bad-news/good-news situation. The good news is that there is no grand, coordinated strategy here and that nearly all of the people advising Trump were against it. The bad news is that Trump is in love with tariffs and willing to overrule the people around him in order to get them.
Finally, you can’t rule out that this is a fake leak that’s part of some kind of strategy. Maybe that Mnuchin and Lighthizer go to the next round of talks and say “we need to bring back something or Trump is going to raise the tariffs to 25%.” But that seems to be a pretty questionable strategy to me.
This tweet from December remains the most-telling tweet of Trump’s Presidency.
Trump tweet

China press: Beijing ‘won’t give an inch’ to Trump

The latest from the South China Morning Post

The latest from the South China Morning Post
A just-published article highlights comments from the foreign ministry and commerce ministry on Trump’s new tariffs.
Both the foreign and commerce ministries said the US would have to “bear all the consequences”and demanded more sincerity from Washington if negotiations were to continue following the president’s latest announcement, which caught many in Beijing off guard.
The statements indicate that plans for further talks could be shelved after the US broke an agreement not to impose further tariffs during negotiations. It also hinted at retaliation.

Officials did not give details on the possible counter measures China would take, but observers said China would be less willing to buy US agricultural products, and could restrict exports of rare earths – a key material used in the manufacturing of hi-tech products such as smartphones .

It may also speed up the production of its list of “unreliable entities” – companies deemed to pose a threat to China’s interests – a measure that could target US firms and hamper their operations in China.

Read it here.

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