The mainstream media narrative about the U.S.-China trade war implies that Trump is on a highly damaging ego trip and China holds all the cards. The exact opposite is true. Trump has ample financial warfare weapons including tariffs, penalties, bans on direct investment, improved cyber-security, forced divestiture and freezing of assets.
Meanwhile, China has almost run out of room to impose tariffs. They will invite retribution if they try to devalue their currency further.
China’s vulnerabilities run deeper than that. The U.S.-China trade war comes in the aftermath of a Chinese Communist Party conference that made Xi Jinping dictator for life and enshrined his doctrines on the same level as Mao Zedong. Once Xi got these powers, he proceeded on a disastrous policy course that has resulted in a slowdown of the Chinese economy, higher debt defaults, lost investment opportunities in the U.S., and declining hard currency reserves.
As this article shows, the knives are now out in Beijing. Xi’s opponents are questioning his judgment and the wisdom of expanding his powers at such a critical time. Xi still has torture, firing squads, and concentration camps at his disposal, but the notion of a unified, coherent leadership structure in Beijing is now seen to be a myth.
Trump will keep up the pressure; he never backs off and always doubles down. It will be up to Xi to blink and acquiesce in many U.S. demands. The U.S. will win this trade war because Xi does not want to lose his throne.
Yet, there will still be material damage to the global economy and lasting animosity between Xi and Trump.
Accredited investors interested in learning more about Jim Rickard’s private placement in the world’s first predictive data analytics startup that combines human and artificial intelligence with complexity science should check out his offering at Meraglim Holdings. Click the link to learn more.