Trump after marginalizing G20 attacks Europe and China where it hurts, brandishes currency war

Last week’s G20 meeting in Osaka confirmed that the forum’s commonly shared concern about our future on the planet is definitively a thing of the past. Last week, the cacophony at the table of the 20 heads of the largest countries of the world – which first appeared last December in Buenos Aires – became a standard. However, Donald Trump and Xi Jinping felt obliged to give capital markets a reason to celebrate. So, they said they are restarting trade negotiations. Of course, stocks gained a lot on Monday but then closed lower, leaving hefty wins only to traders and market makers, not to investors. The next day, Tuesday, capital markets also quivered. Investors returned again to safe havens. US treasuries and gold gained, while stocks continued to shake because everybody understood that what Trump and Xi said had only face value and the trade impasse remains far from being resolved. Restarting negotiations doesn’t mean anything about the outcome. Caring for the markets Undoubtedly, the two leaders showed a dangerously shortsighted attitude, despite representing the largest economies of the world. They know very well what the capital market sharks expect from them and they dutifully played the game. Trump and Xi, no matter how important their role is for their great nations and the rest of the world, still bowed to a handful of bankers and market makers, giving them what they wanted. It’s a drastic shortening of the time horizon, actually telling all of us, hard working people, that we live just for the next few days. Nothing is certain anymore and hard working people must learn to live with the fear about what the next day may bring. For many years now we watch the top management in the league of the great business operating with a very short time horizon not exceeding the next quarter of the year. Shortened time horizon Usual business goes like that: a top CEO makes an announcement about reducing the work force by some tens of thousands workers. The stock of the company hits high scores, giving the opportunity to the market sharks for immense gains. And this, despite the possible long term harm this personnel reduction may mean for the real business. Some days or weeks later the price of the stock returns to lower grounds. Undoubtedly, nowadays, big money is made in the financial markets, or rather ‘casino capitalism’, not in the production shop floor or the drawing room. Coming back to last week’s developments in Osaka, for the first time the G20 gathering didn’t exorcize protectionism. The world leaders concluded “We strive to realize a free, fair, nondiscriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open.” Not a single reference to repel protectionism. After the Buenos Aires meeting the references to protectionism definitely belong to the past. It’s a brand new international trade environment, where the US can take protective measures, while threatening the rest of the world not to retaliate. The newest ‘new order’ Clearly, then, the Trumpist outlook for the global economy contains as key elements the fullest possible liberties and the greatest opportunities for the financial markets and of course for the US economy. The rest of the world must comply to this ‘newest order’. To consolidate this position, the White House announced last Tuesday a round of additional import tariffs of $4 billion on European Union products. Attacking Europe According to reports from Washington, the new list includes olives, Italian cheese and Scottish whiskey. The United States Trade Representative Robert Lighthizer’s office explained they have included 90 new categories to a long list of EU products (planes, tractors, food and others) to be super levied. The extra tariffs will be imposed soon on all those imports, if the two sides do not conclude a trade deal before 31 October. To make things more difficult, the Americans said this US-EU trade deal must include the agro-food sector, otherwise there will be no agreement. This is a red line for the Europeans though. Last week, the French President Emmanuel Macron observed that the agricultural and food sectors will never be included in a US-EU trade deal. The reason is the vast differences between the two sides regarding key issues like the genetically modified products, the use of hormones in the animal sector, the environment and last but not least hygiene and consumer protection. Clouds over the Atlantic Unquestionably, then, the key trade disparities between the EU and the US are growing rather than being resolved as the two sides dig into their differences. It turns out that the same gloomy prospects characterize the US-China negotiations, despite the Trump-Xi hand shake in Osaka. On both occasions, the US is the unruly party. In the Pacific, Trump wants to transform China’s socio-economic modus operandi in order to conclude a trade agreement. Over the Atlantic Ocean the US wants Europe to give in to decades old American demands (GMOs production, use of hormones in livestock, the environment, consumer protection). Currency war? It’s not clear, then, what Trump’s America is aiming at when attacking China and Europe where it hurts most; their way of life and doing things. In the latest incident, Trump accused China and Europe on Wednesday of currency manipulation. He tweeted “China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA. We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games – as they have for many years!” Obviously ‘matching’ means more aggressive action. Is it the beginning of a devastating currency war? Who knows. Trump can do anything to get reelected. Trade wars may not be enough…