Trump in Chinatown

The title of Roman Polanski’s 1974 film Chinatown was a bit of shorthand. That movie wasn’t about Los Angeles’ Chinatown at all. It was about the California water wars in the early years of the last century. Somehow, no one quite knew how, Los Angeles interests secured water rights in the Owens Valley. So there would be a modern Los Angeles. But what had happened was never clear, and the main character in the Polanski film, the private investigator Jake Gittes, played by Jack Nicholson, was just hanging on. And there was a backstory. Gittes had twice gotten people he was trying to protect killed, in Chinatown, because he didn’t know the culture there, or the power structure, or who to believe and trust, or who not to trust at all. Chinatown was too foreign. Nothing made sense there. And now nothing made sense in these California water wars. He had no idea who the bad guys were. And who were the good guys? Finally an old friend clues him in – “Forget it, Jake. It’s Chinatown.”

That’s the last line of the movie. There are some things you’re never going to understand. Polanski’s wife, Sharon Tate, had been murdered by the Manson family five years earlier. This was his last movie here – Polanski fled to Europe to avoid being arrested and tried for sex with very underage girls here in the Hollywood Hills. Perhaps nothing made sense to Polanski. That might explain this odd movie. But this was a worldview too. In the end, nothing is going to make sense. Don’t pretend otherwise or you’ll be the fool here. And the Chinese really are inscrutable. Don’t mess with them.

That’s why Trump blinked:

In backing off on China tariffs Tuesday, President Donald Trump showed just how much pain the U.S. could tolerate – and China may use that to its advantage, key voices on Wall Street say.

Markets rallied on the announcement by the U.S. Trade Representative office that certain items were being removed from the new tariff list, while duties on others would be delayed until mid-December.

The short-seller Jim Chanos, who tweets under the alter ego “Diogenes,” hinted that Chinese President Xi Jinping may take this as a sign that the U.S. may cave with enough pressure.

“So then tell me why Xi should not continue to wait out The World’s Greatest Negotiator, who keeps ‘dealing’ with himself?” asked Chanos, founder and managing Partner of Kynikos Associates.

Trump may be the one who is in trouble here:

Some investors took Tuesday’s announcement as a sign that despite the White House’s claim that China would bear the brunt of tariff impacts, the trade war was indeed hurting consumers. The products in the group exempt from tariffs include cellphones, some apparel, and video games – all of which are crucial to the U.S. consumer market, especially during the holiday shopping season. Trump announced on Aug. 1 that 10% tariffs would go into effect on Sept. 1 on the remaining $300 billion worth of Chinese imports that had not been slapped with U.S. duties.

Trump told reporters Tuesday afternoon that he postponed tariffs for the Christmas season “in case it had an impact on shopping” and the delay would “help a lot of people.”

So, tariffs are paid by importers, not the Chinese, and the cost of those tariffs is passed on to consumers – Trump kind of admitted that – but he had to:

Hedge fund manager and Hayman Capital Management founder Kyle Bass said based on the tariff de-escalation, “it does look like President Trump has blinked.” While Trump has been vocal in the tariff fight, Bass said “every time it makes the stock market go down a few hundred points” the president “backs away.”

“It looks like he doesn’t want the price of iPhones going up into Christmas,” Bass said on CNBC’s “Squawk Alley” Tuesday. “The Chinese are going to read this as a key weakness.”

So, now Trump really is Jake Gittes in Chinatown. He can’t protect anyone because he has no idea what’s going on. And he’s getting hammered:

China meanwhile, has not publicly backed off. It announced last week that it would not resume buying U.S. agricultural products, despite assurances otherwise by Xi to Trump at the June G-20 summit. It also has retaliated with its own tariffs on U.S. goods and set off more worries about the trade war on Friday by letting its currency weaken.

The Washington Post’s Heather Long covers a bit more of this:

President Trump has repeated the same mantra for months: The Chinese are paying the full price of his tariffs. It’s a line that the overwhelming majority of economists and business owners say is false, but Trump kept saying it.

And he just now stopped saying that:

“The decision to delay new tariffs on Chinese-made toys, smartphones, laptops and other popular holiday gifts is a tacit admission that consumers pay for tariffs, not Chinese producers,” said Ryan Young, a senior fellow at the Competitive Enterprise Institute…

“Trump didn’t want to be the Grinch that stole Christmas,” said Phil Levy, a former economist in the George W. Bush administration who is now chief economist at Flexport, a freight and logistics company. “This seems to me like the administration is retreating.”

And something else was bullshit too:

Trump and his policy adviser Peter Navarro have said that China has devalued its currency enough to compensate for the cost of the tariffs, but U.S. companies point out that the devaluation doesn’t cover all the tax and many contracts with Chinese manufacturers are executed in dollars, not yuan.

So that was nonsense, but this is serious:

Trump’s latest round of tariffs is different from his prior ones. The earlier rounds mainly went on component parts that manufacturers such as auto companies bring into the United States to assemble into final products. Many U.S. companies opted to absorb a lot of the added costs, effectively canceling out some of Trump’s corporate tax cut, instead of passing the higher cost on to consumers.

But Trump’s push to put a 10 percent tariff on another roughly $300 billion worth of Chinese imports by the end of the year will mainly hit finished goods like shoes and iPhones that are assembled fully in China and then shipped to the United States. Business owners say it’s a lot more difficult to absorb those costs or find ways around them.

And that forced Trump’s hand, but it didn’t end the nonsense:

Trump insisted Tuesday that his tariffs are working – both by helping the U.S. economy and forcing the Chinese to negotiate.

“The stock market is way up today for various reasons, including tariffs,” Trump said.

No, the market was down four hundred points the day before, and down hundreds of points each trading day for more than a week, and suddenly jumped up when Trump blinked and suddenly lifted key tariffs and delayed the rest of them. The stock market is way up because there would be no new tariffs for now, because he blinked. But don’t worry about it. It’s Chinatown.

But it may be time to worry:

Many economists and business leaders said the tariff delay does little to mitigate the uncertainty surrounding Trump’s trade policy that is weighing heavily on the economy.

“We are all just one tweet away from significant volatility,” wrote Joe Brusuelas, chief economist at RSM in a note to clients. “The idea that this is a major source of relief to the economy is not tethered to empirical reality.”

Trump may tweet again and shut down all trade with China. He does get angry, and Thomas Friedman sees a geopolitical film-noir here:

I was glad to see the stock market get a boost from the news that Chinese and U.S. trade negotiators were talking again and that President Trump blinked a bit and pulled some of his planned tariffs.

But don’t be fooled. Trump and President Xi Jinping of China are still locked in a cage match over who is the true big dog in today’s global economy. Both are desperate not only to “win,” but to be seen to win, and not be subjected to the scorn of their rivals or critics on social media.

Precisely because neither leader feels he can afford that fate, both have overplayed their hands. Xi basically believes that nothing has to change – and all can be made to stay the same by the force of his will. Trump basically believes that everything has to change – and all can be made to change by the force of his will.

The rest of us are just along for the ride.

Or the rest of us are just watching this movie, sitting quietly with our popcorn in the big dark air-conditioned room, and we’re watching a madman up there on the big white screen:

Trump was right in arguing that America should not continue to tolerate systemic abusive Chinese trade practices – intellectual property theft, forced technology transfers, huge government subsidies and nonreciprocal treatment of U.S. companies in China – now that China is virtually America’s technology equal and a rising middle-income country.

But fixing that problem does not seem to be Trump’s only, or even primary, goal. He is obsessed with China’s persistent trade surpluses with America, even though economists keep telling him those are driven by more than just China’s trade barriers. They’re primarily driven by U.S. fiscal policy, interest rates and America spending more than we produce, and importing the difference.

In his confusion, Trump has never spelled out what he considers “victory” in the trade war with China, which he initiated and declared to be “easy” to win. Are we seeking reciprocal treatment for U.S. companies in China (which should be the goal) or to eliminate our trade deficit with China? The first takes a lot of work with China, the second a lot of work at home.

Just like Jake Gittes, Donald Trump is lost in this environment he’ll never really understand:

Lately, Trump has curbed the ability of U.S. software and hardware companies to sell their products to Huawei, a Chinese tech giant. So last week Huawei, the third-largest phone handset maker in the world, after Samsung and Apple, announced it was creating its own operating system to replace Google’s Android. It won’t be as good – today. But in a couple years?

I suspect China’s leaders are now drawing up a list of advanced industrial products for which they will never allow themselves to depend on America again. What are the long-term consequences of that?

And there’s also no point in making these people angry in the here and now:

The president has tried to persuade China to buy large amounts of American farm goods before an agreement is reached, but that hasn’t happened. He continued to berate China on Tuesday for not making such purchases and suggested that the tariffs might force it to do so.

“As usual, China said they were going to be buying ‘big’ from our great American Farmers,” he wrote on Twitter. “So far they have not done what they said. Maybe this will be different!”

Chinese officials and state media outlets have responded to Mr. Trump’s prodding by taking an increasingly strident tone and threatening to punish American firms.

“Forget it, Jake. It’s Chinatown.”

But there’s no need to make things worse:

President Donald Trump’s Secretary of Agriculture Sonny Perdue cracked a joke that American farmers “whine” about Trump’s trade war with China and got laughs as he intended but also boo’s from audience members that seemingly found it insensitive.

“I had a farmer tell me this in Pennsylvania,” Perdue said at a farm show in Minnesota last Wednesday, according to Agri-Pulse. “He said, ‘What do you call two farmers in a basement?’ I said ‘I don’t know, what do you call them?'”

Perdue said the farmer said: “A whine cellar.”

There was laughter but boo’s came as some members of the crowd did not find Perdue’s joke funny, just two days after China declared it would no longer buy any American agricultural products to hit back at Trump for imposing an additional 10 percent tariff on Chinese goods.

They don’t like being called pathetic losers by the people who made them actual losers:

Trump’s tariffs on China have led to farmers filing bankruptcy at never-before-seen rates.

Minnesota Corn Growers Association President Brian Thalmann said farm producers are not “starting to do great again” and that “things are going downhill very quickly.”

American Soybean Association member Joel Schreurs expressed concern about export markets with the ongoing trade war and predicted the markets are “just not going to come back in a day or two.”

But Perdue stood by Trump’s pressure on China and belief that the United States will come out on top in the end.

That’s getting harder to sell:

Farmers in other states have cast similar frustration with the president’s trade war.

“It’s really, really getting bad out here,” longtime North Dakota farmer Bob Kuylen told CNBC on Saturday. “Trump is ruining our markets. No one is buying our product no more, and we have no markets no more.”

Daniel Drezner sees that this way:

Trump has tweeted about the country’s “Great Patriotic Farmers” multiple times. Tweets don’t put food on the dinner table, however. On that front, this administration has been a blight on America’s breadbasket. Indeed, one has to step back and appreciate the devastation wreaked by administration policies. The Trump White House has taken one of America’s leading export sectors and turned it into a group dependent upon government welfare for its very survival.

In short, he emasculated these people. That’s the word Drezner uses, but David Ignatius looks at the larger issue here:

One of the weirdest aspects of this year’s Democratic presidential campaign is that foreign policy, potentially one of President Trump’s most vulnerable issues, has been nearly absent from the debate.

Trump is steering the country into a foolish trade war with China that has spooked the stock market, frightened farmers and fueled uncertainty among investors at home and abroad. Without any significant pushback from Democrats, his tariff-driven “America First” agenda is pushing us toward what could be a decades-long cycle of global retreat and economic decline.

Even Trump seems worried about his tariff zealotry, moving Tuesday to delay the latest round from September to December.

So this is a foreign policy mess:

China appears to be a strategy-free zone for Trump, but so is most of the rest of the world: His North Korea policy, at bottom, is an often fawning pursuit of a nuclear-armed dictator; his Iran policy is an undeclared economic war that he hopes won’t have kinetic consequences; his key Middle East alliance is the no-questions-asked embrace of a Saudi crown prince who has been jilted even by the neighboring United Arab Emirates; he treats traditional allies such as Germany and France as disposable tissue paper.

But the Democrats can fix this by changing their focus now:

Make foreign policy an issue. Summon the public not to more senseless wars in the Middle East but to the real global challenge that will define this century – the competition, hopefully peaceful, with a rising China.

That’s it – make China the issue – but turn the tables on Trump:

The domestic issues that animate Democratic voters come into better focus when we see them as part of this call to combat China. We need better schools, a fairer economy and an inclusive, diverse, welcoming society – not just because these values are morally right but also because they help rebuild our democratic political system so that it works again and, yes, can compete with an autocratic and intolerant China.

Today’s Democrats need a little more of President John F. Kennedy’s call to arms, not on foreign battlefields but at home. We should “pay any price, bear any burden,” as JFK put it during his inaugural address, to make the country stronger internally. The heroes in this version of the new frontier are teachers, farmers, factory workers, tech innovators and even Wall Street bankers.

Trump’s reelection strategy is to inflame identity politics. A successful Democrat will figure out a way to bank those flames by uniting the country to meet a foreign challenge. This should be a “Sputnik moment.” China’s strengths should help us to see our own weaknesses.

In short, don’t try to humiliate the Chinese. Be better at everything than they are. The Soviets put the first satellite in orbit and sent the first man into space. We put our guys on the moon. We won that one. We can win this one. And that would do us good:

One benefit for Democrats of injecting foreign policy into this campaign is that it’s a call to idealism. It evokes a cause that’s bigger than identity-group politics or selfish personal interest. Americans may be mistrustful of elites, but they also want to believe in something larger than themselves. That’s a yearning that Trump can’t answer. He is small-minded selfishness personified.

And this would not be small:

American internationalism is weak when it’s a project of the coastal elites. It’s powerful when it comes from the heartland. People forget that the architects of postwar American power were people such as President Harry Truman from Missouri, President Dwight Eisenhower from Kansas, Sen. Mike Mansfield from Montana and Sen. J. William Fulbright from Arkansas.

If Democrats stopped running scared on foreign policy, they would see that this is an issue that can unite the country and summon disaffected Americans to a test on which their future livelihoods depend, quite literally.

So that’s the plan:

The China challenge could be the best issue the Democrats have, if they would just start talking about it.

They won’t. Trump is busy dismantling most everything America does and is. There are too many other fires to fight, and in the end, nothing is going to make sense. Don’t pretend otherwise. “Forget it, Jake. It’s Chinatown.”

But it’s not. That was a depressing movie.

About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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