Trump’s trade tweets put US business on notice

US President Donald Trump attends the first working session of the G7 Summit. Picture: Getty Images

It would have been a treat to see the faces on the central bankers and academics at Jackson Lake Lodge, Jackson Hole, Wyoming, over the weekend as the Donald Trump tweets and news reports about him were coming in.

There they all were earnestly discussing the “Challenges of monetary policy” against the backdrop of the Rocky Mountains while the President was both upstaging the symposium and giving its theme real meaning.

Just as Fed chairman Jerome Powell was clearing his throat for the opening remarks at 8am Friday morning, Trump tweeted: “Now the Fed can show their stuff”.

Forty minutes later, after Powell had sat down, a disgusted Trump was on his phone again: “As usual, the Fed did NOTHING.”

And then, a minute later, this astonishing tweet: “My only question is, who is our bigger enemy, Jay Powel or Chairman Xi?”

At 10am, when the crowd at Jackson Hole were thrilling to a discussion on “Monetary policy spillovers to advanced and emerging market economies”, Trump produced the tweet of the year: “The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”

Hereby ordered. The words caused hearts to stop on the floor of the New York Stock Exchange.

He also “ordered” Fed Ex, Amazon, UPS and the US Postal Service, to “SEARCH FOR & REFUSE all deliveries of Fentanyl from China (or anywhere else!)”.

All this furious ordering was in response to China’s announcement that it would impose tariffs of 5-10 per cent on $US75 billion worth imports from the United States in two rounds, one starting on September, the day that trade talks are due to begin and a second to start of December 15.

....better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing..

— Donald J. Trump (@realDonaldTrump) August 23, 2019

This, in turn, was in response to Trump’s earlier threat to impose tariffs of 10 per cent on $US300 billion of imports from China on September 1.

By the time the Governor of the Bank of England, Mark Carney, had got to his feet for the luncheon address, the stock market was in free fall, and the President was in a more playful mood, tweeting: “The Dow is down 573 points perhaps on the news that Representative Seth Moulton, whoever that may be, has dropped out of the 2020 Presidential Race!”

The Dow ended up falling 623 points.

At 11pm that night, as the central bankers were staring hollow-eyed into their late-night cocktails in the Blue Heron Lounge at Jackson Lake Lodge, Trump explained how he can order private companies to stop dealing with China: “For all of the Fake News Reporters that don’t have a clue as to what the law is relative to Presidential powers, China, etc., try looking at the Emergency Economic Powers Act of 1977. Case closed!”

From there Trump was off to Biarritz, France, for the G7, firing off rollicking tweets all day Saturday as the Jackson Hole crowd were soaking up the words of a succession of professors plus Phillip Lowe, Governor of the RBA, while checking their phones for the latest Trump outrage.

On Sunday it was time for the central bankers to head home, and for Trump to have breakfast with Boris Johnson, on the way to which, when asked by a reporter whether he was having second thoughts about being so aggressive with China, he said: “Yeah, sure, why not? Might as well. Might as well. I have second thoughts about everything.”

A few days earlier, shouting over the helicopter rotor blades, he had told reporters: “This is a trade war that should have taken place years ago … somebody had to do it. I am the Chosen One.”

One thing Trump has been giving a rest in the past few days is the proposed acquisition of Greenland, although yesterday the State Department apparently told Congress in a latter that it was planning to re-open a Consulate there, having closed it in 1953, although nobody knows whether this has anything to do with the offer to buy the place off Denmark.

It’s been a weird week, even for Trump, and has brought it home to investors and business people that they have no idea what’s happening.

The President of the United States might declare a national emergency and invoke the powers of a 1977 Act that, in the event of an “unusual and extraordinary threat … to the national security, foreign policy, or economy of the United States”, gives him the power to block international transactions, freeze assets and confiscate assets.

Or maybe he won’t because, you know, he has second thoughts about everything.

Actually, on second thoughts, those business people and investors who are thinking clearly about things, as opposed to running around in circles with their hair on fire, probably do know what’s happening.

They are engaged in a great battle with the conservative culture warriors in the United States who see China not as a market, but as a philosophical threat.

Businesses and their investors just want to sell stuff to China’s 1.4 billion people, this quarter, and this year.

The conservative political classes in the US who are animating Donald Trump are doing something else entirely: they are trying to trying to show — again — that communism doesn’t work and that free market democratic capitalism is the only way to go.

They showed that in 1989 with the collapse of the Soviet Union, but subsequently the China Communist Party has inconveniently succeeded, largely because American companies have been getting rich trading with them.

Now they are going to fight to keep doing that. Beijing knows how to fight, but do businesses?

Alan Kohler is Editor in Chief of InvestSMART.com.au