Sucks to be Xi...

 At present, Trump's tariff situation is unpredictable, even chaotic. We are all well aware of the vacuum effect it has had on the equities markets and America's savings accounts. Trump is doing a lot of good things regarding national security, immigration, and advocating for American industry. But his tariff program is wreaking havoc and destruction. It was not well planned and is being terribly executed. I think Trump has shot himself in the foot and refuses to admit it hurts. However, he is taking steps to ameliorate the situation, however token some of them may be. He has initiated a 90 day pause for effecting most of the tariffs with but one exception; China. This month he raised the general tariff rate for Chinese goods to 145%. Essentially, this closes most of the American market off to China. Any way you look at it, that is major. The US accounts for more than a third of global consumer spending. 

For many and various reasons the world has been deglobalizing for years. The Trump Liberation Day tariffs are significantly speeding up the process, further threatening the stability and well-being of the People's Republic of China and other export-driven economies. The Russian invasion of Ukraine has essentially put a nail in the coffin of globalization. The Covid pandemic dealt a massive blow to connectivity between nations, companies and people as well. 

Practically every country involved in trade has tariffs. With the American consumer market off limits to China, other countries are not going to allow China to flood their markets with goods that otherwise would be sold to the US. Most of them are not large enough to absorb China's massive export volume, and they won't allow China to butcher their national industries. A major problem, for China, is Trump's tariffs come at the worst possible time. China's economy is in dire straits. Export factories in southern China are closing as orders dwindle. Workers are returning to hometowns subsisting on farms. China is experiencing its version of '2008'. Xi's predecessor, Hu Jintao attempted to avoid a downturn by launching the biggest stimulus program in history, causing China to take on enormous debt. (Sound familiar?) Today, China's total debt to GDP ratio is approaching 400%. No typo, 400%. That is not sustainable. For years there have been a series of high profile debt defaults especially in the property sector. 70% of wealth in China is in property. 

And here came the tariffs cutting off China's biggest customer. Makes sense that Xi's best course of action would be to call Trump and work something out. Make a deal as Trump says. The chances of that happening though are about as good as raising a bumper crop of corn on the north slope of Alaska. Xi cannot back down or make concessions without appearing to be weak as a leader. Such would lead to challenges to his position. There are already signs of discontent with his rule, especially in the military. "China does not flinch from any suppression," he claims. If he doesn't compromise, China's economy will fail. If their economy fails, he will fail. Yes, it sucks to be Xi...