Some quick thoughts on the North Korea summit collapse and Chinese trade

I have been trying to avoid politics. But I think it’s become unavoidable these days given how much it dominates the news cycle with US President Trump. And since I once was a diplomat, I do have a great interest in foreign policy. So let me say something about what’s happening in North Korea and China as it relates to trade and economics.

Yesterday I was on CBC’s On The Money program to talk about Chinese trade negotiations. You can see the video at the link here. What I was saying then was that Trump wished he could have reversed the order of negotiations: North Korea nuclear deal first, Chinese trade negotiations later. And the reason is that the two are inextricably linked since North Korea is sometimes (hyperbolically) referred to as a Chinese client state. And this seems to be the perception that Trump has developed as well.

Let me lead with this: John Bolton is a geopolitical risk as Trump’s National Security Advisor. I wrote a whole areticle on why this is true. And if you re-read that article in the context of what has happened in both Iran and North Korea since I wrote it, you should be alarmed. None of the language Trump is using publicly now or used prior to the North Korean deal collpase is different from Bolton’s. So we have to assume that Trump shares his worldview. And that suggests that Trump is predisposed to taking a more bold course of actions across a wide swathe of geostrategic issues

This matters in trade, particularly with China. Trump now believes the Chinese put pressure on the North Koreans and influenced them in a way that ended up torpedoing the deal. Given Trump’s predisposition to taking a muscular approach, I believe we will see this spill over into how Trump deals with China on trade going forward.

Moreover, to the degree a wounded Trump turns the screws on China, we should expect him to act in kind on NAFTA and with the EU on trade as well. In short, a Trump wounded by how the North Korea peace deal has collapsed is a dangerous Trump. And we should expect this to play out in trade deals going forward.

Thus, the economic risks are increasing. And this is occurring as the Fed is attempting to manufacture a non-recessionary tightening cycle against all odds. Having written about the dangers of a recession coming in the next two years, I am concerned.

But none of this speaks to the risk of military action against Iran (from Israel or the US) or the risk of a pre-emptive first strike against North Korea as John Bolton advised last summer. Those risks are now greater. And that is more concerning than the economic risks.

I will leave it there for now. I am sure there is a lot more to come on this.

Comments are closed.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More