The trade war with China is top strand in the White House soap

13-Feb-2019 Intellasia | The Guardian | 6:00 AM Print This Post

Art is supposed to hold a mirror up to society butfor Donald Trump the opposite is the case. Current events in the White House increasingly mirror the soap opera of the West Wing only with a rightwing nationalist rather than a social democratic globalist at the helm.

As with the TV series, there are a number of interwoven plots. Is Trump involved in an attempt to smear the world’s richest man, Jeff Bezos? Will the probing by the special counsel Robert Mueller lead to the president’s impeachment? Will the president’s battle with Congress over a wall along the border with Mexico lead to a second shutdown of the government?

But the main story line this week is whether Trump is getting ready to do a deal with China over trade. Last week, hopes of an agreement before a 90-day truce runs out on 1 March were fading. That episode ended with the president announcing that he had no plans to meet China’s president Xi Jinping before the deadline.

But all good soaps have a twist and as talks between middle-ranking Chinese and American officials began in Beijing, the White House let it be known that Trump and Xi might indeed meet “very soon”. Wall Street, which wants the trade war to be over as quickly as possible, loved that.

The financial markets are getting ahead of themselves. A clearer idea of whether Trump wants a peace deal will come later in the week when the US trade representative Robert Lighthiser and the treasury secretary Steve Mnuchin join the talks. Here too, though, there is an element of drama, because Lighthiser is a hawk and Mnuchin a dove.

Trump will eventually have to decide which of the two men to listen to but probably not for a while yet. His instincts are those of a protectionist and his belief is that China has been playing fast and loose with trade rules for too long. Mnuchin’s argument that trade wars are bad for shares is less compelling now that the Federal Reserve has removed the threat of further increases in interest rates.

And, let’s face, Trump is an actor a ham actor, admittedly who simply adores the limelight. This one is going to run a bit longer, with some cliffhangers along the way.

A switch in time

E.ON has become the first of the big six energy suppliers to raise its tariffs after the regulator, Ofgem, raised the price cap. It won’t take long for the other five to follow suit. Anybody who is on a default tariff can expect to see their bill increase by 10 percent from April five times the current rate of inflation.

In one sense, Ofgem’s new tariff is to domestic energy users what university fees are to students: a ceiling rather than a cap. There is a tendency among the major energy players to charge the maximum allowed. In that respect, the big six operate in classic oligopoly fashion: they don’t compete on price.

Yet the university comparison is not entirely accurate because there are now a total of around 60 suppliers in the energy market and those outside of the big six have won a 25 percent share of the market by wooing consumers with lower prices.

E.ON and the other members of the big six are clearly not too bothered about that process continuing, as it now inevitably will. In truth, they are more interested in diversifying out of energy supply and developing other parts of their businesses.

To be sure, some of the new, smaller suppliers go bust and every household pays a small supplement on their bill to pay for that. But the costs are much smaller than the potential benefits of switching, which is why so many of us are shopping around.

Counting on the counter-cyclical

Wonder of wonders, the incurably pessimistic financial blog site Zero Hedge has found something to be cheerful about: the prediction by Nobel prize winning economist Paul Krugman of a US recession within two years. Given his self-confessed dodgy track record, markets might see Krugman’s crystal-ball gazing as a reason to buy, Zero Hedge suggests. Well, perhaps. It’s a question of which is the bigger counter-cyclical indicator: Krugman saying there will be a recession or Zero Hedge saying there won’t be.


Category: China

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