Weekly Commentary: Close To A Melt-Down

2025-05-17 04:35:26 ET

Summary

• It was in both the U.S. and China's interests to end what was effectively a trade embargo between the world's two rival superpowers.
• After the shock and horror of seemingly losing sway over White House economic policy, equities rejoiced in the President's hasty retreat on tariffs and the China trade war.
• Equities are a historic speculative Bubble - an important component of the overarching global Bubble.
• Corroborating the high-risk thesis, last month's near meltdown confirmed the backdrop had turned inhospitable for leveraged speculation.

Give Credit where Credit is due. Cooler heads prevailed. It was in both the U.S. and China's interests to end what was effectively a trade embargo between the world's two rival superpowers. Surely tough to swallow, President Trump, Secretary Bessent, and U.S. Trade Representative Jamieson Greer did what had to be done.

May 13 - Bloomberg (Chris Anstey): "Former Treasury Secretary Lawrence Summers applauded the Trump administration's walk-back from what he characterized as overly aggressive trade protection measures, singling out Scott Bessent in particular for his weekend work with China. 'Many of the biggest failures in US history come from an unwillingness to pull back in the face of a mistake and to double down on the infeasible - that's what Vietnam was about,' as well as US conflicts in Iraq and Afghanistan, Summers said… 'When you make a mistake, when you've done something imprudent, it's a good idea to salvage what pride you can and to retreat.' Summers highlighted three elements of retreat since April 2… First came the 90-day pause on duties above 10% on all nations but China, then the 'fig leaf of some kind of deal with Britain' last week. Most recent was the removal of most of the punitive tariffs on China."

Bloomberg: "Xi Jinping's decision to stand his ground against Donald Trump could hardly have gone any better for the Chinese leader… The deal ended up meeting nearly all of Beijing's core demands."...

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