Heisenberg Report

Trump Piles On, Threatens To ‘Crumble’ China’s Supply Chain, Create Massive Job Losses

The mood was already pretty dour on Tuesday as the combination of more political turmoil in the UK and darkening prospects for meaningful US-China negotiations weighed on sentiment.

Trump made things worse, as he’s wont to do. “We are doing very well in our negotiations with China. While I am sure they would love to be dealing with a new administration so they could continue their practice of ‘ripoff USA’, 16 months PLUS is a long time to be hemorrhaging jobs and companies on a long-shot”, the US president tweeted, effectively suggesting that the chances of his losing in 2020 are miniscule.

He continued, ratcheting up the tension for no readily discernible reason. “And then, think what happens to China when I win”, he said. “Deal would get MUCH TOUGHER!” Earlier, reports indicated that the two sides are far apart on agreeing to terms for planned talks in Washington this month and Huawei issued a statement alleging vast abuses perpetrated by the US government against the company and its employees.

Read more: ‘The World Is Sighing’: US-China Stalemate Shows No Signs Of Breaking

Trump continued, warning that while Beijing tries to wait him out, “China’s Supply Chain will crumble and businesses, jobs and money will be gone!”

That may sound like typical Trumpian bombast – and it is – but do note that this comes on the heels of a week during which Trump went out of his way to praise Xi and Liu He in an effort to keep markets from falling further, praise that was itself necessary to clean up for the mess the US president made the previous week. And you can trace the schizophrenia back as far as you like.

One imagines this makes Bob Lighthizer’s job nearly impossible. It’s hard to see how the US trade rep is supposed to work towards convincing the Chinese delegation to fly all the way to Washington this month while Trump is tweeting about “crumbling” supply chains and massive job losses.

Remember, the employment issue is a particularly delicate one. The prospect of social upheaval is a non-starter for Beijing and the Party is especially sensitive to the subject thanks to the situation in Hong Kong, where Carrie Lam is apparently being forced to stay in her position. (On Tuesday, she denied reports that she would prefer to resign and Global Times Editor Hu Xijin is working hard on Twitter to dispel what he’s characterizing as “fake news” from Reuters.)

Tuesday’s tweets are a good example of why one bank’s clients recently complained about “the difficulty, or even inability, of holding onto positions for extended periods of time given the sheer volume of – sometimes conflicting – messages by US President Trump on issues like US-China trade policy and the Fed”. That’s a quote from a Barclays note which carries the title: “A little (blue) bird told me…”