China Markets

Trump Terminates WHO Relationship, Blasts China For Hong Kong Incursion. Market Hears ‘Blah, Blah’

"China's coverup allowed [COVID-19] to spread all over the world".

Donald Trump on Friday terminated America’s relationship with the World Health Organization during a hotly-anticipated press conference laying out the case for corrective action against Beijing in connection with a laundry list of grievances.

“China’s coverup allowed [COVID-19] to spread all over the world”, Trump declared, adding that  “Chinese officials ignored their reporting obligations [and] pressured WHO to mislead” the international community. “China has total control over WHO”, he assessed, on the way to saying the US is now ending its relationship with the Geneva-based body.

This comes a little over a month after the White House suspended funding for the organization, alleging a coverup and blaming WHO for the loss of life globally.

Read more: Trump Halts Funding For World Health Organization. Says WHO ‘Caused So Much Death’

Trump went on to accuse China of all manner of malfeasance, including unlawfully claiming territory in the Pacific Ocean, misleading US investors, and, of course, encroaching on Hong Kong’s autonomy.

“This was a plain violation of Beijing’s treaty obligations. The truth is Hong Kong was secure and prosperous as a free society”, Trump said, of the planned imposition of new security laws in the city. “China’s latest incursion makes clear that Hong Kong is no longer sufficiently autonomous to warrant special treatment”, he added, charging Beijing with transforming “One country, two systems” into “One country, one system”. (China will not take kindly to that.)

Trump then said he will direct his administration to eliminate policies that give Hong Kong special treatment, including extradition treaties and export controls. Chinese officials will be sanctioned, he said.

The president also exhorted investment firms not to expose their clients to “China risk”. A “working group” will be established to study US-listed Chinese firms, he remarked.

Additionally, Trump said he’ll take action to stop entry for some foreign nationals.

Markets initially sank as he spoke, but pared losses to trade positive. Early Friday, reports indicated Trump would announce his support for bipartisan legislation which authorizes sanctions on Chinese officials for human rights abuses.

Ostensibly, Trump’s rhetoric and the measures the US president says the administration is now actively considering mark a significant (if expected) escalation in tensions with Beijing at a delicate juncture for both nations. But the verdict seems to be that there were no surprises, and that’s all the market needed to know.

China is attempting to climb out of an unprecedented economic contraction while fending off accusations that the Party engaged in a coverup during the initial stages of the coronavirus outbreak. At the same time, the international community has expressed extreme consternation at Xi’s decision to effectively impose mainland national security laws on Hong Kong by decree in a bid to snuff out the violent, pro-democracy demonstrations which have left the city’s economy in tatters.

Locals see the new laws as the beginning of the end for the city, at least in terms of its coveted status as a vibrant hub for international business and finance. For its part, Taiwan is understandably not amused.

In the US, meanwhile, both parties are acutely aware of the extent to which the pandemic can be leveraged for political points ahead of the election. Each side is keen to blame the other while simultaneously faulting China to varying degrees. It’s a rather odd juxtaposition that pairs partisan bickering over hotly-contested domestic issues (e.g., the proper course for reopening states) with a bipartisan push to crack down on Beijing for everything from human rights abuses to a lack of transparency around COVID-19 to well-known accounting irregularities at Chinese firms listed on US exchanges.

The US economy has plunged into the deepest recession in a century, but domestic equities have rebounded strongly. Mainland shares in China have underperformed the S&P for two months in a row.

In China, it’s the opposite. The economy has rebounded, but markets are on edge pending the next move from Trump and US lawmakers.

As for the trade deal, the White House doesn’t intend to scrap the agreement – yet. And that’s giving investors an excuse to hang in there, even as tensions escalate.

Trump has variously touted the “phase one” agreement as one of the most monumental accomplishments of his presidency, and while he admits to having cooled on it in light of recent events, abandoning it altogether would mean that two years of damaging tit-for-tat escalations were all for nothing. That, in turn, would open the door for Democrats.

Ultimately, nobody believes China can or will live up to its commitments under the deal this year. While the White House (and, likely, Beijing) will insist that everyone is doing their best considering the exigent economic circumstances, there’s just too much ground to make up and too little time. Even if there’s a will, there may not be a way.

(BofA)

Ultimately, markets are in a forgiving mood and reopening optimism still takes precedence over geopolitical tension in the minds of those intent on chasing the rally in stocks (or those who have become forced buyers).

Through it all, don’t forget that we are quite possibly witnessing the beginning of what could be a complete decoupling between the world’s two superpowers – especially if Trump is reelected in November.

Although the likes of Peter Navarro and Steve Bannon have long argued for such a clean (or maybe “messy” is more apt) break, the very fact that the two sides were actively negotiating a trade agreement the whole time meant such an outcome wasn’t really in the cards.

A lot has changed since then. 2020 is not 2019. For all kinds of reasons.


 

15 comments on “Trump Terminates WHO Relationship, Blasts China For Hong Kong Incursion. Market Hears ‘Blah, Blah’

  1. It is not impossible that the ‘ glacial ‘ pace of change is now gonna’ get a proverbial kick in the ass. In the world of Geopolitics this has been known to happen time to time…sometimes expectedly sometimes not..

  2. The classic Trump arsonist/fireman market pump. Nothing to see here unless, of course, if you live in Taiwan.

    • I don’t live in Taiwan but I’m here right now. This is the usual all bark no bite from the West. Remember all the hoo ha about Taiwan joining WHO? The West talked Taiwan down from pushing for membership

  3. Hung Kong?

  4. I mean as long as the Fed has unlimited ammunition… what does reality matter? I honestly am not sure it does at least not until major metropolitan areas are in flames… maybe not even then? I really do not know at this point.

  5. “Trump has variously touted the “phase one” agreement as one of the most monumental accomplishments of his presidency, and while he admits to having cooled on it in light of recent events, abandoning it altogether would mean that two years of damaging tit-for-tat escalations were all for nothing.”

    The president always turns on those who have “let him down”. If it becomes obvious that the Trade deal was an abject failure, will Peter Rasputin Navarro be shunted aside? Or will he gain influence by convincing the boss that the deal only failed because “we weren’t tough enough”? What does Jared think? Ivanka?

    This stuff is getting scary.

    • I would say that it is not at all scary. It was a press conference for his audience at home and Bejing will see it that way. Pulling out of WHO is the only material event and that is not likely to be permanent. Most will see through it as a purely political ploy that it is to make himself look stronger by beating up on WHO.

      I have avoided watching him in action and seeing how he treats people. He was 50 minutes late for a 9.5 minute teleprompter speech. Could have sent it out as a letter instead with the same message, except that he cannot grandstand as easily in a letter.

      I think the only thing that gets Jared’s attention is a commission which he and Ivanka got on the Saudi arms deal to the tune of 10% of a multi-billion dollar deal donated to a charity run by Ivanka. The way this family treats charity they could have as well written a check to Ivanka and cut out the middle man.

    • Good stuff Derek. Rasputin Navarro made me laugh. For now, sainthood is more likely. All bets are off in November

  6. Anonymous

    What does Jared think? Ivanka? LMFAO

  7. What I notice is that he referred to the USA flag as the Union Flag. WTF, do we have to fight that war again?

  8. If there’s a complete decoupling and Trump throws a party… will there be anyone else there??

  9. What’s odds of
    1. Delisting of Chinese stocks and ADRs from US exchanges
    2. China shutting down/disrupting US companies’ Chinese sales or supply chain
    3. Military conflict with shooting

    I think those will affect the US markets.

    I think anything short of that will be brushed off as something to worry about next year.

  10. Problem is even WHO knew how the Chinese people fight wigh the virus, it has no rights to order Trump to wear a mask. Trump’s problem is that he will always deny the numbers came from China which WHO approved to be true. So basically WHO become the enemy of Trump. Unfortunately, the political attacking has no effect on virus.

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