Count me as surprised, but it seems like the China trade deal is collapsing. Surprised because both sides, China and the US, have much to lose in this battle.
While there’s certainly some temporary local benefit to various pockets and sectors of the economy, the fact remains that the world economy is still exhibiting signs of slowing down and anything that puts additional weight on the economy right now could be the stone that sinks the barge.
With equity markets in the US being the main engine of financialization and real estate in China being theirs, both countries have massive bubbles that will be quite painful to their economies should they burst.
Hey, it’s going to happen sooner or later, but given the looming elections in the US, this seems to be a bad time for Trump to suddenly begin Hulk smashing in the China shop, so to speak.
The Levy Is On
The big looming question was always would the additional $250 billion of levies be imposed on Friday May 10th. Well, looks like waiting was too hard; the levies on $200 billion of Chinese goods got announced this morning at 8:53 a.m.
What a 25% levy means is that if you were to buy a solar panel from China that would have cost $100 before the levy now you’d have to pay $125. $100 to the manufacturer as before, and $25 to the US government at the customs office.
Seen this was there’s exactly zero difference between a “levy” and a tax. It’s a US government tax designed, like any tax, to create incentives and force behaviors.
First let’s point out some obvious “”market”” shenanigans today before we check out the deal a bit deeper.
Shenanigans
There’s always shenanigans in the US equity futures markets with authorities intervening on a daily basis to defend this line, or stop that down turn (or at least blunt them), or send a counter signal to signal its presence and desires.
by richcabot 
