For almost 18 months, market valuations, in part, have been based on the somewhat tenuous, but nonetheless universally held, assumption that, despite their differences, China and the U.S. would reach an accord on a trade deal due to mutual economic self-interest. Financial journalists, especially subscribed to this belief, espoused the conventional wisdom that held, since there was too much at stake for both parties, the blustering and posturing would end eventually and a deal would ultimately be consummated.
The underlying risk for the market is that analysts and investors have been singing the same old song for the past 18 months, yet no agreement appears in sight.
Investors seem to have been operating under the delusion the only sticking point in the ongoing trade dispute was to iron out some small differences, or for the other party to end its hardball negotiating tactics. What was unimaginable was that the status quo, which had defined the trade relationship between the parties for the past 30 years, would forever remain unchanged.
For example, a May 9 article in the Wall Street Journal said that, “The sudden deterioration of trade talks between the U.S. and China this week has raised the prospect of a once-unimaginable rupture between the world’s two largest economies.”
First, what is the factual basis for analysts and financial journalists’ contention that a rupture between China and the U.S. is “unimaginable?” China conducts cyberattacks against U.S. defense contractors, hacks into the databases of private corporations, steals our trade secrets, conducts brazen espionage and has successfully recruited employees of defense contractors to spy and disclose confidential military secrets.
Why would this prolonged perfidy by China continue to be advantageous to the U.S.? All of this activity is not “alleged,” as erroneously and frequented reported by journalists, it is well-documented and real.
For those who have been paying attention to the overall aspects of the relationship, the rupture wasn’t unimaginable, Read More