This is why Trump is doing the correct things- -
The author is Joel Ross, Principal, Citadel Realty Advisors, 15 West 36th Street, NYC, NY. Mr. Ross publishes the Ross Rant, a $300 per year subscription newsletter, which makes predictions based upon economic data. To understand the trade war with China, you need to understand that China at the moment is having a major slowdown economically. The stock market is down 25%. Many banks are being bailed out by the government. Everything and everyone in China is way over levered, and the economy is therefore in a high risk position which the government was trying to fix. The trade war got in the way, forcing the government to subsidize the smaller banks. China is loaning tens of billions to countries like Pakistan to build ports and railroads and infrastructure. Problem is, these countries have zero possible way to ever repay these loans. So now they are faced with stopping the projects or asking the IMF to bail them out. It is a mess for China and the countries who took the loans. There is starting to be pushback against China for this. So, Trump’s timing to go after China is exactly right. They are in a weakened position right now. Ignore all the hype about how they could sell their $1.4 trillion of US Treasuries —to who??? Not going to happen. The whole world agrees China violates every rule on trade and steals IP. Trump is just the only one who is willing to take them on, with the rest of the world cheering him on from the sidelines. Now it appears the EU is willing to cooperate with Trump and revise the WTO and to push China on IP and other trade violations. Something they were never willing to do before. Can 4% GDP growth continue? Maybe. But 3.5% would be great. Remember the left, and the press saying in 2016 and early 2017, 2% was the new normal maximum, and the US was at its peak and we faced stagflation, economic decline, etc. 2% was the accepted number as what good growth would be. Larry Summers was right out there saying 4% was impossible. Some in the mainstream media and Wall St said getting above 2% was pure fantasy, and Trump was dreaming. So, as I have said often, ignore the talking heads, and the mainstream media. They all have an agenda. Almost none are objective. The tax bill and deregulation was a huge boost. The left just can’t admit it. There are even stories now in the press that 4% is really a bad thing??? 4% is great, it may not be 4% next quarter, but 3.5% would be terrific. If Trump really does a deal with the EU, Mexico and Canada, and then Japan, 3.5%, or better, is very realistic. Capital expenditures will ramp up further once the tariff issues subside and that uncertainty goes away. They say exports were hyped due to pending tariffs, but to do that, inventories were drawn down, so this quarter inventories will be rebuilt, pushing up GDP growth upward. The press does not want you to believe it because it means the Republicans win in November, so they will try to convince you otherwise. Even my very liberal economist friends admit privately to me that the economy is going to be booming for at least 6 more quarters. The key is to reelect Republicans to control Congress. Keep in mind Maxine Waters is chair of the finance committee if the Dems get control, and Nancy is speaker. Think about that combo, and the ability to get budgets and more tax reform done. It should drive you to the polls and to take all your friends with you to vote. What a trade: Trump, and 4% GDP, or Maxine Waters. If you want to understand Russia, and the whole gas pipeline issue — gas and oil is 52% of Russia’s GDP. The GDP of Russia is slightly smaller than NY State, around $1.5 trillion. GDP per capita is only $8,748 in 2017. Far lower than in 2013. We heard this first hand when I was in Russia, but now the stats show it to be true. The standard of living in Russia is declining. 20% of the Russian budget goes to weapons and the army. So Trump is right - how can Germany build a new gas pipeline with Russia which will fund more weapons spending, when they are supposedly having sanctions because of weapons and Crimea. It is nuts. The gas line will provide Russia billions of new cash flow for weapons which are aimed at ----Germany. But Merkel also thought letting in over 1 million Muslims was also a great idea until the voters rebelled, and the rest of the EU voted right wing in response. Reality is Russia is now in economic decline due to lower oil prices and corruption. Defense spending was reduced this year. So what does Merkel want to do – build the pipeline to pay them more badly needed money. Trump is not out of line for his comments. The pipeline is the same as Obama paying Iran $150 billion just as their economy was tanking. Truth is Russia cannot afford to wage a real war in Europe now that Trump has forced NATO to materially up spending and readiness. If Obama was still in power Putin could take over Baltic states and have only a few sanctions because under Obama NATO was militarily unable to react. That was why Putin felt he could go into Crimea with no big problem. Putin also knew he could continue his cyber war with no real consequences under Obama. Don’t believe the crap about Trump favors Putin, or they have something on him. It is more lefty nonsense. The US pays 71% of NATO costs. Germany pays less than 1.2% of their GDP for their own defense. We pay far more for Germany’s defense than Germany does, and they can afford to pay. Trump is right for making this a major issue. So in 2018, NATO and the US are upping spending on defense and Russia cannot keep up. Russia is forced to reduce spending because oil prices did not rise as much as Putin needed. Under Obama US defense spending went down from 2013 on, and Russia went up a lot, and China even more. Obama left us in very bad and weak shape vs our main adversaries. It was massive US defense spending by Reagan vs Russia, that won the cold war. The story now is very similar vs Russia and Iran. The best way to win a war is to far out spend the bad guys until they fold with no shots being fired. A strong offensive capability and willingness to use it (missiles fired at Syria) is the best defense. Putin and Xi got the message. Putin blew it by favoring Trump. The last thing he wanted was a much stronger US military and stronger, capable NATO. Iran’s GDP is $439 billion, less than that of 14 states. And now it is tanking. Obama gave them $150 billion - 34% of their GDP. Iran cannot compete with US and Israel. Israel is much smaller by population and has a GDP of $320 billion. With sanctions Trump is imposing, Iran is in real economic trouble, and cannot afford a war with us, the Sunnis and Israel. The Obama nuke deal just empowered Iran to go on an expansion into Syria, Iraq, Yemen and Lebanon. Now Israel and the US are pushing back with the help of the Sunnis. Reimposing sanctions will severely cripple Iran and they will likely try to attack shipping in the straits and the Red Sea. It will end very badly for them now that the Sunnis, Israel and the US are teamed up, the US military is being rebuilt, Sadr is pushing back on Iran trying to control Iraq, and the Iranian people are protesting and ready to revolt. The entire Mideast situation is going to change by year end when sanctions go back into effect. Iran will run out of money to continue their expansion. What is astonishing is Merkel and the EU prefer to try to get around the US sanctions and trade with Iran instead of cooperating with us and destroying the regime. And the press thinks Trump acts badly with the EU??? The EU doesn’t pay for their own defense and they favor Iran. The US economy is on a roll. It will be strong well into 2019 and maybe into 2020. The stock market will go up. Just be patient. Bond prices will decline further. All equities will continue to work. They will resolve trade in the next 90 days. Before November. NAFTA will get revised. WTO will get revised. Putin is in no economic shape to invade anyone, or do another Syria. He is now motivated to try to work with Trump. If oil prices stay around where they are, Russia is hurting. Q3 GDP will be over 3%. This is like under Reagan. Trump will bury Putin in military spending and Putin will have to concede on some issues. It will just take time. It took Reagan three years. If the result is no pipeline, Russia is in more trouble. Farm products in the EU will still be a big problem. Macron cannot give in on this and stay in office. From here on it is all about China, and how Xi can give in and not lose face. Bottom line, a very strong US economy and big defense spending will overwhelm Russia and Iran. A strong economy, allowing big defense spending, matters a lot in terms of geopolitics. The price of oil is strategic, not just economic.