US Markets are hot. Growth is unstoppable. But will Donald Trump’s China trade war kill momentum for American business?
The US is now in the middle of the longest economic expansion in history. All signs point toward continued growth but one: Donald Trump and his China trade war.
No doubt this is a risky strategy as Trump himself has admitted in a recent interview, “My whole life is a bet.”
Trump has, of course, escalated tensions with frenemies like China with aggressive Tariff policies. But he is even lashing out at allies like Mexico with similar measures to gain leverage in border negotiations.
Could all these strong-arm tactics backfire? And, why is Trump so aggressive on the issue of trade with China?
The gambler’s method
Trump’s China trade war actions can be explained with his own gambling analogy, according to former US small business Administrator Hector Barreto.
Baretto argues that if you see the bullish US economy as the house, or casino, then you realize it’s important to leverage that statistical advantage.
Other countries he writes, “have a tremendous incentive to get along with us. When we do well, the world does well. And the world trusts us, far more than any other country. It is globally understood that America’s economic resilience is unique and important.”
Pressing the advantage
American small business accounts for two-thirds of new jobs and about half of GDP. Add to that a booming and resilient investment market.
Baretto explains it’s this economic diversity that gives Trump the strong hand with which to gamble.
“Right now, the environment for entrepreneurs in the U.S. is outstanding. Optimism for small business is at record highs thanks to tax and regulatory reform that has reduced cost and complexity,” Baretto writes for Fox News.
Every poker player knows that when the chips are stacked high, that’s when you want to start leaning on other players at the table.
The chip leader is only likely to increase his stack if he continues to play aggressively and scoop up pots shorter stacked payers aren’t willing or able to chase.
If poker isn’t your game, take the inverse scenario into consideration, minus the analogy.
If small business was struggling, and the US stock market was crumbling, what leverage would the US have in a China trade war?
We simply wouldn’t have the economic cushion to take short term hits for the long term gain of a better trade deal.
A winning hand
Experts have long agreed China has violated the spirit of US trade agreements and is practicing innumerable unfair policies. They spy, they hack, they subsidize private businesses that compete directly with US companies, and, they steal intellectual property that cost the US billions to innovate.
If we can’t come to a better trade arrangement with China when we are strong, then when?
Trump may be a gambler and that can be a reckless habit. But, at least he’s playing the game with the strongest possible hand.
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