“Happy Passover!”
Fortunately, the three- or four-day pause since our previous update—to tend to more pressing matters (and we're not even the ones managing risk)—has spared us the trouble of making subsequent redactions related to tariffs. Sometimes, less is more.
We’ll try to keep this omnibus edition fun and easy after last week’s ordeals, but (hopefully) still informative.
JT Nails It Again!
First, we can check off several of the items from the John Thomas (JT) client meeting notes from April 7. Congratulations once again to JT, and a huge thank-you for being so generous with your time at such a crucial moment. One day, they’ll follow us off a cliff with the crystal ball.
We're also grateful to our attendees for their excellent questions—especially those who shared immaculate meeting notes. While preparing the amalgamated summary, it became clear that:
i) JT is a clear and highly effective communicator—an essential trait for his role; and
ii) our clients and partners are diligent listeners. Often, people hear what they want, filtered through their own interpretations.
By mid-week, we had lost track of where respective tariffs on U.S.–China imports and exports stood. At this rate, the Sinaloa cartel might consider hiding Chinese consumer goods in fentanyl.
As things currently stand, we are more or less where JT predicted we’d end up with regard to Trump’s tariff policy back in mid-January—except for the U.S.–China tit-for-tat escalation cycle that entered the calculus in early February. Here's how he assessed market expectations on tariffs at that time:
“I think your users’ [Spectra Markets client survey panel] consensus opinion on most of these things will be accurate as the Trump admin’s policies play out. Smart large enterprises are looking at this tariff issue as a competitive advantage. We’ve built a dedicated team at Nestpoint internally just focused on waiving tariffs.”
Might Work in Practice, But Not in Theory
As stated previously, we don’t have a strong stance on the merits of the U.S. tariff plan or how it fits into the broader Trumponomics agenda—at least, nothing original or substantive to add for our average reader. We’ll leave that to the experts in trade economics to hash out.
As a general observation, we see as much evidence of pseudo-economics at play among those influencing policy as we do of conjecture, masked by the veil of macroeconomic orthodoxy, among those without the power to shape outcomes. Perhaps generously, we’ve assigned the Trump tariff plan to the “things that may work in practice, but not in theory” bucket.
Reframing The Narrative
Based on JT’s inputs and the other best-available sources, here’s how we would reframe the current tariff narrative:
By Monday morning, a 90-day pause on U.S. tariffs—announced on “Liberation Day”—was already a serious and likely consideration. The subsequent White House denial was disingenuous. The stresses that appeared in the U.S. Treasury market likely served as the catalyst that nudged the Trump administration to delay the tariffs, after many affected countries had already agreed to begin negotiations.
As it stands, the universal tariff rate on U.S. imports is 10% for all countries—except China. Darn, they got us again with their “flood-the-zone” strategy. One can only imagine how much time was wasted by trade experts trying to decode the implications of what we dubbed the “AliExpress Tariff Flash Sale.”
A handful of multinationals dominating the smartphone and semiconductor sectors—Apple, Samsung, and TSMC—had already pledged significant investments to reshore production to the U.S. in exchange for tariff waivers. We even explicitly stated it was unlikely “Tim Apple” would face tariffs on iPhones imported from China. Nvidia CEO Jensen Huang also voiced support for the administration in a recent Bloomberg interview. The magic number for a “huge” Trump deal announcement seems to be $500 billion. Whether they follow through is another matter. For now, it solves the import duty headache—and may even offer a competitive edge, as noted above.
Taken together, the media narrative of a Trump U-turn may be misleading—or at least exaggerated. Also, for reasons we’ll expand on later. While many interpret the latest developments as a U.S. capitulation, we see reasons why the administration might feel—rightly or wrongly—vindicated and emboldened.
Readers are free to disagree. Alternative interpretations are welcome.
We’ll defer to the JT meeting notes for a more detailed view of how “Trump world” sees these negotiations unfolding in the coming months. It’s difficult to predict where the ball drops next in a fluid situation. All we can do is prepare to receive and pass—without chasing every loose ball and tiring ourselves out in the process.
Questions We’re Left to Ponder:
- Was the strategy from the outset to isolate China with more punitive tariffs than other nations, regardless of Beijing’s negotiating stance?
- Did Chinese and EU leaders correctly read the U.S. negotiation strategy and adapt accordingly?
- Will the CCP grant special exceptions to certain U.S. exporters to China? If so, how does a U.S. export apply for tariff waivers?
To borrow a trading term, we may be seeing some two-way flow here. And some folks are always 10 steps ahead of us.
In the world of spies and lies:
- Do Americans understand the Chinese better than the Chinese understand Americans?
- Who has better intelligence-gathering capabilities—the CIA or the MSS?
- Perhaps more important: which leadership is better at leveraging its foreign intelligence services?
The View From Beijing
We suspect something went wrong between mid-November—when a U.S. delegation (including a prominent former CIA China analyst) visited Beijing—and early February. Perhaps the prevailing theme of U.S. exceptionalism in markets and economic narratives led to overconfidence. As we’ve noted on multiple occasions, a persistent shortcoming of the U.S. foreign policy establishment is its failure to anticipate actions by its counterparts abroad. In other words: the adversary also gets a vote.
Who Is China’s Henry Kissinger?
Mentioned in previous updates, Wang Huning is often referred to by Western commentators as the “Henry Kissinger of China” for his long-standing role as senior advisor to multiple Chinese presidents since the mid-1990s. In fact, “Kissinger on steroids” might be more accurate. But the comparison stops there. Little is known about Huning—he rarely speaks publicly or grants interviews.
Harvard scholar Graham Allison—who coined the term “Thucydides Trap”—is the last Westerner we have on record to have met with Wang Huning in Beijing in mid-to-late November. Allison returned from his trip to China with a notably upbeat tone.
America Against America
Huning's famous book America Against America, published in the early 1990s, is often described by Western commentators as a prediction of America’s eventual demise. I read it a few years ago and, if that was the intended message, I must’ve missed it. It reads more like a question: Are the U.S.'s wealth and racial inequalities sustainable in a liberal democratic order?
Based on a series of trips across the U.S. as a visiting academic in the late ’80s and early ’90s, America Against America is a fun read. If anything, it offers a glimpse into how Americans were perceived at the time by an observant outsider. Memorable highlights include:
Every American household has a car—often more than one.
In America, it’s common to have children out of wedlock.
The key difference between Democrats and Republicans.
Alex Joske’s Spies and Lies, based on open-source research into the rise of China’s Ministry of State Security (MSS), is also an amusing read.
What began as a Soros-backed NGO initiative to promote democracy in China was quickly infiltrated and devolved into an infestation of MSS spies. Just brilliant!
Iran Nuclear Deal
Based on official statements from both sides in the U.S.–Iran nuclear talks in Oman, it appears that the D.C. foreign policy establishment was once again kept out of the loop. What we previously referred to as the “TTT” (Trump Tower Tehran), with a new nuclear deal thrown in, appears to be back on track. Of all of Trump’s foreign policy challenges, a renewed Iran nuclear agreement may be the lowest-hanging fruit—provided both sides can move past old grievances and allow pragmatic voices to prevail.
