Did China Pandemic Endanger The World For A Deal?
Trade wars cause world wars. And the fact that China did not want to fight the trade war with Donald Trump is now being overshadowed by a report from Talkmarkets Contributor Danielle DiMartino Booth that has gone viral.
Phase One, the Skinny Deal, had requirements that China buy a certain amount of goods from the USA. I reported that Jim Cramer had said that we had China right where we wanted them. How is that working out Jim?
It is clear that China never wanted to buy that much if market demand did not require it. China was, in my view, stalling and kicking the can down the road with the Skinny Deal from the beginning. Donald Trump was in way over his head. I wrote numerous articles about how the trade war was a bad idea, yet both political parties piled on to Trump's abuse of China.
And it was an abuse. We all had a good thing going. China was beginning to buy more from the US until Trump ruined it. China was clever, by putting a clause in the Skinny Deal.
The Pandemic Clause
The Skinny Deal was signed on January 15th, and Danielle reported that the Coronavirus Covid-19 was announced within days of that deal. The Pandemic clause put into the deal gets China out of buying promised goods. The Chinese knew they had a pandemic brewing but they waited to report it.
Now I don't know if the Pandemic was an accident, or if it was done on purpose. Our Generals don't know the answer to that question. But DiMartino Booth points out that China waited to report the virus in order to get the out clause signed. She said:
So, did the Chinese know damn well that this thing was running around the world for six weeks before they shut down Wuhan? Yes they did. Is that criminal? Yes it is. Does it deserve to go in front of a world tribunal? Yes it does.
I understand her fury, that the Chinese were likely playing hardball and innocent people the world over died, and that maybe the WHO believed China too much. The pandemic has been horrific. If China did not want a trade deal it should have walked away. The damage would have been less than is happening now.
Was the virus spread planned? Joint Chiefs Chairman Mark Milley is unable to determine if the virus came from a market or the Wuhan laboratory. And if it came from the lab who could prove it was done on purpose? We certainly hope it was not. The US wants to survey the Wuhan lab. It may not have been spread on purpose, but withholding information about the virus to sign a deal was just wrong on every level.
Trump's Response to the Pandemic
Donald Trump had intelligence and shut down air flights from China in late January. But then he did nothing for an entire month, hoping the virus would go away. Perhaps he believed the WHO. He believes anyone except American intelligence it seems.
Danielle took Trump to task for "dithering". So this attack on America was not just China. It was Trump failure to act as well.
The Trade War
The Trade War was an act of war too. It became more an act of war as we had Republican and Democrat politicians all trying to muscle China. Some of those names are all too familiar, Cruz, Schumer and Rubio. It was an act of war because we had cocky politicians like Steve Bannon going around saying we need to crush Huwaii. Bannon has said that China poses a mortal challenge to the United States. Sorry, I can't get behind the argument that a cell phone company could do in the USA! So we made war first. I wrote:
Bannon falls back on the 1974 Trade Act, specifically sections 201 and 301, which is a US law only. That act has no international status regarding the transfers of tech within sovereign nations. Yet the government is beginning to box itself into commitment to the bad law.
China has done some good in the world, bringing 700 million people out of poverty, and bailing out the USA from the Great Recession. In fact, it is China that reaches out to other nations seeking to develop them. Now, I personally believe China will at some point need to apologize for sitting on the virus. And there may be reparations. They better be reasonable or do we forget what happened to Germany after World War 1 which spawned Adolph Hitler?
Or China will have to bail out the world to make up for the great evil it has spread. Some say China won't be able to do so this time:
Now Beijing shows little appetite for budget-busting stimulus. Its fiscal steps in response to the pandemic account for about 3% of GDP, according to Bloomberg Economics. That's tiny relative to the 10% and 20% unveiled by Washington and Tokyo, respectively. And while the central bank continues to nudge borrowing costs lower, its steps appear restrained compared with the array of tools being deployed around the world.
How will Trump behave through this process? Now is POTUS's chance to divorce China. That is what the right wing wants. Of course, the rest of the world, though not happy with China, will likely act pragmatically. We need to as well or we will be left out of supply chains left and right.
World War
Trade Wars cause World Wars. Cary Huang of South China Morning Post made the case for that back in July of 2018. The coronavirus fiasco raises the risk of world war. But Huang saw the danger way before the virus added to the danger. He wrote:
In 1930, US president Herbert Hoover signed into law the Smoot-Hawley Tariff Act, which intensified the currency war and deepened the Great Depression. The protectionist law raised tariffs on more than 20,000 imported products and triggered retaliation from many US trade partners.Trade wars stoke nationalism and hatred among people and finally trigger wars, as evidenced by the breakout of the second world war: the Japanese invaded Manchuria in 1931, and the whole of China in 1937; the Germans invaded Poland in 1939, then the rest of Europe; and the Japanese attacked Pearl Harbour in 1941.
Trade wars stoke nationalism. And that nationalism is so evident in the USA and it is getting worse. The Covid-19 disaster will increase this nationalism on the US side. I can feel it coming. But history says watch out! Watch out America.
And certainly, there has been an increase of nationalism on the Chinese side. We know that the Cultural Revolution was a failure of nationalism in the 1960's. That fact alone should have warned Donald Trump not to establish a nationalistic tariff war with a China that was calming down and was playing by the international rules, just not American rules.
Just be careful not to light a nationalistic fire under the most powerful economic machine in the world, Donald Trump. Please Bannon and Gaffney and all the misfits who want to stake out a dangerous political position, just calm down.
So far POTUS has been restrained in his rhetoric. Seek justice, Mr. President but free trade too. Nationalism is a two way street to hell. Trade wars cause world wars, Mr. President. The pandemic has raised the stakes in a poker match that should not even be played. End the trade war, Donald Trump, in exchange for China's cooperation through stimulus in this time of need worldwide.
Disclosure: I have no financial interest in any companies or industries mentioned. I am not an investment counselor nor am I an attorney so my views are not to be considered investment ...
Update 5: Five Eyes Spy group has said that the Covid-19 has come from the Wuhan lab, but by accident. However, China withheld timely information. Trump's only idea is to slap tariffs on China. While some sanctions make sense, more tariffs do not. This will hurt the recovery in the USA more than Trump can imagine.
Update 4: Trump's idea of sanctions on China is to increase tariffs. POTUS45 is considering applying additional tariffs. That is a very bad idea.
Update 3: China has warned Australia to drop efforts to investigate China's response to and origin of the Covid-19. Australia will lose business, but seems determined to move forward.
If China can be investigated and punished, it should be. But what international body has the power to do so?
With China stone walling, deflecting and literally deleting all its research, how can any other country realistically investigate them. It would be impossible to prove anything definitively.
The only way people can "punish" China is if individuals and companies stop buying from them. But let's face reality. As mad as people are, they'd still rather save a buck by buying an item made in China for less. And companies that want to maximize profit will always choose to source their components from the cheapest option. And that's China.
But it is more than that Kurt. Buy China and you buy the hope for world growth and prosperity.
Update 2: France and Germany are inquiring into China's handling of the Pandemic. But those nations and the scientific community have broken with the USA which suspects the Covid-19 was created in the Wuhan lab.
I find this hard to believe. It almost sounds like China wanted the pandemic to get a better trade deal. But China's inaction ended up costing them billions.
It is hard to believe. But putting a pandemic clause in a trade deal is not normal. It is the smoking gun. Like I say, it could have been an accident or naturally occurring. Without an investigation no one can prove the virus was deliberate. But not sharing information was deliberate!
Update 1: Australia is demanding an investigation into the origin and spread of the Coronavirus. It was just a matter of time. One hopes that moderation accompanies resolve. The world has enough evidence alone to sanction China for delaying information. But for the sake of world peace, the sanctions should be limited.
That's pretty wild. But is there any way to prove it?
That is a very good question. Danielle is convinced that China had the knowledge and the time to announce the virus, yet waited until after the deal was signed to do so. I believe she makes a strong case. I believe we should act in a calm fashion, although hot heads could prevail. That would be a mistake in my view even though we have every right to take the low road.
Sadly, it makes perfect sense to me.
I'm not one to believe in conspiracy theories but for China to list a pandemic as an out clause weeks before a pandemic was announced... well the timing is awfully coincidental.
While on the surface it does looks suspicious, I would think acts of God are always listed as exceptions to such agreements. Was this standard terminology that was always used?
It doesn't matter if it is standard or not. If China knew they had a pandemic on their hands, but knew a pandemic provided an easy out for them,.it would make sense that they would be both quick to accept the deal, and to keep the pandemic quiet until the deal was signed.
ApparentlyMichele, this pandemic wording is not standard in trade deals.