Trump concluded a skinny deal with China. He called it phase one; "skinny deal" is more of an accurate description.

Before the deal was struck, early in the morning Pacific time Ron Paul and Jim Cramer were on CNBC discussing the way forward in trade. I am not often a fan of Ron Paul. But as the Republicans and Democrats scurry to look tougher regarding China trade, Paul looks like the voice of reason.

As I say, Jim Cramer and Ron Paul were on Squawk, but they were saying two different things. Ron Paul took a more responsible tack saying we don't need to be adding tariffs and hurting our citizens. He opposes socialism in America but says we should not be telling trading partners what to do.

For Ron Paul, tariffs are socialism. However, communist China wants free trade. Free trade is more an expression of capitalism. The US is deviating from capitalism under Trump. China is embracing capitalism. 

Cramer, on the other hand, said Trump has the Chinese right where he wants them. Cramer thinks a Skinny Deal means we are winning. Cramer has swallowed the anti-capitalist populism of the Donald, making it his own. 

Skinny, Skinny Deal

The deal cut by the White House clearly was a Skinny Deal, not lifting the December 15 tariffs, not rolling back any previous tariffs. All that was agreed to was a delay in the October 15th tariffs. Reporters covering the meeting between the Chinese vice premier and POTUS clearly pointed out that there was no deal regarding intellectual property at all. Sure, tech transfers will not be required for financial firms locating to China, but that was already old news. 

AFP reports that tech transfers will be allowed under serious and unexpected compromise:

Trump said the talks had "made very good progress on technology transfer" -- a key point of friction.
Without giving further details, he said an agreement could be reached soon, with US companies sharing their know-how in exchange for access to Chinese markets.

But Steve Bannon clearly wants a very big deal regarding intellectual property and tech transfers, and was observed saying that the ultimate goal of Trump was to bring all manufacturing back to the USA.  Bannon has said that a destruction of Huawei was his intense desire, but Huawei was not even part of the Skinny Deal.

So, three weeks to get phase one, the Skinny Deal, in writing. Then Lighthizer, the chief trade representative for Trump, said there was time to deal with the December 15th tariffs before the holidays.

With so much stuff up in the air, it makes things really hard for the Fed. It makes things really hard for the Chinese, who really are not wrapped around anybody's finger, as Cramer would couch it, because the deal was so Skinny that it was more like skin on bone. There was no meat at all!

We still have no idea how much control Trump has. One could interpret the deal as Trump desperation, needing a "win" to bolster his election hopes. Who is the weak side here? I don't think this deal proves anything about that. I think Cramer has to be eating a little crow with this weak deal.

So, we have to look forward on this trade debacle. We have a lot of time before the election, November 5, 2020. A lot can change. Evidently this trade situation has become such a zoo that Warren Buffett just got out of many of his stocks. Retail investors would not be stupid to take his actions as an example. Buffett's Berkshire is 60 percent in cash.

Bannon World View

The real question is, how tied is Trump to the world view of Steve Bannon? There are two possibilities regarding Trump and the Bannon world view:

1. If Trump is reelected the world economic system is in grave danger. If he were to carry Bannon's plan to the end, even companies that go to Mexico and other Asian nations would be subject to massive tariffs. Our companies would be forced to come home or simply declare their headquarters to be out of the United States.

or:

2. If Trump is reelected he will no longer need his radical base. He will forget the push for Chinese curbs on intellectual property "theft", realizing that that "theft" is really legal everywhere but in the US. US law alone makes this behavior in China illegal.

So, which way will Trump want to go? Of course, he may not get reelected. One hopes the Democratic candidates hop off the tariff horse, but it depends on the candidate. He may resign rather than risk his tax returns going public. But if he is reelected, would he want to leave as a successful president from a purely economic standpoint? Or would he want to force a divorce with China? Bannon has said he personally does not want a divorce but clearly wants China to bow to US law. That seems to be at direct odds with what Trump said about sharing know-how. 

I think that as of this point, it is a close call. Only his friends know for sure. Bannon seems convinced that he wants to extend the trade war to white hot intensity. But others have the ear of POTUS, like his daughter. She has made a lot of deals with China. He may want to please his daughter. Family is family in the White House mob.

Marco Rubio Mucking Up Includes Hong Kong

And of course, it gets more complicated than that. Marco Rubio is mucking up things with his desire to combat China becoming the dominant economic superpower in the world. He is also selling plots in the Florida swamp. I feel more confident in the swamp.

But these folks want more friction in the relationship. Maybe that is what the executive of the Houston Rockets wanted as well, more friction. That doesn't work so well, does it? When will these ill informed people realize that China has 1.4 billion people that must prosper and it will do what it needs to do to make sure they prosper!

The United States should be happy China is a relatively peaceful nation. But apparently that isn't enough for the senator. Now he wants to probe TikTok and its parent company, Bytedance. Here we go again, just like Huawei, which obviously ran afoul of the USA because it just makes better phones cheaper. Now we have a serious threat to YouTube and the government mobilizes once again. This is really disappointing.

Here is something interesting on TikTok from the Washington Post:

TikTok’s lack of content related to the Hong Kong protests, which Chinese leaders have pushed to undermine, has raised fears that the platform is censoring ideas the government wants to suppress. In response, TikTok’s Beijing-based parent company told The Washington Post last month that the app’s U.S. platform was not influenced by the Chinese government, and that the lack of protest footage could be related to users’ view of the app as a place for entertainment, not politics. It declined to share any additional details about its content-moderation practices.

But I have a problem with all of this, as would Ron Paul. We are meddling. It is one thing to make sure the Chinese follow sound accounting practices, but Hong Kong protests? And I have a few problems with the protests in China. The protesters in Hong Kong got what they wanted. They got the bill allowing extraditions to China to be taken off the table completely.

Yet they continue to riot and destroy. Perhaps some people in the west should pay more attention to the issues before commenting. I know I was in anti war protests in the '60s in California. Once the Bank of America was destroyed in Isla Vista, the protests, at least off campus in that student community, were totally crushed. The Chinese government has shown infinite patience compared to the US government in Isla Vista.

Americans have the right of free speech. But you can't badmouth your employer. You can't badmouth your customers. You can, but you will be fired. Adam Silver, who I have great respect for when he got rid of Donald Sterling, dropped the ball. He should have considered the customers in China, his NBA customers. And he should have considered his business partners. He should have studied the issues in Hong Kong. 

People in America have forgotten that pragmatism is not evil. Sometimes you have to possess the trait. That is why we are still trying to figure out if Trump has Bannonite in his DNA, (which is kryptonite to the US economy), or if he is a pragmatist. Time will tell, as he may not even know. I believe we can be a little more optimistic about this than I have been in the past, but the details are what count going forward.