Trump: The Two Sides of a Chinese Coin

When it comes to China, it’s tough to get a consistent read on the president-elect.

Throughout the campaign, Donald Trump used China as a whipping boy. He criticized the country’s trade practices as unfair. And he blamed much of middle America’s economic angst on "really bad trade deals."

He also made a lot of noise about China’s "currency manipulation." As such, he accused policymakers there of rigging the game in favor of their exports and against U.S. imports.

Yet the president-elect’s campaign rhetoric didn’t just fade after his election victory.

We know this based on the continued verbiage against China, including the mention of steep tariffs on Chinese goods. Then there was the acceptance of the congratulatory call from Taiwan’s president, a move that represented a diplomatic breach of etiquette from the so-called "one-China" policy.

Then there was the biggest move — the creation of the White House National Trade Council, headed by outspoken China critic Peter Navarro. Mr. Navarro is an economist, and the author of "Death by China," a book eminently critical of China’s trade practices.

So, what should we make of the president-elect’s China posture followed by his seeming embrace Tuesday of the most well-known, as well as the richest, business leader in China — Jack Ma of Alibaba (BABA)?

Image credit: World Economic Forum

In what the president-elect described as a "great meeting" yesterday at Trump Tower, the Alibaba executive chairman and Donald Trump discussed 1 million new U.S. jobs.

According to a CNBC report:

Ma said that Alibaba’s expansion would focus on products like garments, wine and fruits, with a special focus on trade between the American Midwest and southeast Asia.

"We’re focused on small business," Ma told reporters. "We specifically talked about … supporting 1 million small businesses, especially in the Midwest of America. Small businesses on the platform selling products — agriculture products and America services — to China and Asia, because we’re pretty big in Asia."

The willingness of Donald Trump to speak with the face of Chinese business is interesting, confusing …

And ultimately, I think, very encouraging.

It’s interesting, because given the blatant opposition to China and its trade policies, you might suspect that Mr. Trump wouldn’t want to be seen speaking to Mr. Ma in any type of collaborative way.

Of course, Mr. Ma isn’t a Chinese policymaker, so the analogy isn’t quite appropriate. Still, Ma does represent Chinese business success, and the new era of Chinese capitalism.

BABA shares are already up 10.1% in 2017, and up 36.6% year-over-year.

Moreover, Mr. Ma and Alibaba both have benefited mightily from China’s trade policies — and that makes the meeting more than just a bit confusing.

Yet what is encouraging about the meeting between President-elect Trump and Jack Ma is that it represents a sort of "end around" in the communications department.

A meeting between two business/world leaders discussing job creation now is a sort of proxy for diplomacy … and to me that’s a positive development.

What’s also a positive about this meeting is that it might just put China on notice that things are going to be very different.

In an op-ed on the subject for CNBC, senior columnist Jake Novak described the situation in the following fashion:

Ma … represents something much more dangerous to China than Taiwan ever could: an idea. In this case, the idea of individualism.

And the fact that Ma and Trump discussed the even more individualistic topic of global small business entrepreneurship puts an exclamation point on it all.

That, to me, is very encouraging. It shows that Donald Trump might just be able to shrewdly connect with leaders outside the traditional political realm to improve relations between countries.

If this can be accomplished, I’ll be among the first to offer congratulations.

***

What do you think about President-elect Trump’s meeting with Jack Ma? What about the posturing toward China on trade policy? I want to know what you think, so please share your thoughts with me by leaving me a comment on our website or sending me an e-mail.

***

It was the definition of a mixed day in the markets. The Dow dipped, the S&P 500 stayed flat and the Nasdaq notched another closing high. Its 20-point gain (+0.4%) put it at 5,552 at the closing bell. 

  • The UK’s record streak of record highs: The FTSE 100 Index has closed at a record high every trading day since Christmas. This nine-day win streak broke a 20-year record and puts the index up about 2% here in 2017. A rally in commodities has helped. So has the sterling trading at a 31-year low (vs. the greenback), which has boosted exporters.
  • Gold hit a one-month high at $1,185.50: With Lunar New Year just around the corner, physical buying in China has been strong. However, holdings in the biggest gold-backed ETF, the SPDR Gold Trust (GLD), have fallen about 15% since the U.S. election.
  • And oil fell to a one-month low: Oversupply fears continued to weigh on black gold. WTI crude slid 2.2% in Tuesday’s session to $50.82, adding to yesterday’s 3.7% dip that took it to a three-week low.
  • Citi downgrades Goldman: Trump is going long GS, by way of hiring two alumni for his Cabinet. But not Citigroup, which just cut the bank’s rating to "Sell" because it believes the stock’s post-election rally — which accounted for a quarter of the Dow’s gains — has "overshot."
  • Verizon is still buying Yahoo’s (YHOO) web business. And Marissa Mayer is one of six executives stepping down from its board once the deal is complete. (VZ is reportedly still on track to pay $4.8 billion, although it wants a $1 billion markdown after a series of massive YHOO data hacks.)
  • Meet … Altaba? As for what happens to the rest of Yahoo!, it’s dropping the exclamation point … and the name. A recent SEC filing says it’s becoming a $36B investment company named Altaba, which will be charged with boosting returns on its Yahoo! Japan and Alibaba investments. One Twitter user suggested Altaba is Latin for "We should have taken Microsoft’s $45 billion offer in 2008."
  • President Obama delivers his farewell address from Chicago tonight. He will be joined by first Lady Michelle Obama and Vice President Joe Biden. The Dow gained 140% since his 2009 inauguration, and 210% since the Dow’s March 2009 bottom.

Good luck and happy investing,

Brad Hoppmann
Publisher
Uncommon Wisdom Daily

Your thoughts on “Trump: The Two Sides of a Chinese Coin”

  1. All this is a smart play to leverage what we offer the world.. if I were a CEO of a foreign company I would be knocking on the door through Donald Trump.

    It is not what you say.. it is how you say and who you present you plan to.

    Pretty darn simple. NO Masters degree needed .

  2. one cannot sell President Trump short. he is a very smart decisive worldly person who has seen the inside of economics his predecessor could not imagine and the beauty part is he is on our side.

  3. Everybody got points after the Trump/Ma meeting. But there’s the details. The Chinese Post subsidizes shipping from China outward for goods sold on Alibaba, but won’t for shipping to China from the US. So shipping costs provide a barrier to some degree. Then there’s all the fraudulent goods sold on Alibaba–will our mid-westerners want to share that platform? So don’t count on a million jobs just yet.

  4. Using the term: “Record High” to describe stock prices is, frankly stupid! Nominal prices mean NOTHING! The Market Indexes are NOT at record highs at all in real terms or in terms of value. This tactic is used by the news media to hype things and wrongly influence the public. Financial professionals should not continue this line!

  5. I think you are right on Trump being the person for our times. He is sophisticated in ways that politicians in general are not, he hobnobs with the very wealthy who see the world in a different way than you or I or a politician, but mainly he has the raw ENERGY and SPEED of thought that is needed to make the raft of appropriate decisions that will be his to make and soon. Obama did not do everything wrong, but his goal was never to make America great. Trump’s is just that, and he knows just how to do it. The Art of the Deal is just what the commonsense of our Founding Fathers used to bring about. No more Political Correctness, PLEASE! Less Regs – More Jobs – Oooyah!

  6. Was no coincidence Mr. Ma comes before January 20 and don’t think for a minute Beijing is not fully aware and the directors of this meeting. Spending 10 years in China I can tell you they are master’s at business and deception and Mr. Trump is one of few that understands, and they know it.

    I expect the end results to be good for both as the loss to China would be far greater then all the reports lacking the whole story.

  7. I have been coming to both Taiwan and China for 34 years or more and over time, have seen the relations between China and the United States vary. I am encouraged, however, about the possibilities for the dawn of a new era that increasingly envisions China as a welcoming partner in increasing improved relations in our collective futures.
    It is counter-productive to keep agonizing as to the past election in the United States – we have to support our new President where we can, and have the fortitude to let him know that we are behind him as a nation, regardless of how we cast our vote. This from one who did not cast his vote for him!
    Dick Cornell, now residing in Taiyuan, China

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Brad Hoppmann originally grew up in Florida, but has lived in Baltimore, Charlotte and New York as well throughout his career. Always an athlete, he played varsity football and water polo at the University of Florida and received All-SEC/SCC honors.