Digging a Hole to China

Digging a Hole to China

Good news: The trade war is over. No, it’s getting worse. Or maybe it is ending but it could start again tomorrow.

Confused? All of the above were true at various points in the last few weeks. Markets bounced around in reaction. And we are still no closer to knowing how it will all end.

Needless to say (but I’ll say it anyway) this uncertainty has a chilling effect on business investment. If you are considering whether to spend billions on new manufacturing capacity, opening stores, or hiring new employees, you need to know your costs and have reliable supply chains. That is all but impossible with tariff rates going up, down, or sideways depending on the day.

The saddest part is that the world trading system does, indeed, have serious problems, many of which emanate from China. We need to fix them. I fully support that goal. I am glad we have an administration that takes Chinese behavior seriously. But the tariff strategy is making the situation worse, not better, and the focus on trade deficits is entirely misplaced.

This will be a potentially incendiary letter, but sometimes things just need to be said. But first, I want to call attention to one of our gifted young writers at Mauldin Economics, Jared Dillian, and give you a chance to read him for free. That’s because, like the old potato chip commercial, I bet you can’t eat just one.

Jared writes a daily newsletter called The Daily Dirtnap. When I first heard the letter name, I thought, “Really?” But that was me not getting Jared’s Gen X humor. When I first started reading him, I appreciated the insights he was giving me. My dad would say, “Jared’s about half a bubble off dead center.” He just sees things differently. Then I realized that’s not entirely true. He’s a full generation different than me with a gift for writing and explanation and a wicked, brilliant instinct for the markets.

I urge you to try The Daily Dirtnap. For those of us of an older generation (ahem), you might need to have Google handy, as there will be some phrases and acronyms you’ve never heard of. That’s part of the fun and the learning process. It's just three pages a day—you’re through it in well under 10 minutes, but you’ll be thinking about what you’ve read throughout the day. Click here to learn more.

China and Intellectual Property

I’m going to start with a story that might fit better in the middle of the letter, but I suspect some readers will not get there. They will read my rather strong free trade biases and feel that I don’t recognize the problem China represents. Nothing could be further from the truth. While I am not happy with the way that Trump is conducting the “trade war,” I’m glad he is doing something about it.

There is a drug produced in China that works well on strokes and numerous other less devastating medical issues. It is derived from pig pancreases or human urine. It isn’t approved in the US due to justifiable regulatory issues, but it is used in Europe as well as China. It is quite expensive, both to produce and buy.

A small biotechnological firm in the US has the technology to synthesize this drug without using pancreases or urine. This would be safer and lower-cost. The Chinese company agreed to pay the US company $4.5 million upon the meeting of certain guidelines and then to purchase the drug from the company at a fraction of its Chinese production cost. For the US company, having the main distributor buy their drug without having to set up the distribution process was a good deal.

The US company spent a great deal of money and met their guidelines, providing the Chinese company with everything required under the contract. The Chinese company then said, basically, “We need to see the actual process and cell lines in order to verify the process.”

That means, in essence, “Give us your intellectual property.” With that knowledge, the Chinese company would no longer have needed the US company. When the US company had to tell shareholders that the deal fell through because they (correctly) told the Chinese company to go pound sand, their stock value plummeted. The Chinese company knew that would happen and had bet the Americans would fold. In this case, they didn’t.

This happens many times every year with Chinese companies on a hundred different fronts. Standard practice. It is why the US and other countries push back against the theft of intellectual property by Chinese companies.

Let me go just a little bit further. This is not just some widget or a better way to make a phone. This is a drug that, if it were introduced into the United States and the developed world, would allow far quicker treatment for stroke victims and save thousands if not tens of thousands of lives every year.

This is just a small part of the cost of Chinese intellectual property theft.

Binary Thinking

I have long said that protectionism is the single biggest threat to global prosperity. As we were approaching the 2001 recession, there were calls for trade protectionism. I wrote at the time that the single most destructive economic force that can be unleashed on the United States would be serious trade protectionism.

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Unfortunately, I have to keep saying that because politicians keep trying it. What Trump is doing right now is not new. I wrote this back in 2007.

That is the growing mood in Congress for passing trade protection legislation that could start a series of retaliatory actions around the world that could result in a trade war, a la Smoot-Hawley in the 1930s.

Stephen Roach, chief economist at Morgan Stanley, writes a rather chilling description of his recent testimony before the Senate Finance Committee. He noted that as he entered the room, he looked up and saw a picture of Senator Reed Smoot on the walls, as Smoot was a former chair of the committee and the co-sponsor of the Smoot-Hawley Tariff Act of 1930, largely responsible for the Great Depression.

At the hearing, it was clear that a bi-partisan effort is getting ready to pass legislation that would punish China for the large trade deficit we have with that nation.

As I recall, it was Democratic Sen. Chuck Schumer and Republican Sen. Lindsey Graham who led the way worrying about trade deficits, proving mainly that neither of them knew anything about trade deficits. As we will see in a bit, trade deficits are not the issue. Fortunately, that effort fizzled, though I suspect it helped set up the 2008 fireworks.

Politicians of all parties love free trade in theory. Its benefits are clear, but they are also unevenly distributed. Which I admit is a problem.

As long as we have sovereign national governments, goods will face obstacles and delays getting across borders. We can’t have truly “free trade” unless we eliminate borders, which of course creates other problems. (Think of the US as a free trade zone. Would we be nearly as prosperous if we had to negotiate every little trade deal between various states?)

Countries that trade with each other need fair and reasonable rules governing it, and both sides must enforce the rules. Obviously, this is complicated in a modern economy. That’s one reason trade agreements take so long to negotiate. And of course, there will always be squabbles and disputes. But generally open trade is possible, as we see in blocs like the European Union and NAFTA. It works because all sides are committed to making it work.

Problems occur when a country flouts the rules or enforces them selectively, as China does. I’ve often talked about China’s rapid entry into the advanced world’s economy. In less than a few generations it went from subsistence farming to modern industry. This happened because the US and others agreed to let their domestic businesses trade with China on favorable terms.

China was supposed to reciprocate with similar terms of its own. It pretended to, but hasn’t been thorough or consistent. This is most evident in intellectual property. The Chinese government routinely extracts (or steals) trade secrets from foreign businesses that wish to operate in China. Software code, drug formulas, and other information then finds its way to Chinese companies that shamelessly copy it.

Again, this is nothing new. The same thing happened years ago when Chinese merchants pirated all manner of Western consumer goods. More recently they’ve done the same for intangible technology and sent it into overdrive. And the Chinese government does nothing to stop it.

Talks to resolve these and other problems have been fruitless. Beijing agrees to changes then fails to implement them, and gets away with it because the US and other Western democracies have these inconvenient things called “elections.” China’s rulers know they can just wait out the clock until we get a new leader with different priorities.

The Trade Deficit Is Not a Scorecard

Give Trump credit for at least recognizing the problem and trying to do something about it. Unfortunately, he has some odd ideas about what “winning” looks like. Furthermore, he gets bad advice from so-called “economists” like Peter Navarro. I deleted half this letter which was basically an exposé on Peter Navarro who I think is the most dangerous man in the Trump administration, if not the country. I know he has a Harvard PhD, but I think William Buckley had it largely right when he said better to be ruled by 2,000 random names from the phone book than by professors from Harvard.

We see this in the president’s trade deficit obsession. He seems to believe it is some kind of scorecard. If the US buys more from China than China buys from the US, the US is losing. That is not what it means at all. Both sides get what they want. China (or other exporters) gets cash, we get useful goods at fair prices (or we would stop buying them).

Better yet, since we own the reserve currency, we get to pay for these goods in dollars, which then return here as the Chinese or foreign recipients invest in US assets, namely our Treasury debt. That’s good for Americans. In fact, it’s critical. Our interest rates would be sharply higher, and our currency much lower, if not for the trade deficit, because US savers would have to cover the entire government debt. We don’t save nearly enough to do that.

And that is a very critical point. If other nations don’t want your currency, you can’t run trade deficits without severe economic problems. Valéry Giscard d'Estaing was right: The US has an exorbitant privilege as owner of the world’s reserve currency.

In fact, if you have the reserve currency, it is your obligation to run deficits so that the world has enough currency to conduct trade. No country south of the Rio Grande has that privilege. The Europeans kind of, sort of do. And the Japanese. The Chinese are working diligently to make the yuan a reserve currency, though they are not there yet.

If the US fails to run a real trade deficit, we will cease to have the reserve currency. It is that simple.

Bilateral Trade Balances—Whack-A-Mole?

Eliminating the trade deficit is not as easy as it may sound. Paul Kasriel sent out a note this week that I found compelling. Let me quote:

President Trump has imposed higher tariffs on US imports from Mainland China, in part, to narrow the bilateral trade deficit that the US runs with China. The president’s tariff policy appears to be working. As shown in Chart 1, the 12-month cumulative US trade deficit in goods with Mainland China (the blue bars) is narrowing. For example, after a reaching a record goods deficit of $419.5 billion in the 12 months ended December 2018, the US goods deficit with Mainland China narrowed to $400.7 billion in the 12 months ended June 2019.

Source: The Econtrarian

So far, so good for President Trump’s desire to see the US bilateral trade deficit with China narrow. But, I think it is fair to say that the president believes that it is in the best interest of the US to not only reduce our bilateral trade deficit with China but our trade deficit with the rest of the world as well. And here, things are not moving in President Trump’s desired direction. Also shown in Chart 1 is the 12-month cumulative US trade deficit in goods with the world (the red line). Although the US bilateral goods trade deficit with China has been narrowing in recent months, the US goods trade deficit with the world widened to a record $886.0 billion in the 12 months ended June 2019. This seems like a game of Whack-A-Mole. President Trump hikes tariffs on imports from one country in order to reduce the bilateral trade deficit with that country, and our trade deficits with other countries widen.

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Again, the trade deficit is not a problem. But even if you assume it is a problem, tariffs won’t solve it so long as the government continues to run huge and growing deficits. No one in either party has any intent of even moving toward a balanced budget. Therefore, the trade deficit is going to grow—with other countries even if not China.

The US is using the wrong weapon to solve the wrong problem and harming our own economy in the process. What would work better? I believe that Trump’s choice (which candidate Clinton said she would do as well) to cancel US participation in the Trans-Pacific Partnership was a mistake. That agreement would have set up a giant free-trade zone as a counter to China, and I think at a minimum would have forced Beijing to negotiate more sincerely. TPP had more than a few problems, but they could have been fixed. But best case, it would’ve made it much easier for companies in the US to skip over China for their supply chains.

As it stands, the other TPP nations went forward without the US and are now trading with each other on more favorable terms. Thanks to TPP, Japan increasingly imports food products from Canada instead of the US.

Navarro appears not to care, and Trump appears to agree with him. And to be fair, Trump had protectionist leanings long before he met Navarro. Some of this might be happening anyway. But the combination of Trump and Navarro is proving economically catastrophic.

There has been a series of articles for the last five months pointing out that the Trump tax cuts averaged around $900 per taxpayer. Tariffs have already eaten about $800 of that tax break, essentially nullifying the benefits of the tax cuts. JPMorgan said it again this week.

We have spent two years digging a hole to China. Will we spend at least that many years refilling it? Trade wars are not easy to win.

Should we be dealing aggressively with China on its theft of intellectual property, its lack of a fair playing field, its mercantilist policies and government subsidies of companies? Absolutely. And you can insert a few expletives deleted after that absolutely.

We can start dealing one-on-one with companies that are clearly violating intellectual property and other WTO rules. Simply ban them from doing business in the US, or take away their banking privileges. WTO should classify China as a developed market in WTO, not an emerging one. Just look at pictures of Beijing and Shanghai and dozens of other cities to recognize China has emerged.

Tariffs are hurting US consumers. China is not paying those tariffs, we are, and any economist worth their salt (other than Navarro) knows it.

Get tough with China? Damn Skippy. But don’t make Americans pay for it. If you’re going to fight a trade war then don’t point the gun at yourself.

I Need a Vacation from My Vacation

I mentioned a few months ago that my partners at Sanders Morris Harris in Houston had a particularly interesting private offering for income and appreciation. I want to call your attention to it one more time, as that offering will close within the next month or so. It is not a hedge fund that stays continually open. You really do want to get to know my friends at SMH as they have a variety of ways for accredited investors to potentially enhance their portfolio returns. You can go to my Mauldin Securities LLC website and simply fill in your name, email, and a little information. I will share it with SMH and they will contact you. You really, really want to do this. (Please note, while I personally receive compensation from SMH, neither SMH nor Mauldin Securities LLC are affiliated with Mauldin Economics.)

I know it’s kind of a cliché, but sometimes you really do need another vacation after your vacation. Maine, Montana, and New York were absolutely fabulous. Then I came back to Puerto Rico with 400+ emails in my inbox, despite trying to deal with it while on vacation, and an extra 10 pounds. I will get my emails under control before I lose those 10 pounds but I’m working at it, or actually Shane will, as she will be feeding me fish pretty much every night.

The good news is I had a really productive time thinking about the future, not only writing but about the new things we can do for you as a reader. I think you will see some changes in the next 60 to 90 days.

And with that, I’m going to hit the send button. You have a great week and enjoy the waning days of summer…

Your starting the rest of his life/diet analyst,

John Mauldin Thoughts from the Frontline
John Mauldin

P.S. If you like my letters, you'll love reading Over My Shoulder with serious economic analysis from my global network, at a surprisingly affordable price. Click here to learn more.


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Aug. 26, 2019, 3:40 p.m.

Wioth all due respect, I think John is maybe sorta kinda really wrong on the virtues and value of globalization. Once upon a time, free trade was a useful idea. Early industrial economies had small markets of potential buyers because much of society was still at subsistence level. Expanding trade offered bigger markets which led to greater economies of scale and a more refined division of labor which were keys to raising living standards.
All well and good. Today however, things are much different. For decades, technological progress has made it possible for factories to achieve economies of scale etc at ever lower production runs. Even as long ago as the 1970s, the Econ textbooks I studied in college briefly admitted that, if a country or trading area were fairly large like USA or EU, there would be adequately large markets and sufficient competition to get most of the above maximum benefits of free trade. Expanding it further to outright globalization would not produce dramatically better results. 
Today, the advent of 3-D printing must make us question if economies of scale and division of labor even have any meaning as economic concepts. If you have a country or trading bloc of a few hundred million people and well enforced anti trust laws (something we currently lack) then globalization is not needed and rightly should be phased out. Globalization has become just another way for large global corporations to play labor markets against one another while yielding diminishing returns to citizen well being and exposing us to crisis contagion from other countries and regions. Aside from importation of commodities which we do not have on our own shores, international trade of goods & services should be limited to 5 or 6% of GDP. I suggest moderate tariffs aimed at maximizing tariff revenues. We can employee economists to calculate the price sensitivity of each country’s exports and establish a level of tariffs for each country that would approximately maximize tariff revenues from that exporting country. This would be a happy middle ground between complete autarchy on the one hand and blind free trade on the other. Countries with similar costs of labor, environmental and safety standards to our own would export widgets that are about the same price as ours and would have tariffs set lower because high tariffs would choke off their more expensive exports and hence reduce tariff revenue. Countries with low wages and lower health, safety and environmental standards would have much cheaper widgets to sell so higher tariffs could be imposed before the tariffs reach a level of choking off exports so much that revenues from the tax will fall.  This formula would provide some semi objective means of setting tariffs other than the current whim of politicians. It would also minimize the friction with our traditional geopolitical allies in Europe and Japan who would be amongst those with the smallest tariffs on their exports.  This would make imported widgets about the same price as domestic ones. Competition would be based on quality more than price. Some trade would occur but would be more limited than in a free trade arrangement. Either this or we go back to a gold standard or something similar that self corrects extreme surpluses or deficits in trade. I look forward to other ideas in this forum.

Aug. 26, 2019, 11:50 a.m.

Let’s say you are not against free trade, per se, but you recognize the large and increasingly negative national security implications of the impact of “free” trade with China.  You want corporate decision makers to include these negative implications in their (largely, if not exclusively financial) calculus, but (unlike your Chinese counterparts) you aren’t directly able to impact their decision-making (thank goodness).

If you were the democratically-elected President of a constitutional republic, what options would you have to indirectly force this calculus adjustment?  Perhaps you would look for ways to convert the national security implications into a financial implications as a way to bake it into the calculus.  Increasing the financial uncertainty of these outsourcing decisions, by “unstable” tariff adjustments or otherwise, is a way to signal to these decision makers. 

These tariffs (and the related multi-front trade negotiations) are designed to change the behaviors of US (and allied) decision makers as much as Chinese decision makers.  There is a much, much larger game at play here.  This is an attempt by the US government to harness the levers of capitalism through full-costing these outsourcing decisions to re-establish nationalist thinking in increasingly politically-agnostic multinational companies in the West.

Our side is playing the long game, but we just don’t recognize it because it is so unfamiliar after 50 years of administrations maximizing the present at the expense of the future.

Aug. 26, 2019, 10:28 a.m.

The underlying theory was that if free trade and capitalism were introduced into communist China,  it would cause the downfall of communism.  This turned out to be wishful thinking,  as it did not take into account the nationalism of the Chinese people.  The end result has not been the downfall of communism,  but a perfectly content and autocratic politburo largely made up of billionaires.  The experiment has failed,  at an extreme cost to the United States.  Now it should be ended, along with the free pass to China.

This is actually turnabout.  Lenin and Trotsky thought the workers of Europe would embrace communism.  They failed to take into account the nationalism of Germany, Poland, Hungary, and the other countries they tried to convert.

Aug. 26, 2019, 8:46 a.m.

“better to be ruled by 2,000 random names from the phone book than by professors from Harvard.”
Actually, his oft repeated phrase, he started with 100, then 400 and then 2,000. That’s not the point, he did refer to the Boston phone book, most of those are Adams with direct link to the John Adams family, a clan dedicated to reasoned public service. He gave his wry smile every time he gave this reference. Took great joy in it, as he lifted it from Marx in a twisted way. Read Pillsbury “the Hundred Year Marathon” regarding our current war with China. It’s enlightening.

William McCarthy
Aug. 26, 2019, 1:15 a.m.

There you go again, John. (Friendly smile) Trying to defend “Free Trade”; as if it actually exists. Free trade regimes are much like cartels. Everyone joins; and, then cheats. Ah! But, we have an agreement!!!

There can be no such thing as free trade between societies with significant development, legal, cultural or government system gaps that does not boil down to some form of unearned arbitrage for capital and usually at the expense of labor in the more developed country. But, it’s “free” trade so we should defend it. What is that joke about how we are driven by the theories or utterances of some long dead economist?

As for China. How can we have free trade, let alone finance their rise, as a rising geopolitical challenger or outright enemy? Especially, one that has a million people in re-education camps; is becoming the leader and promoter of the 24/7 surveillance state; and even disappeared the head of Interpol? Basically, we cannot. Therefore, the trade war is nothing other than geo-political conflict playing out in trade. And, the public gets the rhetoric of the trade imbalance. And, tariffs are a heck of a lot better than bullets.

Also, per one of your publications, the primary message to US corporations and global capital is; move your supply chains out of China. And, where are they moving to? In many cases to the very same countries we need (Vietnam, Indonesia, Malaysia, Japan, S. Korea, Taiwan, Philippines, India, Mexico). Many are in the South China Sea, or Indo-Pacific, that we will need in the containment/balance effort with China. These are the beneficiaries of the shift in supply chains. Maybe it is simply dumb luck. Or, heaven forbid, maybe there is actually a strategy afoot. Much like how we used the Asian Tigers in our containment strategy during the Cold War. There are almost two billion people in South Asia and India that will be more than happy to make stuff for the vast American consumer market.

Let’s face it. It was a great run, for capital, for a long time. Too long for too many in this country. Now we have a stock market propped up by central banks, government debt and global economic assumptions that are not valid or sustainable. What is the right discount rate for global corporate earnings? The adjustment will be painful.

Trade will always be subordinate to national interests. And, a tool to pursue those interests. Not an end unto itself. And, of all the developed countries on the planet the US is the least dependent on exports as a percent of GDP. Not to mention, US, Mexico and Canada are the single largest trading block on the planet. Trade will be alive and well. Notwithstanding hiccups with China.


Justin McCarthy

Aug. 26, 2019, 12:15 a.m.

This is a potentially incendiary comment, too.

The trade war is NOT over. The danger is that the trade war will morph into a real war. Or even worse — much worse — America will be forced to capitulate.

Does that sound preposterous? It used to. Now, not so much.

Before I retired (in the early 2000’s), I worked at one of this country’s biggest defense contractors for more than 30 years.

When the Berlin Wall came down in the early ‘90’s, everyone was in shock. We had won the Cold War! After a while, everyone began to relax. President Clinton and Congress began to discuss spending the “peace dividend.”

Around that time many eastern European engineers who had lost their jobs because the Cold War ended, emigrated to America and began applying for jobs. I suspect they were hired because they had experience, and they were cheaper than American engineers fresh out of school.

The company liked the results, but we noticed new signs in various parts of the buildings that said: “Only American Citizens Allowed Beyond This Point”. The buildings were huge, 300’ x 600’ or larger. The signs began appearing in the early ‘90’s.

The company also hired some Russians around that time to come in and explain to employees how the KGB (now the FSB) used to collect classified information.

The spying was low tech, but very effective. The spies got themselves hired as janitors, but they were actually highly educated engineers, trained by the KGB. They mostly worked on the graveyard shift; midnight until dawn. As they emptied the trash and cleaned up the engineers stations and cubicles, they would go through the wastepaper baskets looking for discarded drawings, blueprints, notes, etc.

Later, photos of the Russian equivalent of the Space Shuttle appeared in the paper, side by side with our own shuttle. It was impossible to tell which one was which from the pictures.

After that the Chinese engineers began to flood in, and almost all were from mainland China. I know this because my neighbor worked in the employment office, and I’d talk to her occasionally.

One day I kidded her about the Chinese names (“How can you tell one Lee from another? Do we have an office in Taiwan?”)

She corrected me: “Most of them are from the mainland. Try tracking down relatives there!”

Since we won the Cold War the only concern seemed to be whether ‘spending the peace dividend’ would result in massive layoffs.  That attitude wasn’t limited to our company. Most defense contractors, like ours, tended to relax their view of security concerns. Some employees referred to others with heavy accents as “spies.” But they were just joking…

In retrospect there’s little doubt that most, if not all mainland Chinese were — and still are — spying. They really don’t have much choice in the matter.

Maybe most 20-something engineers from the mainland are just interested in engineering, not spying. But pressure can easily be brought to bear on them by reminding them of their relatives back home.

All it takes is cooperating one time, and they’re trapped. Espionage recruiters in every country know how to coerce their civilian countrymen.

And back then when a foreign national was seen in a forbidden hallway, his excuse about taking a wrong turn was sufficient. After all, America won the Cold War; no need to worry.

China has steadily ramped up its espionage, both industrial and military. Anyone with at least two brain cells can see they’re stealing us blind. It’s their government’s policy. They’re thieves, or at least their government is.

Being accused of “racism” is now the #1 concern of U.S. companies, especially large companies, so they won’t do what’s clearly necessary for our survival: do not hire foreign nationals, especially Chibnese. And thos applies in spades to our country’s defense contractors.

The race-based policies of U.S. defense contractors go overboard pandering. They are truly insane. Worse, they are suicidal. It’s no different than if you discovered that a friend of your son is a drug addict and a thief. But because his friend is a different race, to be politically correct you tell your son, “Of course you can have your friend spend the week here while we’re vacationing in Greece. We love all races!”

When you return, your wife can’t find her 2 carat diamond engagement ring, and your gold coin collection is missing.

Same-same, no?

Yes. The question is, what should be done?

Do we keep mainland Chinese (and other foreign nationals) from working for U.S. defense contractors?

Or do we commit national suicide?

It’s a stark choice. But based on what’s clearly happening, the only rational choice is to hire American citizens exclusively. And preferably, third generation or farther back.

art Chen
Aug. 25, 2019, 11:24 p.m.

This may not be unethical but it is not the Chinese government, It could have happened in the U.S. and our government could not do anything about it. You cannot patent a cell line.

” The US company spent a great deal of money and met their guidelines, providing the Chinese company with everything required under the contract. The Chinese company then said, basically, “We need to see the actual process and cell lines in order to verify the process.”

That means, in essence, “Give us your intellectual property.” With that knowledge, the Chinese company would no longer have needed the US company. When the US company had to tell shareholders that the deal fell through because they (correctly) told the Chinese company to go pound sand, their stock value plummeted. The Chinese company knew that would happen and had bet the Americans would fold. In this case, they didn’t.

This happens many times every year with Chinese companies on a hundred different fronts. Standard practice. It is why the US and other countries push back against the theft of intellectual property by Chinese companies.”

David Edstam
Aug. 25, 2019, 10:01 p.m.

The rate of global started its decline early in 2018. There are more complications impacting global macro conditions than trade disputes.
This bigger picture has been the primary source of business uncertainty globally to date.  Look at the numbers and market trends since the beginning of 2018.
It is naive to think that China has the incentive at this point to ever negotiate on anything going forward.  Their own internal market is now big enough.  And realistically their internal power structures and culture prevents them from doing so.  The Chinese can not negotiate.

Fabien Hug
Aug. 25, 2019, 9:21 p.m.

I don’t really agree with your argument pertaining to China stealing IP, at least with the bio tech example you presented. In my view this is not stealing it’s simply a condition they impose to get into their market and you’re free to accept or not. Like showing your underwear when you travel by plane. We lost but they lost too. But I have no doubts that there is real stealing on their side. But the problem with calling this stealing is that it will make an agreement more difficult to reach. And being assertive to a different point of view, I can understand their reluctance to have foreigner coming into your country with dominant technology over which you have no control. Look at the problems Europe has with Uber, Facebook and Google.

Aug. 25, 2019, 7:01 p.m.

Is anyone in the Trump administration taking note of Mauldin’s advice? Is anyone listening? Does any of this filter up to the President? Even then, is there a chance this is even discussed? I pray to God that someone in the administration is willing to show those above him that there is another path. I fear we are skating on very thin ice, and a heat wave is just around the corner.

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