Decoupling

While Donald Trump was enjoying the pomp and pageantry in London this week, his Republican colleagues at the US Congress were threatening a rebellion.

Trump’s arbitrary decision to impose punitive tariffs on all Mexican exports to the US angered American consumers, distressed American businesses and offended even his Republican allies. The tariffs were ordered by Trump to force Mexico to stop the migrant inflow into the US. Tariffs and migration are two unrelated issues that Trump confuses.

This is not the first time Trump used tariffs as weapons to achieve political ends. He imposed tariffs on European goods because he was unhappy with the levels of defense spending of the major EU powers. He has ordered sanctions studied against India. Then, of course, there is that worsening trade war Trump has unleashed against China.

Trump is pursuing exactly the same trade policies that, nearly a century ago, produced the Great Depression that plunged the whole world into misery and war. Tariffs imposed across the board curtail trade. In turn, constricted trade undermines economic growth.

The market has responded clearly to the tariff wars Trump induced. US stock prices climbed down sharply. Economists for the world’s largest banks are now forecasting recession in as close as three quarters from now as a consequence of the bizarre trade policies pursued by Trump.

Trump is clueless about the hard rules of economics. Because of this, his erratic trade behavior is bound to continue.

Tariffs, for instance, are not likely to revive American industries. The intractable supply chains and higher manufacturing costs in the US militate against that.

Renowned economist Jeffrey Sachs sees little prospect for US trade negotiations with China. Notes Sachs: “The problem with the trade talks is that it’s all based on a false premise. The premise is that somehow China’s trade imbalance is because of unfair practices. This is the kind of economic illiteracy of the president of the United States…”

China has so far demonstrated incredible patience in the face of Trump’s economic illiteracy and reckless propaganda aimed at forcing the world’s second largest economy to yield to America’s impossible demands. Trump has called China a “currency manipulator” and accused Chinese companies of stealing American know-how.

Beijing’s patience now shows signs of wearing thin. President Xi has rallied his people to a “new Long March” – indicating the Asian power is preparing to play a long game against American threats to trade. He has reminded the world China is almost exclusively the producer of rare earth metals vital for all technological products.

Chinese consumers have begun a quiet boycott of American goods in response, reflecting in the declining sales in the world’s largest consumer market. This could hurt key US companies. General Motors sells more vehicles in China than in the US. China is Apple’s largest market.

A recent Chinese white paper indicates rising hostility toward US trade policies. The paper notes that “the more the US government is offered, the more it wants.” Beijing increasingly views US trade demands as running against the grain of its closely held economic beliefs, its understanding of “socialism with Chinese characteristics.”

Should the trade hostilities continue, many analysts fear we could be seeing a decoupling between the economies of the US and China. That will have grave repercussions on the health of the entire global economy.

There is little optimism the face-to-face talks between Trump and Xi during the G20 meeting June 28-29 in Osaka will cause a reversal of this unhealthy trend. Trump does not seem ready to grasp global economic realities.

Omission

This is very strange.

Last Friday, the Philippine Drug Enforcement Agency (PDEA) finally filed a case against Zhijian Xu (alias Jacky Co) for involvement in the P1.8 billion shabu shipment intercepted at the Manila International Container Port last March 22. The shipment was fraudulently declared as resin.

Along with Jacky Co, the PDEA included 16 other personalities linked to the massive drug smuggling attempt. These other personalities were employees of three companies associated with the shipment: Wealth Lotus Empire Corp., Fortuneyield Cargo Services Corp. and freight forwarding company Federal Fortunes Logistics Corp.

That looks fine at first blush.

Sources at the Bureau of Customs (BOC), however, point to a glaring omission in the charge sheet filed by the PDEA. While clerical personnel were included in the charges filed, the respective presidents of Fortuneyield Cargo Services and Federal Fortunes Logistics were surprisingly excluded.

What makes this all the more glaring is that the two company presidents were included in the case recommendation letter sent by the BOC to the PDEA. The two company executives have been on the BOC radar for a while. According to sources, the two are among those suspected of involvement in the mysterious disappearance of 105 containers from the Port of Manila last year. Heaven knows what those missing containers might contain.

If low-level employees of the two cargo handling companies were included in the charges filed, why were the top executives dropped from the list? 

The PDEA better have a clear explanation for the apparent “dagdag-bawas” in the list of persons charged for the attempted smuggling of dangerous drugs. This is simply too glaring an omission.

First, there are the missing containers. Now, there are the missing names from those to be charged.  Something is amiss here.

It is strange enough that PDEA charged Jacky Co and company were charged only after his name surfaced in Sen. Panfilo Lacson’s expose last week.