As we've discussed over the past few weeks, Trump's "escalate to de-escalate" strategy is about drawing the rest of the world back into alignment with the U.S., using the U.S. consumer as leverage.
And then isolating China.
That said, it was reported this morning that Trump's lead on trade negotiations, Treasury Secretary Scott Bessent, revealed in a closed-door summit hosted by JP Morgan, that a de-escalation with China would come very soon.
Not surprisingly, stocks liked it.
But there has been no indication from either side that any formal talks have actually happened.
And as we've discussed in my daily notes, Trump 2.0 is about ending China's multi-decade economic war, not just getting movement and claiming a win.
He has a team of China hawks in place to carry it out (Rubio, Bessent, Lutnick).
His escalation tactic has worked.
It's forced the world to take a side. And with 75-plus countries reaching out to the administration to make a deal, they've sided with the U.S. consumer.
So de-escalating with China at this point doesn't make sense.
For context, in September 2020, when Trump laid out his agenda for a second term, his China plan was very aggressive.
He said he would "make America into the manufacturing superpower of the world." He said he would end our reliance on China. And, this is a big one: He said "we will hold China accountable for allowing the virus to spread around the world."
Also in 2020, Mike Pompeo (Trump's Secretary of State) built a global coalition against China. Within that effort, he made a speech at the Nixon Library calling on "every leader of every nation," for the "future of the free world," to set the standard for dealing with the Chinese Communist Party.
He called for an alliance of like-minded democracies, to "act now" against the CCP or let them "erode our freedoms and subvert the rules-based order that our societies have worked so hard to build."
So, the trade war is all about China.
And a de-escalation move (like an interim or partial deal) doesn't align with the Trump hardline-on-China agenda.
Please Note: I'm away for the remainder of the week, so you won't see a Pro Perspectives note from me until Monday. Have a great week!
