Trump Plays it Cool on Hong Kong

When Hillary Clinton Tweeted her hardline support for the Hong Kong rioters just hours after they conducted an ISIS style torture of a Global Times journalist inside an airport, the world could have and should have breathed a sigh of relief. The seemingly counter-intuitive sigh of relief should have been breathed for two reasons. First of all, if Hillary Clinton was in the White House, the possibility of war on multiple fronts would have been vastly more likely. As frightening as it sounds, a hot conflict between China and the US could not have been discounted had Hillary Clinton won. The second reason why Clinton’s pro-lawlessness Tweet was important is because it provided explicit guidance to Donald Trump about what not to do.

Today’s American politics is such that for Trump and his base of supporters, anything said and done by Hillary and William Clinton is considered automatically bad. Because the record of the Clintons was so dismal, Trump happens to be right much of the time when he opposes that which is endorsed by one of the Clintons.

Even prior to Hillary Clinton’s Tweet, Trump showed no real interest in Hong Kong and even referred to it as a Chinese matter in which the US was not involved. Things however grew more complicated when Chinese media released photos of a US government official meeting with some of the gangster ringleaders of the Hong Kong riots, thus proving that at a ‘deep state’ level, the US was well and truly involved in stoking tensions in China.

But rather than allowing himself to be boxed into a corner, Trump praised President Xi, called for calm in quite a non-partisan manner and requested a meeting with his “good friend”, the Chinese leader.

Based on Trump’s previous Tweets throughout the last several days, it is clear that the US president is frustrated at the major downturn in the US stock market and accompanying inversion of the yield curve for US bonds. As investors race away from stocks and into traditional safe havens including both gold and bonds, Trump has correctly blamed the Federal Reserve rather than China for the chaos in the American economy. Whilst I personally have different views on how the Fed got it so wrong, the fact remains that Jerome Powell’s decision to make a modest rate cut failed to satisfy those like Trump seeking vastly lowered interest rates whilst simultaneously disheartening advocates of sound money who think that increasing the money supply (even by a small amount) would only inflate a bubble that is well on its way to bursting. In other words, the Fed’s decision was a compromise that left everyone unhappy – including and especially investors and traders.

Be that as it may, irrespective of the domestic issues behind this week’s helter skelter market ride, any sign that the US and China are even a fraction closer to a trade deal would help to calm market tensions in both the west and in Asia. In this sense, a would-be Trump-Xi meeting gives both leaders a chance to privately talk trade whilst publicly appearing to take inversely “tough” positions on Hong Kong.

In reality, the Hong Kong rioters know that they bit off more than they could chew at the airport and whilst they continue to wave American flags, Trump is interested in putting a bandage on the wounded US markets far more than he is concerned with the events in Hong Kong. To put it another way “making Hong Kong British again” has little to do with Trump’s idea of making America great again.

A Trump-Xi meeting or even a Trump-Xi phone call would demonstrate to the world that trade talks have resumed in good faith which would be good for the markets. At the same time, such a meeting would make it clear that Hong Kong’s status quo will not be changed. The US will not risk a total economic let alone military showdown with China over the matter (as could have happened under Hillary Clinton) but nor will the PLA enforce martial law in Hong Kong.

In reality, the future that awaits Hong Kong is one that has been damaged by the terrorist style actions of some of its own deeply misguided and in some cases mentally deranged people. When the dust settles, the people of Hong Kong will know that neither Xi nor Trump are to blame for this unfortunate and completely unnecessary reality.

By using Hong Kong as an excuse to talk trade, Trump is cleverly showing his cards to China whilst temporarily virtue signalling to America’s liberal and neocon extremists who for the entire summer have thought a great deal about Hong Kong whilst going silent on the real issues that matter to Americans.

Finally, it is important to remember that Trump genuinely has more respect for Xi Jinping than he does his domestic opposition. As such, a conversation with Xi will bring about a far more constructive bilateral understanding regarding the lawless interventions into Hong Kong by American actors who themselves tend to be on the opposite side of the US political divide to Trump himself.

Getting trade talks back on track will help to bring stability to global markets in desperate need of steady waters. Hong Kong is as good an excuse to talk about the real issues as is anything else and it is also a chance to build a firmer personal trust between the leaders of the world’s two most important countries.

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