There is no certainty on how anything is going to go if it involves Donald J. Trump, but the peripheral evidence suggests the U.S. is going to hold to its a hard line on China at the G20 meetings next week. And if he was to pull some trick during the meeting to claim victory, it’s hard to see how it would stand up to scrutiny and approval by those around him. Declaring victory in the China spat doesn’t have overwhelming implications for Wall Street and has little impact on the U.S. economy. So, while we might be wrong, we’re sticking with our view that the meeting will not result in a breakthrough and the China-U.S. freeze is going to get chillier.
If that is true, then what is the impact on the Chinese economy? Impossible to be sure, but our view is that the U.S. trade situation is a trigger or spark rather than a fundamental issue. The general atmospheric mood this week has been gloomy, and there is something close to unanimity that 2019 is not going to be a good year for the Chinese economy. Anecdotally, because that is the best anyone can do, there is a sense of frustration out there over a long list of issues, a discomfort to an extent we don’t remember having sensed before.
The most high-profile news of the week was the stupid video advertisement put out by Dolce & Gabbana, showing a Chinese girl wrestling unsuccessfully with Italian food using chopsticks. It was so obviously offensive that it is just mind-boggling that no one in the decision chain – the creatives, the advertising agencies, the D&G executives – no one spotted it. They should all be fired for totally mis-reading the market. The reaction, of course, was just as ridiculous with people lining up to blast D&G for their own cynical reasons. But think of the poor model – she will never get an assignment ever again.
We’ll end this week with a wish for peace and normalcy, but we’re not optimistic. This is all going to get a lot weirder before it gets straightened out.