China and the US have Agreed to Agree - And to Continue to have Discussions - To Agree to Agree -- In Which They Will Continue to Agree to Continue - This Game is Over, Folks
WEEKLY -- On Sunday -- All previous Editorials are available on the Substack Archive Further long term archives are available at LinkedIn and Wordpress https://boomfinanceandeconomics.wordpress.com
BOOM is still on holiday. However, this week, BOOM has found the time to make some fresh observations about what really happened over the last 6 weeks of Donald Trump’s “Trade War” with the World (and especially with China).
1. What’s Happening in China?
2. The Trump Speed Bump
3. What Really Happened Last Week
4. Let’s Review Donald’s Trade “Deals”
5. Anchoring with a Baseball Bat
6. Stop Anchoring, Donald - It Won’t Work with China
7. They Have Baseball Bats too
8. Updates: Moody’s Downgrades US Credit Rating
9. Trump Ignores 150 Nations - No Tariff Talks with Them
WHAT’S HAPPENING IN CHINA?
The Chinese take a 50 - 100 year view of their economy. Over the last 50 years, they have literally created the most impressive economic growth story in history, pulling 1.5 billion people out of poverty to become a manufacturing behemoth that exports to almost all nations worldwide. It’s a complex mix of Potemkin Village capitalism and non-rigid communism but always with strong centralised control and oversight from their carefully selected best and brightest bureaucrats. It is not democratic in any way. The people are self motivated, work hard and seek to improve production steadily in both quantity and quality. Their annual GDP is now estimated to be around US $ 18 Trillion and is approximately 18 % of the global economy. Their Per Capita GDP on a PPP basis shows a steady growth pattern and, thus, a steady increase in purchasing power and living standards.
Please Note: BOOM does not admire Totalitarianism in any form. However, the economic facts speak for themselves.
CHINA GDP PER CAPITA ON A PPP BASIS (Purchasing Power Parity)
(from TradingEconomics.com)
The Annual Gross Domestic Product per capita in China was last recorded at US $ 22 Trillion in 2023, when adjusted by purchasing power parity (PPP).
It is probably well in excess of US $ 23 Trillion now.
China’s economy grew 5.4% year-on-year in the first Quarter of 2025, maintaining the same pace as in Q4 of 2024 and exceeding market expectations of 5.1%. It remained the strongest annual growth rate in 1-1/2 years amid Beijing's ongoing stimulus. March economic activity was robust with industrial output rising at its fastest pace since June 2021, retail sales posting the biggest gain in over a year, and the surveyed jobless rate eased from a two-year high. Fixed asset investment also slightly surpassed expectations in the first quarter.
On the trade front, exports recorded their strongest growth since October as firms accelerated shipments ahead of looming tariffs, while a drop in imports narrowed. The statistics bureau said the Chinese economy was “off to a good and steady start” and highlighted the growing role of innovation.
THE TRUMP SPEED BUMP
Then Trump’s “Liberation Day” Speed Bump occurred on April 2nd when he painted America as a poor victim of trade oppression and the entire world was put into shock. All readers would be familiar with the resultant stock market and bond market turmoil triggered by the threats issued on that day. Stocks, in particular, dropped dramatically worldwide.
Currently, the mainstream media and the alternative media are awash in stories describing how the Chinese economy is about to collapse because of the Trump tariff threats, how factories have closed, how workers have suddenly become unemployed. BOOM begs to differ and regards all of those stories as nothing but propaganda. Racist, anti-Chinese propaganda. There has been some slowdown, for sure, generated by the massive uncertainty unleashed by Trump and his Tariff War against the the whole world. However, this is no longer a trade war. It is a propaganda war and the victims are the people of the advanced economies, and especially the people of America.
Let’s take a look at the effect on the Chinese stock markets. BOOM predicted strength to come in those markets way back in August 2024 when BOOM used the Headline … CHINA STOCK MARKETS POISED TO RISE.
The stock markets in Hong Kong and Shanghai have been very resilient in response to the recent Trump Turmoil. They are looking very strong indeed ..... as predicted by BOOM.
SHANGHAI STOCKS OVER THE LAST 30 MONTHS (Daily Chart)
HONG KONG STOCKS OVER THE LAST 30 MONTHS (Daily Chart)
And the US stock markets have recovered sharply — also as predicted by BOOM on April 13th (one month ago). Yes, BOOM nailed it yet again categorically just 11 days into the “Trump Trade War”. On 13th April, BOOM’s Headline was —
The Tariff War is Over -- Trump has Backed Down - China and the Rest of the World has Won
“The people of America can breath easy. BOOM expects US stock markets and bond markets to rally strongly … next week. And the US Dollar should rally as well”.
More from that BOOM Editorial dated 13th April:
“Donald Trump’s 90 day “Pause” on the proposed reciprocal tariffs to all nations except China is clearly a back down. The “Pause” means that his disastrous tariff war is over. China and the rest of the world has won. The people of America can breath easy. BOOM expects US stock markets and bond markets to rally strongly on this knowledge next week. And the US Dollar should rally as well.
At some point early last week, Trump was read the riot act from Wall Street and Main Street. Some responsible, professional adults somehow managed to gain entry into the Oval Office to explain the dire consequences to America’s economy if he were to continue to threaten almost all other nations on Earth in a trade war. The news was all bad and the rest is history. There was no alternative but to cease hostilities and revert to propaganda. Trump’s bluff has not worked. His bluster and ego-centrist, unpredictable behaviour has now badly damaged America’s reputation. In discussions behind closed doors, all nations and all businesses now regard America as being unreliable and untrustworthy unless and until proven otherwise.”
Then, last week, upon actually meeting the Chinese delegation, the Trump team folded fast and admitted defeat. Here is what Scott Bessent, the US Treasurer said after the meeting when he appeared very nervously on Bloomberg TV to discuss the newly announced 90-day suspension of most tariffs between the United States and China.
As reported by Bloomberg:
(BOOM’s comments are in bold at the end of each statement).
BESSENT: “Both sides agree. We don’t want to create a generalised decoupling.”
(That would be a disaster for the USA and the Global economy)BESSENT: “We will see where the Final China Reciprocal Tariff Ends”
(Yes, we will, won’t we Scott. We will see sometime in the future)BESSENT: “The Current Tariff Level for China is a “Floor”
(And floors can be lowered over time, Scott?)BESSENT: “The April 2nd Tariff Level will be a ceiling for China”
(Yes, it will, of course, Scott)BESSENT: “Now we have a process in place to avoid a China escalation”
(Yes — America has now seen what would happen if China were to get really pissed off and stop all exports to the USA and imports from the USA).BESSENT: “We want to see China boost their domestic consumption and open their markets more”
(Yes, Scott, that would be nice. I am sure China wants to expand their domestic economy too).BESSENT: “We can always go back to the April 2nd Level for China Tariffs”
(Yes, Scott, of course. But you won’t make that mistake again, will you?)
There was a Joint Statement that said that the US will reduce levies on most Chinese imports from 145% to 30% within 2 days. WITHIN 2 DAYS.
(That is a Capitulation — right there — no doubt)
Of course, China “agreed” to reduce their 125% tariff on US goods to 10%.
So — THE TWO TEAMS AGREED …. to continue discussions to stop this stupid tariff war and revert to normal relations within 90 days.
That is what happened.
Donald’s arse was definitely NOT kissed.
China turned up with a baseball bat instead.
The joint statement indicated that Monday's agreement would pave the way for “further negotiations between senior officials”.
After taking the aforementioned actions, the Parties will establish a mechanism to continue discussions about economic and trade relations
Oh — that would be nice, wouldn’t it? Further negotiations. And discussions. Yes. Let’s agree to continue to agree to have some nice dinners. And both sides can claim “victory” in their respective media.
WHAT REALLY HAPPENED?
In summary, BOOM can guess what really happened. At the outset of the meeting, China stated bluntly that it could survive very well without any exports to America or imports from America and that was their preferred mode of future action if Trump were to continue his aggressive Tariff War.
That statement would have been delivered in a very sober, blunt manner and followed by a very long pause. There would have been no doubt about China’s resolve. The American team subsequently panicked and capitulated to prevent such a catastrophe from happening.
TIME TO REVIEW DONALD TRUMP’S TRADE DEALS
On February 16th, BOOM wrote: “The Trump Presidency is moving at a fast pace. Many good initiatives have been launched and BOOM is happy to recognise them. On a number of occasions, BOOM has previously declared a strong preference for Trump over the cackling, now forgotten, Presidential candidate who was put forward (presumably) by the Democratic Party. BOOM has also declared Trump to be far preferable to the demented, aged former President whose name is perhaps best left to decay into a deep, dark, forgotten corner of US history. However, it is early days in the new administration.”
Much water has passed under the bridge since February, three months ago. Trump has announced that the United States is somehow a poor victim in trade matters and has been taken advantage of by other nations. Remember, the USA issues the global reserve currency, is the largest national economy on Earth and exports its military power through hundreds of military bases world wide.
According to David Vine, professor of political anthropology at the American University in Washington, DC, the US had around 750 bases in at least 80 countries as of July 2021. The actual number may be even higher as not all data is published by the Pentagon. Japan has the highest number of US bases in the world with 120 active bases, followed by Germany with 119 and South Korea with 73. No other nation comes close to such military projection so they are clearly not established to defend the USA. There is another purpose and that is to project US Dollar dominance. “Use our currency … or else”. These bases are used to defend the dominance of the US Dollar in settlements of global trade and capital transactions. But, somehow, Donald sees the US as a victim in global trade. Go figure.
Despite all of the facts of apparent global military, economic and currency dominance, Trump is adamant that the US has been victimised by other nations and has been taken advantage of. MMMmmmmm …...
“Liberation Day”, on April 2nd, has come and gone when Trump launched his second Tariff War on all other nations. His first was launched in his first Presidency and failed badly. But Donald doesn’t like to be reminded about that.
It is now time for BOOM to examine Trump’s approach to the new trade deals being “negotiated” that are based upon nations coming to gladly “kiss his arse”.
STOP ANCHORING, DONALD – IT’S NOT OK IN DIPLOMATIC CIRCLES
Donald Trump uses a common negotiating tactic that confuses many people who are not experienced in negotiation. It is called anchoring. So --- what is Anchoring?
“Anchoring” is a bias that all humans suffer from. It is the tendency to rely too heavily on the first piece of information that is offered in any negotiation.
If you are selling a car, for example, and, at the outset, you claim a price clearly higher than the accepted market price, then you have immediately increased the anxiety level of the prospective buyer. That anxiety will make the buyer more willing to pay a price higher than they were expecting before the negotiation began. You have anchored them “high”.
If you are the buyer in such a situation, the best thing you can do with an obvious anchor is reject it. Whenever a seller mentions a too high number, mentally acknowledge that it’s an attempt to anchor you and make a conscious effort to dismiss it.
You should not just say "no," but you can certainly say, "that price is well above my expectations”. It is wise to also explain some reasons.
A skilled negotiator/buyer will stay calm and immediately counter with a low anchor, a price well below what they are prepared to pay and certainly below the accepted market price. In other words, the buyer can immediately anchor the seller to a low price expectation as a counter tactic.
The anchoring effect is a psychological phenomenon in which an individual's judgements or decisions are influenced by a reference point or "anchor". Both numeric and non-numeric anchoring can be used in negotiations. In numeric anchoring, once the price of the anchor is set, all subsequent arguments, estimates, etc. made by an individual may change from what they would have otherwise used without the anchor being present. An example of non-numeric anchoring is when an individual may be more likely to purchase a car if it is placed alongside a more expensive model (the anchor). If the initial price being asked for the car is higher than expected, then subsequent prices discussed in the negotiations that are lower than the anchor may seem reasonable, perhaps even cheap to the buyer, even if said prices are still relatively higher than the actual market value of the car. And vice versa.
In other words, if you are seller, you should launch the negotiation immediately with a high price, above market expectations. And if you are a buyer, you should try to launch the negotiation immediately with a low price, well below market expectations. Don’t ever ask “what do you want for it?”. That is a mistake. Just state the price you are prepared to pay — well below market expectations.
The skilled negotiator who is familiar with negotiations and the anchoring bias will try to name his/her price at the very outset. The first to anchor most often has the most effect.
Another common bias that can be used in such negotiations is the Appeal to Authority bias. This is where the seller will justify a high anchor price by claiming it is justified by some expert opinion. For example, the seller could say “John Smith of Car Magazine rates this model highly and says that the best examples are sold at prices well above average”.
Alternatively, the buyer can say “Harry Edwards of Motor Magazine rates this model as a car with many problems”.
Negotiating is a skill that can be acquired by anyone. Another matter to consider is value. “Price is what you pay and value is what you get”. That statement is often attributed to Warren Buffett and/or Benjamin Graham. When Warren buys anything, he concentrates on the long term value rather than the immediate price. Of course, he wants to pay a price that is well below the long term value.
TRUMP DIPLOMACY – ANCHORING WITH A BASEBALL BAT
Donald Trump uses another negotiating tactic as well — one that is (reportedly) used by criminal gangs. He enters the negotiating room clearly holding a baseball bat. He immediately announces the “deal” with a high price anchor. And before the buyer can make a low price counter anchor, he holds up his baseball bat and adds “I think you should accept my deal …. or else”. In other words, he adds a threat of serious injury to the buyer.
In such a situation, the buyer has limited choices. If he is made sufficiently fearful and did not expect the tactic, he may accept Trump’s offer or offer a price far higher than he would have liked. However, he will (definitely) walk out of that room with a firm view of the future. In other words, he will never buy a car from Trump again. He will never trust Trump again. And he will certainly not do business with him again. And, by the way, he will tell all his friends exactly what Trump did in the negotiation.
But, if he expected this to happen and is a skilled negotiator, he can pull out his (preferably bigger) baseball bat and say “I don’t think that would be a good idea”. That is when the negotiation gets much more interesting and where a more agreeable price may be agreed upon by the two parties. However, the buyer will (again) walk out of that room with a firm view of the future. In other words, he will never buy a car from Trump in the future. He will never trust Trump again. And he will certainly not do business with him again. And, by the way, he will tell all his friends exactly what Trump did in the negotiation.
Trump is playing a very high stakes game here. He is playing with the future reputation of the United States. BOOM would advise a more diplomatic approach to trade negotiations.
Hopefully, for the future benefit of the United States, Donald will learn that lesson sooner rather than later.
THE ART OF THE DEAL — REVIEWS OF THE BOOK
Donald Trump is famous for a book called “The Art of the Deal” which he may, or may not have written. Let’s see what some reviewers had to say about the book.
From The Conflict Expert: Mastering Negotiation: A Critique of Trump’s ‘The Art of the Deal’
“As a celebrated business man and politician, President Trump should know a thing or two about the subject and, as world events demonstrate, he is not afraid of conflict. Read on for a summary of this book and my analysis of it from a conflict perspective. It’s all personal opinion and it is not politically motivated in any way.”
“The Art of the Deal …… by Donald Trump (co-written with Tony Schwartz) is part memoir, part business advice book published in 1987. It outlines Trump’s approach to deal-making, business strategy, and personal philosophy.
The book gives us a fascinating insight into New York in the 80’s and 90’s where the men that dominated industries fought tooth and nail to get what they wanted. His approach to business is fast paced and pretty frenetic and takes us through his clashes, negotiations and deals.
He and his co-writer spell out for the reader, Trump’s business principles, all of which he says, have been instrumental in his successes. He is presented as a master negotiator and much is made of his real estate acquisitions such as Trump Towers, Mar-a-Lago and The Grand Hyatt in New York.
There was no mention of his failures such as Trump Airlines, Trump Taj Mahal Casino, Trump Hotels and Casinos Resorts, Trump Entertainment, Trump Vodka, Trump University, Trump Steaks, and several others. All of these businesses either failed, ended in lawsuits and closure for defrauding students or were bankrupted.
In general, the principles seem fairly obvious- most entrepreneurs think big and are ambitious in attaining their goals and it’s always advisable to know the market one is going to trade in. In light of some of his business failures and the allegations of fraud (the case was settled without fault by Trump for USD 25 million), one wonders how sincere he was about providing value and following through on promises.
When it comes to leverage, it’s again, standard practice to know what your alternatives are in negotiation – generally referred to as a BATNA- which is much more technically expressed by the authors of “Getting to Yes”.
Domination will only create anger, frustration and destruction which could have repercussions as simple as revenge. It doesn’t make you tough. It makes you inflexible, stubborn and probably lacking in judgement.
Politeness, respect and likability are persuasive qualities in any negotiator and empathy is so powerful, it should be a key skill in your conflict resolution tool kit.”
Here are some excerpts from Wikipedia:
“Trump: The Art of the Deal is a 1987 book credited to Donald J. Trump and journalist Tony Schwartz. Part memoir and part business-advice book, it was the first book credited to Trump, and it helped to make him a household name. It reached number 1 on The New York Times Best Seller list, stayed there for 13 weeks, and altogether held a position on the list for 48 weeks.
Trump cited it as one of his proudest accomplishments and his second-favorite book after the Bible.
Schwartz called ghost-writing the book his "greatest regret in life, without question," and both he and the book's publisher, Howard Kaminsky, alleged that Trump had played no role in its writing. Trump has given conflicting accounts on the question of authorship.
Schwartz was hired to write the book for $ 250,000 upfront; Trump assigned him half of the royalties. Schwartz later admitted that his motivation was purely financial, and needed the money to support his new family.
According to Schwartz in July 2016, Trump did not write any of the book, choosing only to remove a few critical mentions of business colleagues at the end of the process. Trump responded with conflicting stories, saying "I had a lot of choice of who to have write the book, and I chose Schwartz", but then said "Schwartz didn't write the book. I wrote the book." Former Random House head Howard Kaminsky, the original publisher, said "Trump didn't write a postcard for us!". The book was published with the authorship given as "Donald Trump with Tony Schwartz". In 2019, Schwartz suggested that the work be "recategorized as fiction".
Schwartz was the subject of a July 2016 article in The New Yorker in which he describes Trump unfavourably and relates how he came to regret writing The Art of the Deal. He also stated that if it were to be written today it would be very different and titled The Sociopath. Schwartz repeated his self-criticism on Good Morning America, saying he had "put lipstick on a pig".
Excerpts From George Wu —
The Art of the Deal Is Not the Art of War
John P. and Lillian A. Gould Professor of Behavioural Science at Chicago Booth.
“It is probably no surprise that Trump’s overall tone in The Art of the Deal is pugnacious. One of his key pieces of advice is to “Fight back.” He casts negotiation as a zero-sum game, with a clear winner and a clear loser.
But like any approach to negotiation, that attitude only works some of the time. It may be successful if you’re trying to drive a hard bargain in a pure price negotiation. But it may fall flat if the negotiation requires that one party really listens to the other, that they collectively try to solve a problem, or that they figure out how to craft imaginative trades.
The pugnacious tone also points to a big missing piece in The Art of the Deal as a primer for negotiation: the lack of any discussion about the role of relationships in negotiation and the process of discovering joint gains. Relationships are critically important in negotiations, because in most important business situations, the final agreement or contract just defines the potential value of a deal. The ultimate value requires implementing the deal, and that depends on people’s ability to work together.”
And more …..
“Because there is no single format for negotiations, it’s hard to think about a simple recipe for being a good negotiator. And yet Donald Trump claims to have such a recipe. In The Art of the Deal, he offers 11 tips to make you a better negotiator. Some of these tips are sensible, but obvious and well known. Others are suspect, vague, and unsubtle.”
And ……….
“Trump has clearly built a business empire, apparently on the notion that all negotiations are tug-of-war battles for money, resources, and power. Whether such an approach would work well in the Oval Office is now up to American voters.”
MOODY’S DOWNGRADES CREDIT RATING OF USA
On Friday 16th May, Moody’s, the Credit Rating Agency, announced that they have dropped the United States creditworthiness to Aa1, joining Fitch Ratings and Standard & Poors at that level. Fitch and S & P lowered their credit ratings for US Sovereign debt in 2023 and 2011, respectively.
The decision to downgrade debt was influenced by “the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” Moody’s said in a statement. Moving forward, Moody’s said it expects borrowing needs to continue to grow and for it to weigh on the US economy as a whole.
TRUMP ENDS TARIFF TALKS WITH MOST NATIONS -- WILL CONTACT THEM BY POST (!)
On Friday, the US President Donald Trump announced that Washington will inform 150 countries of updated tariff rates with the US by post within the coming weeks. It is no longer feasible to meet individually with every country seeking a trade agreement, he explained.
BOOM reacts —
This is NOT how to win friends and influence people
This is NOT diplomatic
Maybe Trump’s arse was sore from so much kissing?
Reminder to Donald — 7.7 BILLION people live outside the USA
Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick will be responsible for sending out letters detailing the new tariff rates that will apply to each country, Trump said. Major US retailers such as Walmart and Target have said they plan to raise prices in response to the rising cost of imports.
BOOM can imagine the calls that will be made to the BRICS organisation in reaction to this.
BRICS Nations Versus G7 — Nominal GDP
1990 - 2025
BRICS Nations Versus G7 — GDP on a PPP Basis (Purchasing Power Parity)
1990 - 2022
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In economics (and finance), things work until they don’t. Do your own research. Make your own conclusions. BOOM does not offer investment advice.
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