Ok, so how did we get here again?
Let's recap. It'll be fun.
First Donald Trump told flyover America that China was largely to blame for the decline of American manufacturing. Then, flyover America elected Donald Trump. Then, Donald Trump made Peter Navarro trade czar. Gary Cohn was supposed to counterbalance Navarro and that worked reasonably well right up until January when Trump took the first baby steps towards what has since morphed into an all-out trade war by slapping tariffs on residential washing machines. Steve Mnuchin made things worse by jawboning the dollar lower in Davos less than 48 hours later. About a month after that, Navarro and Wilbur Ross saw an opportunity to parlay Trump's consternation at the exit of Hope Hicks into the announcement of steel and aluminum tariffs. That announcement prompted Cohn's resignation. Then Wilbur Ross showed up on CNBC with a can of Campbell’s soup he said he bought at a local gas station in Florida. Larry Kudlow replaced Cohn, reviving hopes that Trump would call off the trade war. Three weeks later, the USTR published a list of Chinese products Trump intended to subject to tariffs in connection with the 301 probe. China retaliated immediately. Trump lost his shit and suggested he would slap tariffs on another $100 billion worth of Chinese imports which meant that the total amount of goods subject to tariffs would exceed the total amount of goods America imports from China in a given year. A month after that, Navarro was sidelined from trade negotiations with China after reportedly getting into a profanity-laced shouting match with Mnuchin in Beijing. With Navarro out of the picture, a comparatively rational Mnuchin struck a truce with China and told Fox that the trade war was "on hold". Navarro and Steve Bannon (who started running his mouth to Bloomberg about Mnuchin selling out America) were furious and the backlash from the isolationist contingent caused Trump to change his mind. Fast forward two weeks from that abrupt about-face and you land on Thursday evening, when the White House confirmed that Trump would indeed be slapping $50 billion in Chinese goods with tariffs. In the wee hours of Friday morning, reports suggested that should China retaliate, Trump would go ahead and publish another list and subsequently make good on the promise mentioned above to take things all the way to $150 billion in total goods taxed. Rounding out the absurdity, Trump, in the official announcement Friday morning, maintained that he and Xi still have a "great friendship."
Oh, and somewhere towards the tail end of that, Larry Kudlow had an actual heart attack.
There you go. That's the entire ridiculous story delivered breathlessly as only I can deliver it.
Friday's decision to move ahead with the tariffs on China raises innumerable questions, not the least of which is this: What the fuck happened to Steve Mnuchin?!
It was just a month ago when he had seemingly done what Gary Cohn couldn't: vanquish Navarro on the way to restoring some semblance of sanity to America's trade policy.
But Navarro, like Steve Bannon, is a Rasputin-type and apparently, he has not only redeemed himself in Trump's eyes after being put in timeout for screaming obscenities at people, but is now ascendant again when it comes to dictating trade policy. So ascendant, in fact, that buried in a noteworthy Friday tweet from Italian Dining Correspondent, Dealbreaker mainstay and man who will figuratively choke the shit out of you on Twitter if you say the wrong thing, Charlie Gasparino, was the suggestion that at least someone is thinking about Mnuchin resigning. Look at this:
Now again, Charlie clearly says that according to his sources, Mnuchin has no plans to leave, but the fact that we're even using the words "resign", "tariff" and "Mnuchin" in the same sentence is extremely notable considering that ol' Steve seemingly had this situation firmly under control not even a month ago.
We won't speculate any further than that, but as to the other point in that tweet, more than a few folks have warned Trump that sparking an all-out global trade war could trigger a market collapse and the going assumption is that the President understands he's walking a fine line between appearing "tough" on trade and preserving what JPMorgan's Marko Kolanovic recently called the administration's "market scorecard".
Both of those things (i.e., scoring political points with the base by adopting an optically aggressive stance on trade and ensuring that he can still reference the buoyant stock market as evidence of his "success") are critical vis-à-vis the midterms.
As long as Trump truly does understand how to manage that in a game theoretic sense, he can achieve the best possible outcome, which amounts to making voters believe he's accomplished something on trade without actually "accomplishing" so much that he ends up tanking U.S. (and possibly global) equities.
Count me skeptical as to whether Trump has a good grasp of just how delicate a balance that is.
And count Steve Mnuchin skeptical too - even if he would never say so publicly.