On Monday, global markets overdosed on "covfefe" - again.
This happens from time to time, and usually, someone comes along with some Naloxone before things spiral completely out of control.
Trump didn't invent inflammatory Twitter rhetoric, nor was he the first politician to move markets with social media posts. But - and this is the important part - he was the first person to master the process of extracting pure "covfefe" from nonsensical tweets, and his product is potent as hell.
The GOP is effectively betting the midterms on Trump being able to administer that product in a way that keeps the base high as a kite but avoids accidentally killing risk assets. That's a fine line and one of the problems is that Trump doesn't take into account the possibility that destabilizing news might come from places other than his Twitter feed when he goes about deciding how much unadulterated, uncut, "covfefe" to dole out on a given day.
For example, Friday's broadside on European automakers and Sunday's "more than reciprocity" threat compounded the Daimler profit warning and although China attempted to ameliorate the situation over the weekend by delivering a long-promised RRR cut, news that Trump plans to restrict Chinese investment in U.S. industries (this was reported by FT , WSJ and Bloomberg on Sunday and you should note that those linked posts have since been updated) deep-sixed risk sentiment heading into the new week.
As I put it early on Monday morning, "apparently, Mnuchin is going to begrudgingly accept this new plan".
That plan, to be announced on Friday, will involve what Bloomberg describes as "a two-tracked CFIUS process to review investments, with one specifically for China.”
The reference to Mnuchin there is important. Even if they're only half true, these new reports suggest he is still losing the internal battle at the White House for control of the trade narrative.
Two Fridays ago, Charlie Gasparino tweeted that according to his sources, Mnuchin has warned Trump about the prospect of a market crash in the event the administration keeps pushing the envelope on the trade issue. Fast forward a few days, and reports suggested Mnuchin was deliberately staying silent in what amounts to an effort to express his displeasure with how things are going without actually expressing anything publicly for fear of pissing off Trump or otherwise making his angst known to the public.
Well, if the reports about restrictions on Chinese investment are true, it means that not only did Steve lose the battle on tariffs (which effectively amounted to snatching defeat from the jaws of victory given that he managed to muzzle Navarro last month on the way to striking a truce with Chinese Vice Premier Liu He on May 19), he's now losing the battle on incremental escalations. More important still, it looks like he's actually going to have to put his name on the latest effort to penalize the Chinese for all the various transgressions (real or imagined) Trump swears they're guilty of.
Consider this from the Bloomberg piece linked above:
The Trump administration’s plan to deploy some of the most restrictive investment limits in its economic arsenal against China marks a setback for Treasury Secretary Steven Mnuchin’s effort to take a less confrontational approach toward Beijing.
Mnuchin has been working on the plans since as early as December, but has consistently urged a less aggressive approach that is negotiated with the Chinese behind closed doors, the people said. In the end, he was persuaded by the president and other Cabinet members to use blunt tools to address risks from Chinese investments, they said.
And it gets worse. As Bloomberg goes on to say, Mnuchin's Treasury Department will justify the investment restrictions on China in part by relying on a report penned by Peter Navarro:
Navarro’s office last week issued a 36-page report with the blunt title, “How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World.” The report is seen as part of the evidence the administration will use to justify the investment curbs on economic security grounds.
Needless to say, that's a fucking disaster for Mnuchin, something he clearly knows because on Monday morning, he sent out the following panicked tweet:
You've gotta love how that starts out: "On behalf of @realDonaldTrump".
I can just see it now - Trump and Navarro standing over Mnuchin: "Ok, Steve, open your Twitter app and type this out niiiiice and slow..."
I mean, seriously: who do you think wrote that? The reference to "fake news" and "leakers" that "don't exist" are right out of @realDonaldTrump's tweet Rolodex.
Steve should have tried to sneak "help me!" in there somewhere without Trump noticing.
Whatever the purpose of that tweet was, it did exactly nothing to allay concerns.
European stocks closed sharply lower and the Dow's declines accelerated in the hour after Mnuchin's tweet.
And it's no wonder. I'm not even sure Steve's message is all that comforting. For one thing, it confirms the very reports that it seeks to castigate. That is, those reports are not "fake news", because Mnuchin appears to refer to the very same "statement" that those stories said was coming this week. Additionally, saying that it is "not specific to China" doesn't at all refute the contention that part of the announcement will include restrictions on Chinese investment.
Of course what might have helped is if Steve had been allowed to "refute" these reports himself, in language that sounds like it emanated from the Treasury Secretary, as opposed to asking him to tag Donald Trump's personal Twitter account in a tweet that is ultimately just more "covfefe", only channeled through a different @.
Call it "second-hand 'covfefe'".
Whatever the case, I'm going to go out on a limb here and say that Steve's position is becoming increasingly tenuous with each passing escalation and one certainly wonders whether he has a breaking point.
It's ok to abandon this ship Steve, Gary did.