To All SNS Members:

China has never had a better friend than Goldman Sachs.  In the earliest days of the US/China rapprochement, the Chairman of GS took a leave so that he could live in China and teach there.  Later, not surprisingly, GS was the first US investment bank with an office in China.  And since then, GS has openly advocated for China's interests as its business there rapidly expanded.

Goldman also has an unmatched history at the top of the US Treasury.  Virtually every administration has put a GS veteran into the Treasury Secretary slot, and often there are two or three GS people in the top ranks of the White House.  Examples include Bob Rubin under Clinton, and Steven Mnuchin under Trump.

China's other great US friend is the lobbying firm called AmCham, the American Chamber of Commerce.  AmCham has always lobbied for China on issues of trade, and even though three quarters of its members in China say the Communist Party is ripping off their IP, AmCham continues to lobby the White House not to upset China.

SNS members are fully aware of China's national business model, and its asymmetric approach to trading: China loves "free trader" partners, since China is the greatest violator of WTO free trade principles and rules on the planet.

President Trump is the first US president to do the only thing that will change China's destructive practices, by threatening (and using) tariffs, generally under Section 301.  This worked against Japan in the 1980's, and is working against China now.  The bringing of these tariffs, supported by the team of now-presidential advisor Peter Navarro, USTR Robert Lighthizer, and Commerce Secretary Wilbur Ross, has been the most important (and hopeful) event in recent economic history, going back to China's adoption of its current model in 2000. 

Of course, China hates this practice, since it will force them to change and trade fairly.  All of this brings us to today - or rather, to last week, when Trump sent a US team over to China - at its request - for a last - ditch plea by China to avoid tariffs. That delegation included Mnuchin, Peter Navarro and Robert Lighthizer.

During this period, GS had two people at the top of the WH ladder, the second being Gary Cohn, also a pro-China "free trader."  Cohn was fired a few weeks ago, after Trump got tired of his apologias over China's trade practices.  For GS, that left Mnuchin vs. the three people who really understood China's model.

Wilbur Ross seems to have been sabotaged sometime in the last two weeks; the leaks are that his 7-year embargo prohibiting sales of US components to ZTE, China's second-largest networking firm, were brought up by Liu He, the Chinese vice premier, during last week's Beijing summit.  Other stories out this week indicate that the US team fell into divisive squabbling while in China, with Mnuchin cutting Navarro out of meetings and making it clear that he was the only one to deal with on the US side.  Uh oh.

The Chinese must have been ecstatic. They were so excited, in fact, that Liu He is now back in DC to meet privately with Mnuchin again this week.  Perhaps through coincidence, AmCham is putting up a three - day White House meeting featuring all of those US interests who China has threatened.  Apple CEO Tim Cook, among the most blatant of China apologists, got a special private hearing with Trump last week.

The purpose of this alert is to underline the importance of this moment in US China relations, not just to the US, but to the global economy.  If the US backs down - if the money vs. country folks at GS and AmCham win - the prognosis for free world economies becomes very grim.  Already losing global market share to China, the process will only accelerate. 

The next few days will likely determine whether the US, joined by other free world economies, achieves real change in its relations with China, or whether China wins, and the world loses. For those SNS members with access to Trump or the White House staff, this is the time to tell them not to cave in to Goldman, to AmCham's "globalists without a country," or to China's pressures.

If Trump stays the course, we all win.

Your comments are always appreciated,

Sincerely,

Mark Anderson

CEO

Strategic News Service