Trump sets trap for China, steps in it

Today's Agenda Trump has made a China deal much less likely. The Fed can't help get Trump out of his trap. We must fight white-nationalist terror differently. Stronger unions can fight inequality. Trump Traps Self in Trade War Sun Tzu, who wrote a famous book about war, said, "To a surrounded enemy, you must leave a way of escape." President Donald Trump, who didn't quite write a famous book about deals, could have followed that advice. Trump, with a stronger economy and more tariff targets, has always seemed to have the upper hand in his trade war with China. But he keeps underestimating not only China's capacity for economic pain but also the extent of Xi Jinping's need to escape this conflict without looking like a loser, writes Bloomberg's editorial board. So he keeps making such mistakes as last week's unprovoked threat of more tariffs, to which China retaliated by, among other things, warning it was ready to launch a currency war. That threat hammered stocks and raised the risk of a recession. Despite starting off with a cornered opponent, Trump has blundered into his own trap, reducing the chances of an economy-saving deal.  China's move to let the yuan weaken yesterday also exposed the lie of Trump's claim that China has borne the full brunt of his tariffs, writes Karl Smith. China quickly re-boosted the yuan today, inspiring a market rebound on Charlie Brown-like hopes a deal can still be reached. And both sides have good reasons to settle, notes John Authers. But they have also burned through an awful lot of goodwill. If talks continue to be fruitless, pushing China to follow through on its currency threat, then the shift could be nothing less than the end of a global currency order akin to the gold standard and Bretton Woods system, warns George Magnus. As Sun Tzu also said, "There is no instance of a nation benefiting from prolonged warfare." Trump Traps the Fed, Too It's entirely possible Trump's latest trade-war threat was merely designed to get the Federal Reserve to act, as Shuli Ren notes. And Trump has certainly put the Fed in its own bind, Karl Smith writes: The central bank's job is to stabilize the economy, so it must cut rates whenever Trump destabilizes the economy. But in so doing, it enables Trump and makes itself seem politically compromised. Then again, before last week, Trump could still blame a recalcitrant Fed for an economic slowdown or recession. Now he has made himself the far more obvious scapegoat, writes Brian Chappatta. Not a great look going into 2020. In any event, Trump is apparently operating on fundamental misconceptions about monetary policy, writes Ramesh Ponnuru. Among those is the idea that slashing rates will boost the economy by loosening financial conditions and weakening the dollar. But if the rest of the world is doing the same thing, then those benefits fade quickly. In fact, rates are already slipping into black holes everywhere, with $14.5 trillion of the global debt market yielding less than zero, notes Mark Gilbert. We'll likely soon see policy makers turning to ever-more-exotic tricks to boost economies, from helicopter money to Modern Monetary Theory. Who knows what will result. Further central-bank reading: The ECB shouldn't punish German savers with negative interest rates. – Tyler Cowen Confronting America's Massacre Culture The mass shooting in El Paso makes clear America has a far-right terror problem, which lately has been far deadlier than the radical Islamic terrorist problem that once dominated our fears. Eli Lake writes we must fight white-nationalist terror differently than we fought Islamic terror, including learning from that campaign's mistakes.  We know what motivated the El Paso shooter because he posted a manifesto on the sewer-like website 8chan. Hackers have driven that site from the mainstream internet after security firms stopped protecting it. And those private companies have a First Amendment right not to protect speech on par with the rights of the speakers, notes Noah Feldman. Still, Noah feels there must be a place where even the most abhorrent opinions can be expressed.  Of course, if you're looking for abhorrent opinions, just try reviews of the horrifically lethal ammunition the El Paso shooter and other killers use in their assault rifles, writes Frank Wilkinson. These promise "deep wound cavities" that can easily penetrate clothing and liquefy bones and organs.  Telltale Charts One highly effective way to fight inequality is to bolster worker power, starting with restoring long-lost strength to labor unions, writes Noah Smith. The Barneys New York bankruptcy shows not even luxury is immune to retail's pressures, writes Sarah Halzack. Further Reading Drugmakers on the hook for the opioid crisis are just learning the costs will be enormous. – Max Nisen  Gannett Co. selling itself to New Media Investment Group Inc. is just one of the least bad of several possible grim fates in the newspaper business. – Brooke Sutherland   Boris Johnson wants to turn the Tories into an amalgam of the Brexit and Labour parties. What could go wrong? – Therese Raphael  Like Brexit, India's anti-federalist power play in Kashmir is reckless and self-destructive nationalism. – Pankaj Mishra  Some assistance programs actually make the government money in the long run. – Scott Duke Kominers  A new Koch-Soros-funded think tank uniting isolationists from both ends of the political spectrum will struggle for influence. – Hal Brands  ICYMI Republicans fear their embrace of guns will cause their "extinction in the suburbs." How Jeffrey Epstein tried to stay in Wall Street's favor. R.I.P., Toni Morrison. Kickers Alaska's sea ice has completely melted. Scientists have linked memory to a particular brain signal. A genetic mutation may have sparked recursive language and modern imagination in humans 70,000 years ago. Why Woodstock could never happen again. Note: Please send ice and complaints to Mark Gongloff at mgongloff1@bloomberg.net. New to Bloomberg Opinion Today? Sign up here and follow us on Twitter and Facebook. FOLLOW US SEND TO A FRIEND You received this message because you are subscribed to Bloomberg's Bloomberg Opinion Today newsletter. Unsubscribe | Bloomberg.com | Contact Us Bloomberg L.P. 731 Lexington, New York, NY, 10022