Politics 101 – divert attention when you’re hit with domestic issues or personal scandal. That’s what every young and old politician needs to master in order to survive. In the case of U.S. President Donald Trump, and like other presidents before him, the time could be ripe to play to the gallery. While he could send a dozen of Tomahawk cruise missiles into Iran, there’s a simpler option.

 

Trump could be making a final preparation to bomb China with more trade war missiles, of which he has plenty in storage. As the midterm elections on November 6th fast approaching, he desperately needs to distract voters’ attention from the problems at home by shifting the focus to the ongoing trade war with China. The uglier it gets, the better it is for him.

 

Last Tuesday, Trump was hit by two legal bombshells simultaneously. First, his former campaign chairman, Paul Manafort, was found guilty of eight felonies. Manafort was found guilty by a federal court in Virginia on Aug. 21 of eight out of 18 tax and bank fraud charges stemming from special counsel Robert Mueller’s federal Russia investigation.

Second, on the same day, his former lawyer, Michael Cohen, pleaded guilty in front of a New York federal court to eight felony counts involving various frauds. While rumours have been popping that Trump might consider the option to pardon Manafort, Trump wasn’t so forgiving about Cohen. The president told all and sundry not to engage his long-time personal attorney’s service.

 

Potentially the most damaging piece of extraordinary bombshell for Trump was Cohen implicating the president in an illegal scheme to silence two women from making public their claims of having sex with him. Mr. Cohen declares that Mr. Trump had directed him to arrange payments to the two women during the 2016 campaign.

 

Besides pleaded guilty to multiple counts of tax evasion and a single count of bank fraud, Cohen told a judge in United States District Court in Manhattan that the payments to the women were made  “in coordination with and at the direction of a candidate for federal office,” hence, implicating the president in a federal crime.

One of those payments was a US$130,000 payment Cohen made to Stephanie Clifford, better known as Stormy Daniels – an adult film actress and a former Playboy playmate – in the run-up to the 2016 presidential election. Prosecutors said that Trump Organization executives were involved in reimbursing Mr. Cohen for that payment.

 

The other payment for sex involved a complicated arrangement in which a tabloid bought the rights to the story about the former Playboy model, Karen McDougal, and then killed it. Mr. Cohen, who once said he would take a bullet for Mr. Trump, had been the president’s long-time trouble-shooter, fixing some of his most sensitive personal matters over a decade at the Trump Organization.

 

The two cases – Manafort and Cohen – have given fuel to speculations of impeachment, which is unlikely. President Trump himself warned that if he were impeached, the stock market will crash. He was, of course, overreacting because there are no way the Republicans will be dumb enough to rock the boat at this moment.

Nick Marro, an analyst at the Economist Intelligence Unit, agreed that Trump has demonstrated a pattern of turning to geopolitics as a domestic ploy – “There is a chance that the president could use the trade war as a diversion: We’ve seen him do it before with international affairs.” However, the risk is once escalated, the trade dispute might not be easily de-escalated.

 

One problem is that “both countries think they are winning the trade war”. Hence, the Chinese would not know whether Donald Trump is retaliating or just playing a diversion game when he moves his chess piece. Market watchers are now keeping their eyes on the next round of U.S. tariffs on US$200 billion worth of Chinese goods.

 

To make things worse, there are reports the “odds are overwhelming” that the Democrats will win the House in the midterms. This would add unnecessary pressure for Trump, which in turn could trigger the president to do unthinkable things. The good news is, China understood how unpredictable the U.S. president can be so the Chinese have prepared all the eventualities.

 

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August 27th, 2018 by financetwitter

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