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The Call @ Hedgeye | April 30, 2024

 As Charles Dickens added after his famous opening lines from Tale of Two Cities, "It was the age of wisdom, it was the age of foolishness." Over the last ten days there were signals of foreign policy wisdom from the White House; but there was also an abundance of foolishness.

  • Most importantly, in a sign that wisdom might be prevailing, President Trump called Chinese president Xi Jingping to reassert U.S. adherence to the "One China" policy.  The suggestions the U.S. might be changing this four decade-long stance rattled diplomats world-wide and elevated business risk in the Asia-Pacific region. 
    • But with this Trump stand-down, the question remains: what quid did the president elicit from Xi? It is still not clear from published accounts; but one rumored possibility was Beijing's agreement to pressure North Korea on its nuclear program, a quid that, if true, took on even greater significance in light of yet another test-launch by Pyongyang of a medium range ballistic missile during Japanese PM Abe's visit.
  • And on the Abe-Trump summit, the two leaders bonded in a manner seldom seen in the Oval Office - symbolized by the now-famous "19 second handshake.” Abe in particular has been masterful in working new Tokyo-Washington bilateral ties, from the moment Mr. Trump was elected last fall (much to the annoyance of then-President Obama).  
    • In many respects, the Abe visit showed the president at his best: an intimate, one-on-one meeting, with a visitor prepared and determined to make the new relationship work, and with a U.S. president up-to-speed on the issues. 
    • There was an additional, little highlighted outcome of the U.S.-Japan summit: the establishment of a new bilateral trade and commercial "dialogue," with Vice President Pence and Deputy Japanese PM Aso in the lead.  This particular dialogue will be a clearly elevated forum over the China-focused and cabinet-led "strategic and economic dialogue" of the Obama era. The point? Send an unmistakable message to the PRC on the primacy we attach to our treaty ally, Japan!

With the "One China" issue apparently resolved and with a solid showing alongside the Japanese PM, there was some basis for previewing an "age of wisdom" for the president's foreign policy team.


But then everything fell apart.  The Mike Flynn fracas revealed a White House-led national security apparatus riven by competing factions and incapable of articulating a coherent global security policy. Pillars such as Secretary of Defense Mattis, Secretary of State Tillerson, and CIA Director Pompeo are providing useful course direction while the White House sorts out its internal national security leadership.  Disturbingly, an eminently qualified candidate to take Flynn's place, former Seal Team commander Vice Admiral Robert Harward, turned down an offer; it says volumes about White House in-fighting, and the problems of recruiting a security adviser who demonstrates professional temperament and bureaucratic competence  -- characteristics lacking in Flynn. Bottom Line: the president needs a new national security assistant ASAP.

  • Immediately in the wake of the Flynn ouster, the president hosted Israeli PM Bibi Netanyahu. It should have been another summit remembered for bear-hugs and embraces; instead, it became a major foreign policy question mark: did the President walk back from two decades of U.S. policy towards Israel and the Palestinians? Is he accepting a "one state," not "two-state," solution as the basis for a peace deal? 
    • Because of policy incoherence in the White House and the president's off-the-cuff speaking style (never advisable in discussing the Middle East), everyone, including the Israel PM, was left to wonder what he meant. Hardly an auspicious beginning to U.S. policy in a troubled region.

But with all the turmoil over the last 10 days, the real test lies ahead, and it will be over future U.S. commercial relationships in the East Asia domain. The "One China" reset merely buys time as the White House looks to "level the playing field" with China.  Washington-Beijing tensions will rise -- over currency and tariffs -- as will the business risks. Rarely have we needed more a new "age of wisdom."