Global stock markets bounced after the White House locked up trade hawk Peter Navarro and wheeled out trade dove Steven Mnuchin instead.

A week after Navarro released a White House report accusing China of “economic aggression” through systematic theft of US technology, Mnuchin told CNBC this morning that everything was business as usual: The Committee on Foreign Investment in the US, the government body that reviews prospective takeovers of US companies, would get some additional powers through new legislation, allowing it to prevent joint ventures partly owned by foreign governments from buying parts of US companies.

Mnuchin presented the change as a minor fix on existing policies rather than as a comprehensive policy shift. This reminds Asia Unhedged of Groucho Marx’s old line: “These are my principles. And if you don’t like them, I’ve got others.”

Is America in an existential war with China for dominance of high-technology investment, or simply blustering? A key signal will be the treatment of the Chinese telecom giant ZTE in the National Defense Appropriations Act. According to the consulting firm Beacon Policy Advisers, the Administration will strike a compromise in the legislation’s final version that allows ZTE to stay in business. An earlier US ban on chip sales to the telecom equipment manufacturer threatened to shut the company down.

Chinese President Xi Xinping personally intervened with President Trump, who proposed a US$1.9 billion fine and US government monitoring as an alternative. The Senate put a provision scotching the compromise into the defense funding legislation, and the White House has been working quietly to remove it.

That is a critical issue: If the US can shut down a major Chinese company by banning essential exports, it will have difficulty persuading China to reduce its trade deficit with the US by purchasing more US energy supplies and agricultural products. China will not run the risk that a future US government might shut off energy exports.