If you stop and think about the importance of this turnaround in the U.S. –China trade, it would be easier to understand President Trump's bubbling enthusiasm about his "outstanding" relationship with China's president, and his apparently unbounded optimism about the future American ties with a country Washington actively tried to contain and isolate for more than a decade.

President Trump urgently needs (a) faster economic growth; (b) balanced external trade; (c) jobs and incomes for 14.4 million people without stable employment; and (d) meaningful livelihoods for nearly 40 percent of Americans currently out of the labor market -- a heart-breaking wasting resource.

How can he do all that when his two main policy instruments are virtually out of commission?

The monetary policy is a spent force. Long years of economic mismanagement have brought the U.S. to the point where the lack of investment in our human and physical capital has reduced the country's productive capacities so much that we have accelerating inflation in a slowing economy. That is a deep-rooted structural problem that requires labor and product market reforms – an issue where the Fed, acting alone, is totally powerless.

Is "Chimerica" back?

The fiscal policy is facing an even sharper binding constraint: Currently standing at 5 percent of GDP, America's consolidated public sector budget deficit is on an apparently unstoppable ascending path this year and next. The public debt at 115.6 percent of GDP is also projected to hit 120 percent over the next two years. And with the primary budget deficit of about 1 percent of GDP we have years ahead of us just to stop and reverse the growth of public debt – if we can bring our budget deficits down, and keep them down, way down, for many years.

What's left then is the foreign trade policy. Indeed, a substantial reduction of our large trade deficits is the only fast and safe way of providing support to American economy in an environment of reasonable price stability. Washington has a potential stimulus of $480 billion to draw on – the sum of Chinese, Japanese and German trade surpluses with America. According to all the criteria of international trade adjustment, these three countries have the obligation to balance their trade accounts with the U.S.