Fool's Mission: Repercussions Mount but Trade War Really Just Starting


Despite mounting repercussions of Trump's misguided trade war, insiders suggest the trade wars are just starting.

Axios has an estimation of Trump's trade war that I agree with: Trump Wants China to Suffer More.

The following is written in Guest Post fashion.

President Trump has no intention of easing his tariffs on China, according to three sources with knowledge of his private conversations. Instead, these sources say he wants the Chinese leaders to feel more pain from his tariffs — which he believes need more time to fully kick in.

  • "He wants them to suffer more" from tariffs on $200 billion of Chinese goods, said a source with direct knowledge of Trump's thinking, and the president believes the longer his tariffs last, the more leverage he'll have.

Why this matters: Trump's trade war with China is at the "beginning of the beginning," according to a source familiar with Trump's conversations. And his team doesn't expect much from the tentatively planned meeting between Trump and Chinese President Xi Jinping on the sidelines of the G20 summit in Buenos Aires next month.

  • The Trump economic team has done no substantive planning so far for the bilateral meeting's agenda, largely because the purpose of the meeting is for Trump and Xi to reconnect, eyeball each other, and feel each other out amid their escalating trade war.

"It's a heads of state meeting, not a trade meeting," a source with direct knowledge told Axios.

Between the lines: "Trump is thinking about this meeting as a personal reconnection with President Xi, not a meeting that's going to evolve into detailed discussions," said a source familiar with Trump's thinking. "The sides are very far apart. ... Right now, there's not the common basis for proceeding."

  • Trump isn't focused on the details of a potential China deal. He's focused on creating more leverage, according to another source who recently discussed the U.S.-China standoff with the president.

Behind the scenes: Trump has privately boasted that his China tariffs have driven down the country’s stock market. Experts say the trade war has hurt market sentiment, but the stock market has never been a reliable barometer of Chinese economic strength.

  • The generic point Trump makes to aides, per a source with direct knowledge: "'We are strong and they are weak.' ... He believes more pressure will bring them to the table to make a deal."

Treasury officials have had contact with key Chinese negotiator Liu He's camp to exchange information. There’s been nothing close to real negotiation, according to sources briefed on them. "There is some contact with mid-level Chinese, but not much. ... I wouldn't overestimate the planning process," a U.S. official with direct knowledge told me.

  • Treasury Secretary Steven Mnuchin's team has told the Chinese there's no point in them floating plans to buy U.S. products as the key priorities — structural issues like IP theft and market access — must be addressed.
  • Treasury officials have told the Chinese that the list of U.S. requirements hasn't changed from the summer, according to sources briefed on their conversations.

The bottom line: All signs suggest the trade war between the U.S. and China is just getting started. I've asked sources close to Trump whether he's ever expressed any private concerns over whether his tariffs could backfire due to Chinese retaliation against American consumers or companies. Nobody I've spoken to has heard Trump express anything along these lines. He's all in.

Mish Comments

The Axios article had seven components. I posted just one of them.

I agree with the above Axios take. Moreover, once the midterm elections are out of the way, Trump really won't give a damn about much of anything up to the point his tariffs and Fed policy triggers a recession.

But Trump will blame the Fed, not himself. And of course the Fed will blame Trump. They are both partially to blame. There is lots of blame.

The Fed for lose monetary policy, Congress for inept fiscal policy, and Trump for tariffs.

Mike "Mish" Shedlock

Comments (2)
No. 1-2

Trump is a moron. He is clueless He thinks that trade deficits mean that there is a shortage of jobs. The US does not have a shortage of jobs. It has a shortage of skilled workers to fill all the jobs that sit empty And Trump is too stupid to let in the skilled workers America needed, or set up the programs to train the needed skilled workers. Tariffs hurt the US just as much as they hurt China. Trump’s Tariffs are a self-inflicted wound which will not help reduce the trade deficit. The tariffs will hurt US businesses and consumers. The one thing Trump does understand is that the ”politics of hate” works on his weak-minded supporters. He simply needs to blame someone else to focus his supporters anger on anyone but himself. Take your pick; its those horrible Mexicans, Canadians, Europeans, Koreans, Chinese, PuertoRicans, Democrats, Immigrants, Swamp People, the Federal Reserve, CNN, Washington Post, Any Media he disagrees with, etc He is the worst president ever elected in the US. I feel sorry for Americans.


Anyone who wants to be taken seriously on this topic has to recognize that the Trade War started decades ago -- a lot of it was enabled by stupid US politicians and bureaucrats who did not realize that the basis of their own economy was production. So they made it easy for production to go overseas, and now they wonder where the good jobs went and why there is not enough tax revenue any more. And let's not pretend that a massive trade deficit is sustainable -- we all know it is not. Some day, one way or another, that unsustainable trade deficit will come to an end.

It is not President Trump's Trade War. This is the trade war against the US that Obama, and Bush, and Clinton, and Bush, and others enabled and ignored. You might not like what President Trump is doing, but he gets full credit for being the first guy to try to fight back.

If there are better ways to fight back against the Chinese Trade War, let's hear them!

Global Economics