Trump's Trade Tactics Rattle Markets, China Ponders Canceling Talks
President Trump accused China of backsliding in talks and ramped up tariffs on Chinese imports. The stock maket did not take kindly to Trump's ploy but bond yields tumbled across the board.
Dow Cash Market
The Wall Street Journal reports Trump Tweets Corner China’s Xi—Get a Trade Deal Without Looking Weak.
President Trump’s new tariff threat is putting Chinese leader Xi Jinping in a bind about how to keep the negotiations on track and shore up China’s economy while not being seen as caving to Washington.
Mr. Trump’s weekend tweets surprised Chinese negotiators, led by Vice Premier Liu He, who were aiming to wrap up the trade talks with their U.S. counterparts during a trip to Washington scheduled for this week. Following Mr. Trump’s renewed warning of raising tariffs, China’s leadership on Monday was considering canceling the trip, said a person briefed on the matter. That hews to a line Beijing has maintained throughout the year-old trade battle that it wouldn’t negotiate under threat.
In recent rounds of talks, negotiators have sparred over how to enforce a trade deal. China wants the current tariffs removed or at least rolled back once a deal is reached while the U.S. wants to leave tariffs in place and remove them as China complies with the terms of an agreement. Another sticking point is that the U.S. wants to retain the ability to reimpose tariffs if China backtracks while prohibiting Beijing from retaliating.
“There’s still hope that China can stop the additional tariffs,” said Tu Xinquan, dean of China Institute for WTO Studies at University of International Business and Economics in Beijing. He said Mr. Trump has before threatened to take action and then delayed doing so.
If the U.S. goes ahead and raises tariffs, Beijing is likely to retaliate in kind, Mr. Tu said: “To not reciprocate would look too weak.”
Two Tweets, Two Lies
Yesterday, I commented Trump to Hike Tariff Rate on $200 Billion in Chinese Goods: Two Tweets Two Lies
Lies of the Day
- Tariff payments are responsible for 0% of "great economic results". Rather, Trump's tariffs, or if you prefer, retaliatory tariffs devastated US farmers.
- Costs are not borne by China. Rather, costs are bore by US consumers and businesses that import from China, Mexico, etc.
Yes, the trade talks are going slow.
Implied Third Lie, Just Not Today
Trump's comment that trade talks are going slowly is an admission that trade talks were not really going as well as previously claimed.
The changing timeline and today's tariff increases are further proof.
What to Make of Today's Tweets
Yesterday's key comment: It's difficult to know precisely what to make of today's Tweets. We will not know until we see how China reacts.
Who Wants a Deal More?
The WSJ article implied China wanted a new deal more than Trump. I disagree. If China did, we would have a deal already.
It's difficult to say who is backsliding more. Trump is feeling cocky because the sock market hit a new high.
The key sticking point is Trump wants to keep tariffs but expects China to end theirs. China says no. Trump calls that backsliding, an absurd position.
Matter of Trust
The US may be worried about China honoring a deal, and rightfully so. But look at things from China's standpoint.
Who in their right mind can possibly expect Trump to honor any trade deal?
Mike "Mish" Shedlock