Trump Approves Tariffs On $50 Billion In Chinese Goods, Escalating Trade War

Here we go.

On Wednesday afternoon, as the dollar was surging on the back of a hawkish hike from the Fed, WSJ reported that Donald Trump would in all likelihood make good on his threat to go ahead with tariffs on billions in Chinese goods, with an announcement likely coming on Friday.

That decision (were it to pan out) would confirm reports from a couple of weeks ago when Trump, seemingly swayed by the isolationist/protectionist contingent’s rebuke of a trade truce struck by Steve Mnuchin during a meeting with Chinese Vice Premier Liu He, reversed course on an implicit agreement to hold off on further escalations.

WSJ’s post helped catalyze a reversal in the greenback, which renewed its ascent on Thursday following the dovish spin Draghi put on an otherwise hawkish ECB decision.

Fast forward to Thursday afternoon and these headlines hit:

• SANDERS SAYS TRUMP HAS MADE DECISION ON CHINA TARIFFS
• SANDERS DECLINES TO SAY WHAT TRUMP’S CHINA TARIFF DECISION IS

An hour after that, WSJ was out again, seemingly confirming what they confirmed Wednesday – call it “confirmation squared”. To wit:

President Donald Trump approved assessing tariffs on about $50 billion of Chinese goods, said individuals familiar with the decision, as the U.S. ratcheted up its trade fight with Beijing.

The approval followed a White House meeting with senior White House officials and senior representatives of the Treasury and Commerce departments, U.S. Trade Representative’s Office and national security officials.

It wasn’t immediately clear when the tariffs would go into effect.

Apparently, the list of products subject to the levies is similar to the preliminary list.

This comes just hours after Reuters reported that Mexico is now studying whether to slap $4 billion in U.S. corn and soybean imports with tariffs in response to Trump’s aggressive trade posturing. Here’s Reuters:

Earlier this month, Mexico swiftly retaliated when Trump imposed metals tariffs, hitting dozens of American imports including steel, apples and pork.

But it held back from the most lucrative class of U.S. farm products: grains, especially feed corn and soybeans, used to fatten Mexico’s cows, hogs and chickens.

Imposing such tariffs would be a last-ditch option hitting at U.S. corn farmers’ top export market, and such a move would hurt Mexico’s own industry. But it has already been increasing its imports of grains from suppliers like Brazil and Argentina that could enable it to lessen the impact.

So you know, don’t get too damn comfortable because a lot of the more benign scenario analyses I’ve seen revolve around the assumption that Trump is a rational actor or at least some semblance of sane.

Even if this is all political posturing ahead of the midterms, it’s always possible that he pushes things one step too far or otherwise kicks off a series of tit-for-tat retaliations that aren’t easily reversible once set in motion.