If you were following along back in April, you’ll recall that Donald Trump was seemingly caught off guard by how quickly China responded after the USTR published the initial list of Chinese products subject to U.S. tariffs in conjunction with the 301 probe.
That was a real kick in the balls for Trump – especially the soybeans. Long story short, it was clear that China was aiming squarely at the GOP base in an effort to make voters feel the effects of Trump’s trade war ahead of the midterms.
“We view the inclusion of soybeans in [the] announcement as political in nature and reflective of the escalation of the trade dispute with the US. Soybean tariffs impact US Midwest political swing states and come at a cost that China appears willing to pay,” Goldman’s Damien Courvalin and Jeffrey Currie wrote at the time.
Trump was incredulous, but also furious. The next day, he lost his shit completely and ordered the USTR to consider “whether $100 billion of additional tariffs would be appropriate under section 301.”
In his statement, Trump called China’s retaliation “unfair” and it kinda seemed like the President was taking an overly simplistic approach to “winning” the war he started.
Specifically, Trump seemed to think that if he simply slaps more tariffs on Chinese imports than China can mathematically respond to, he’ll “win” by default. Something like this:
Now I know what you’re thinking. You’re thinking that’s the stupidest fucking thing you’ve ever heard and you’re thinking that if the President of the United States is actually basing his “strategy” on that then we’ve got bigger problems than a trade war.
President Trump said he wanted what amounted to a nearly tenfold increase in the U.S. nuclear arsenal during a gathering this past summer of the nation’s highest ranking national security leaders, according to three officials who were in the room.
Trump’s comments, the officials said, came in response to a briefing slide he was shown that charted the steady reduction of U.S. nuclear weapons since the late 1960s. Trump indicated he wanted a bigger stockpile, not the bottom position on that downward-sloping curve.
The July 20 meeting was described as a lengthy and sometimes tense review of worldwide U.S. forces and operations. It was soon after the meeting broke up that officials who remained behind heard Tillerson say that Trump is a “moron.”
So don’t you go telling me it isn’t at least possible that he saw the chart above (or some derivation thereof) and decided that if he just picked a number larger than $130 billion, he would be the “winner”, no questions asked.
Since then, someone has undoubtedly explained to him that China has myriad other options and yes, he probably had some conception of that in April (after all, he’s accused China of being a currency manipulator for years even during periods when the yuan has appreciated against the dollar).
But China’s other options be damned and despite the fact that he needs Beijing if he wants to foster a relationship with Kim Jong-Un that culminates in Trump building branded casinos on North Korean beaches, Trump is going to go ahead and target $50 billion of Chinese goods with tariffs.
You already know that. But what you might have missed overnight is that now, Trump seems to be leaning towards publishing that list of goods tied to the additional $100 billion mentioned above. Here’s Reuters from a piece out overnight:
The United States has nearly completed a second list of tariffs on $100 billion (75.44 billion pounds) in Chinese goods, as President Donald Trump prepares to enact an initial round of duties that is expected to trigger an in-kind response from Beijing, several sources said.
The second wave of products has been cued up as Washington prepares to announce on Friday a list of about $50 billion of goods to be targeted. They are part of Trump’s decision to go forward with “pretty significant” tariffs, an administration official said on Thursday.
The $100 billion list will be subject to the same public comment and hearing process as the $50 billion list, so it could take 60 days or more to put into effect, three sources familiar with the Trump administration’s thinking on tariff plans told Reuters.
The list is intended to minimise the impact on U.S. consumers and businesses by selecting goods where there are ample alternative supplies from other countries. Eliminating any impact may be impossible.
China has warned Trump against publishing that list. I mean, they’ve warned him against moving ahead with the initial $50 billion, but they’ve specifically said that if goes ahead with the second list, he’s fucked – in no uncertain terms.
If you want some detail on what the second list might look like, you can peruse “Here’s What Happens Next In The Trump-China Trade War, According To Goldman“, but suffice to say that if takes it up another notch, U.S. consumers are going to feel it.
For their part, Beijing said the following on Friday:
If the United States takes unilateral, protectionist measures, harming China’s interests, we will quickly react and take necessary steps to resolutely protect our fair, legitimate rights.
Needless to say, that deal Mnuchin struck several weeks ago that involved China “significantly increasing” their purchase of U.S. goods in an effort to placate Trump on the deficit will be out the window if the second list mentioned above is ever published and it’s probably in serious jeopardy now that the administration is moving ahead with the $50 billion in initial levies.
Meanwhile, the SHCOMP is sitting at its lowest levels since 2016 as trade tensions and a decelerating economy weigh: