On Saturday, the Washington Post confirmed what Bloomberg confirmed on Friday and what Donald Trump himself confirmed in a Thursday tweet. Namely that the U.S. is moving ahead with tariffs on an additional $200 billion in Chinese goods.
This will mark the most serious escalation yet in the trade dispute between Washington and Beijing and it also raises the specter that Trump’s protectionism will finally start to manifest itself in higher prices for consumer goods in the U.S.
News that Trump is all set to move ahead with the next round of duties on Chinese imports comes just as Treasury Secretary Steve Mnuchin is desperately trying to avert disaster by restarting trade talks with Chinese Vice Premier Liu He.
Talks between the two made progress back in May, with China agreeing to a tentative truce that entailed the Chinese buying more U.S. goods. Trump subsequently flip-flopped, reneging on the deal on the way to slapping tariffs on a long list of U.S. allies and moving forward with 301 investigation-related levies on China.
Predictably, China is said to be prepared to cancel the prospective new round of talks with Mnuchin in light of Trump’s ongoing belligerence.
“Faced with fresh threats of tariffs from Washington, China is considering declining the Trump administration’s offer of trade talks later this month,” the Wall Street Journal reported on Sunday, citing officials familiar with the discussions.
This comes as no surprise. Why would Beijing want to enter into talks with emissaries of a man (Trump) who is openly bragging about his intention to negotiate in bad faith?
“We are under no pressure to make a deal with China, they are under pressure to make a deal with us”, Trump tweeted on Thursday, before lampooning China’s stock market on the way to again demonstrating an elementary understanding of how trade works:
We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?
Well, it looks like you aren’t meeting, and according to an official who spoke to CNBC on Sunday, the announcement on the new tariffs on $200 billion in Chinese goods could come as soon as Monday.
We’ve said this before and we’ll say it again: It is by no means clear that Trump has any intention of deescalating this ahead of the midterms. In fact, it’s possible that the White House actually views the ongoing tension with Beijing as a necessary component of a strategy that involves perpetuating the “us versus them” narrative when it comes to rallying the base.
This likely means more pressure for emerging markets in the week ahead as Trump seems intent on pushing the proverbial envelope as far as it will go.