Last weekend, as it became clear that Donald Trump was hell-bent on moving ahead with tariffs on another $200 billion in Chinese goods, reports suggested Beijing would likely decline Steve Mnuchin’s offer to hold another round of trade negotiations.
Even if you support Trump’s approach to dealing with Beijing on trade, you can hardly blame the Chinese for not wanting to sit down with Mnuchin again. After all, the President all but admitted to negotiating in bad faith in a September 13 tweet. “We will soon be taking in Billions in Tariffs & making products at home”, Trump said, adding that “if we meet, we meet?”
Additionally, China has already tried to placate Trump through Mnuchin. In May, talks between the Treasury Secretary and Chinese Vice Premier Liu He produced a joint statement that found China agreeing to a tentative truce which 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 Beijing.
Late last month, lower-level talks went nowhere and the administration’s decision to press forward with more tariffs is stone, cold proof that Trump is not even close to satisfied with anything China has offered so far.
Worse still, it’s now readily apparent that the administration intends to persist in the practice of using China’s retaliatory tariffs as an excuse to slap Beijing with still more duties. In light of that, Goldman this week raised their subjective odds of Trump implementing a third phase of tariffs on another $267 billion in Chinese goods to 60%. Were that to happen, the U.S. would be taxing everything China imports to America.
On Friday, in an unrelated escalation, the Trump administration pushed back on China’s efforts to secure the WTO’s blessing for sanctions against Washington for America’s refusal to comply with a ruling on the “zeroing” issue.
Fast forward to Friday evening and the Wall Street Journal is out reporting that China will indeed decline Mnuchin’s invitation for further trade talks.
According to unnamed sources, Beijing will still send the above-mentioned Liu He to Washington next week and a “mid-level” delegation will be dispatched to set the table for his arrival.
Who knows why the Vice Premier is even bothering with the trip if the trade talks are off, but what’s clear is that Beijing has had enough of Trump’s bombast.
Premier Li Keqiang spent this week tipping tax cuts and stimulus in China to help offset the effects of the trade frictions and he also said Beijing would not weaponize the yuan further. Notably, Li hinted that China would slash tariffs on imports from the “majority” of the country’s trade parters, a kind of passive aggressive swipe at Trump and a clear effort to paint Washington as the antagonist. Bloomberg’s sources would later confirm the plans.
In any event, Trump wanted a war and now he’s got one.
If he thought escalating this situation further was going to force China to the table, he has been proven wrong – at least for now.