China is not amused with “Tariff Man”‘s latest and “greatest” trade escalations.
“Imposing new tariffs is absolutely not the right solution to trade frictions”, Chinese Foreign Minister Wang Yi said Friday, in what amounted to Beijing’s first official response to Trump’s tweets promising to hit the remainder of the country’s imports with 10% levies from September 1.
News that the US president ignored Steve Mnuchin’s plea to give Beijing a warning before announcing the new duties underscores the notion that Trump cares nothing for decorum. Disrespect isn’t something that goes over well with the Chinese side, which has repeatedly called for mutual respect in negotiations. Blindsiding them just 36 hours after Mnuchin and Bob Lighthizer left Shanghai represents a laughably (if characteristically) flagrant move by Trump.
“If the US is going to implement additional tariffs, China will take necessary countermeasures”, foreign ministry spokeswoman Hua Chunying said Friday. Hua has ratcheted up the rhetoric this week. Among other things, she’s accused the US of fomenting discord in Hong Kong, an assertion Mike Pompeo called “ridiculous”.
Chinese equities tumbled on Friday, falling 1.5%, the most since July 8 and the second-most since Sino-US tensions were running high in May. It was the third consecutive day of losses for the CSI 300, which logged its worst week since Trump’s early May tweets announcing that the December trade truce was null and void.
The offshore yuan is now back near dangerous levels, as a 7-handle suddenly beckons anew.
“The chance of CNY breaking 7.0 in the next 1-2 months has increased substantially”, SocGen’s Jason Daw wrote Friday, before adding a cautionary note. “Putting on long USD-CNH risk at these levels isn’t ideal [as] the basis between CNY and the fix is large and would require the fix playing catch up to corroborate RMB weakness”, he said. “We would instead wait for a strong policy signal such as CNY onshore moving above 7.0 or the fix above the previous high of 6.9670”.
Through mid-day, offshore investors had sold more than 5 billion yuan of Chinese equities via the links with Shanghai and Shenzhen. That was set for the largest one-day exodus since May 17.
The foreign ministry’s Hua struck a defiant tone. “China won’t accept any maximum pressure, threats or blackmailing”, she said. “And [we] won’t compromise at all on major principle matters”.