China’s going to “fight to the end.” Japan’s going to make a deal. Or something.

The next few days (and very likely the next few weeks) will see markets, and particularly risk assets, like equities, subjected to a lot of to and fro. It’ll be tempting to ascribe causality. In some cases, that’ll be possible. For example, if Donald Trump postpones tariffs or grants country-specific reprieves based on progress towards “phenomenal” deals, that’s a clear rally catalyst. If he escalates, that’s cause for more selling.

Otherwise — i.e., when you can’t draw a straight line between a Trump pronouncement and the price action — it’s best to chalk it up to the environment. If you traded through the dot-com bust and the GFC, you know it’s a rollercoaster for a while, and you know bottom-calling can be a fool’s errand. The pandemic bear market was somewhat unique for the “V-shaped” nature of the recovery.

China on Tuesday called Trump’s threat of 50% additional levies from mid-week (for a total tariff of 104% on Chinese goods) “a mistake on top of a mistake.” If Trump persists in his bellicosity, Beijing, gun to its head, will fight until the last man, the commerce ministry declared. Trump yesterday vowed to cut off trade talks altogether if Beijing doesn’t drop its retaliatory measures announced late last week.

By contrast, there’s a lot of chatter about the Japanese making nice with Trump, and that was enough to bolster local equities Tuesday.

The Nikkei erased most of its Monday decline, surging more than 6%. Again, this is an absurdist see-saw. You’re not doing investor psychology an favors when you create an environment wherein the collective value of developed economy corporates oscillates by 6% from day to day.

Scott Bessent told Fox that Japan’s probably going to get prioritized in the deal-making process “because they came forward very quickly.” But on the list of reasons for any preferential treatment, promptness is low. Shinzo Abe, may he rest in peace, was quite adept at manipulating Trump with flattery, golf and absurd displays of pomp and pageantry (who remembers the sumo tournament?), and Trump seems to recognize the Japanese as friends. They also own a lot of Treasurys, there are geopolitical reasons to avoid irritating them too badly, and on and on.

As for China, I hope Trump’s prepared. Because they’re going to pull out all the stops. They’ll lean into the yuan (which is drifting back towards its weakest levels on record against the dollar), they’ll prop up local markets (Mainland and Hong Kong shares staged a partial recovery on Tuesday after a brutal wipeout to start the week), they’ll cut rates further, they’ll roll out a dizzying, if characteristically piecemeal, array of stimulus measures (which they were going to do anyway in bid to bolster consumption), they’ll employ all sorts of underhanded tactics against US interests on the Mainland, and they won’t stop.

It’s important to note that Trump, having shattered America’s alliances and irreparably undermined US soft power, has created a scenario where it’ll be harder to enlist other countries in an effort to counter China. Go it alone means go it alone. You can’t just piss all over everyone from Ottawa to Brussels and back again, and then expect their help when you need it.

Outside of trade, Trump doesn’t have a lot of leverage with China. They own a huge amount of Treasurys and they issue a quasi-hard currency, even though it’s soft-pegged to the dollar. I’m the furthest thing from a CCP cheerleader, but Trump vastly overestimates his capacity to bully the Chinese. They’ve had four years to stack the sandbags in anticipation of another Trump presidency, and that’s more than they probably needed. I don’t think he can break them with tariffs. Really I don’t.

On Tuesday morning, just before the cash open on Wall Street, Trump was on TruthSocial talking up a potential deal with South Korea whose “top TEAM is on a plane heading to the US” right now, apparently. “Things are looking good,” said Trump.

He also indicated he’s in the process of negotiating deals “with many other countries,” and it sounds like The White House will demand additional, unrelated concessions and compensation from nations looking for tariff relief.

On Monday, for example, Trump suggested Israel’s pledge to eliminate its bilateral deficit with the US may not be enough to pacify the White House given the amount of money the US spends on Israel’s defense. On Tuesday, Trump said it’s important to “bring up other subjects that are not covered by trade and tariffs, and get them negotiated also.” He called that “ONE STOP SHOPPING,” all-caps in the original, of course.

China, he went on, “also wants to make a deal, badly, but they don’t know how to get it started.” In a stark reversal from Monday, Trump said he’s “waiting for their call” and predicted, “It will happen!” As noted above, Trump indicated Monday he’d “terminate” any and all contact with Beijing related to trade unless they backed off their countermeasures, which they didn’t. Don’t try to reconcile those sorts of apparent discrepancies. If it’s coherence you seek, this isn’t the administration for you.