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Last Week the self-proclaimed "Tariff Man" raised tariffs on all remaining goods in China.

Bond Inversions Strengthened on the news.

Tariff Man Returns

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China Quickly Responds

In response, China Halts U.S. Agricultural Purchases.

China’s state-run agricultural firms have now stopped buying American farm goods, and are waiting to see how talks progress, the people said, declining to be identified as they’re not authorized to speak to the media. Meanwhile, the private crushers haven’t received notices from the government on any policy change since the U.S. escalated tensions last Thursday, people said.

“The leverage that China has is its large agricultural purchases,” Darin Friedrichs, a senior analyst at INTL FCStone’s Asia commodities division, said in an interview on Bloomberg TV. “This does affect U.S. farmers and the rural U.S. voting base that’s normally in support of Donald Trump. If they hit back before the election, that’s the obvious way to retaliate.”

China Soybean Imports Plunge to 2004 Level

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Yuan Slides

Not only did China halt agriculture imports from the US, it also let the yuan slide.

Bloomberg reports China Takes On Trump by Weakening Yuan, Halting Crop Imports

China responded to President Donald Trump’s tariff threat with another escalation of the trade war on Monday, letting the yuan tumble to the weakest level in more than a decade and asking state-owned companies to suspend imports of U.S. agricultural products.

Editorials in state-run newspapers suggested Xi will reject any deal that either retains punitive tariffs or forces China to make concessions on issues like state-run enterprises that could weaken the party’s grip on power.

The onshore yuan weakened 1.4% to 7.0391 a dollar, falling sharply on Monday morning after the PBOC set its daily reference rate at a weaker level than 6.9 for the first time since December.

By linking today’s devaluation with the renewed tariff threat, the PBOC “has effectively weaponized the exchange rate,” said Julian Evans-Pritchard at Capital Economics in Singapore. “The fact that they have now stopped defending 7 against the dollar suggests that they have all but abandoned hopes for a trade deal.”

Allowing the yuan to weaken is not without risk for China. A mid-2015 devaluation spurred capital outflows and destabilized global markets, though tighter capital controls this time around should help prevent another exodus.

OK None At All

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Trade War Becomes Currency War

Trump Accuses China of Currency Manipulation

Note the Major Irony

Interest rate cuts to weaken the dollar and letting support level pegs drop are both signs of currency manipulation.

Negative interest rates in Europe and Japan are more of the same. Currency wars started long ago, and The Bernanke Fed slashing rates to zero in 2008 were part of it.

Did you catch the major irony?

Trump says the currency manipulation will "greatly weaken China over time", yet he wants the US to do the same, constantly moaning about a dollar that is too strong and interest rates too high.

Not Easy to Win

Hello President Trump!

Are you still sticking to your nonsensical statement "Trade wars are good and easy to win"?

Expect Recession

A Manufacturing Recession was Already Underway.

As the Bond Market Screams for More Rate Cuts, Trump Policies Ensure They Come

Yields are lower still today, and they have fallen every day since the FOMC announcement.

A global recession will soon follow, including the US

Mike "Mish" Shedlock