President Trump accused China of backsliding in talks and ramped up tariffs on Chinese imports. The stock maket did not take kindly to Trump’s ploy but bond yields tumbled across the board.
S&P 500
Dow Cash Market
The Wall Street Journal reports Trump Tweets Corner China’s Xi—Get a Trade Deal Without Looking Weak.
President Trump’s new tariff threat is putting Chinese leader Xi Jinping in a bind about how to keep the negotiations on track and shore up China’s economy while not being seen as caving to Washington.
Mr. Trump’s weekend tweets surprised Chinese negotiators, led by Vice Premier Liu He, who were aiming to wrap up the trade talks with their U.S. counterparts during a trip to Washington scheduled for this week. Following Mr. Trump’s renewed warning of raising tariffs, China’s leadership on Monday was considering canceling the trip, said a person briefed on the matter. That hews to a line Beijing has maintained throughout the year-old trade battle that it wouldn’t negotiate under threat.
In recent rounds of talks, negotiators have sparred over how to enforce a trade deal. China wants the current tariffs removed or at least rolled back once a deal is reached while the U.S. wants to leave tariffs in place and remove them as China complies with the terms of an agreement. Another sticking point is that the U.S. wants to retain the ability to reimpose tariffs if China backtracks while prohibiting Beijing from retaliating.
“There’s still hope that China can stop the additional tariffs,” said Tu Xinquan, dean of China Institute for WTO Studies at University of International Business and Economics in Beijing. He said Mr. Trump has before threatened to take action and then delayed doing so.
If the U.S. goes ahead and raises tariffs, Beijing is likely to retaliate in kind, Mr. Tu said: “To not reciprocate would look too weak.”
Two Tweets, Two Lies
Yesterday, I commented Trump to Hike Tariff Rate on $200 Billion in Chinese Goods: Two Tweets Two Lies
Lies of the Day
- Tariff payments are responsible for 0% of “great economic results”. Rather, Trump’s tariffs, or if you prefer, retaliatory tariffs devastated US farmers.
- Costs are not borne by China. Rather, costs are bore by US consumers and businesses that import from China, Mexico, etc.
Yes, the trade talks are going slow.
Implied Third Lie, Just Not Today
Trump’s comment that trade talks are going slowly is an admission that trade talks were not really going as well as previously claimed.
The changing timeline and today’s tariff increases are further proof.
What to Make of Today’s Tweets
Yesterday’s key comment: It’s difficult to know precisely what to make of today’s Tweets. We will not know until we see how China reacts.
Who Wants a Deal More?
The WSJ article implied China wanted a new deal more than Trump. I disagree. If China did, we would have a deal already.
It’s difficult to say who is backsliding more. Trump is feeling cocky because the sock market hit a new high.
The key sticking point is Trump wants to keep tariffs but expects China to end theirs. China says no. Trump calls that backsliding, an absurd position.
Matter of Trust
The US may be worried about China honoring a deal, and rightfully so. But look at things from China’s standpoint.
Who in their right mind can possibly expect Trump to honor any trade deal?
Mike “Mish” Shedlock
Another gap down today. Where are the Dow 30k people ?
Markets rattled?
Hello Bizarro world! Chuck the Schmuck supports Donnie’s negotiations with China!
China is a demographic time bomb. Their population was exploding, so they instituted a one child policy, and there was a preference for males. As a result, their population has three booms, and a bust. The first, small boom, matches our baby boom. They are 60-64. Then come two huge booms, the first currently 40-54, the second one currently 25-34. The number of females at any given age from 0-19, however, is only half of the number each age from 25-29.
What does that imply?
I’m not projecting a disaster for China’s economy, but neither am I projecting smooth sailing. If they are not careful, they very well may have a disaster. Their one child policy was radical, and will have some dramatic consequences down the road, not all of which can be foreseen. Yes, it is not surprising that China is in a period of unparalleled prosperity, with 3 baby booms all in their earning years, and few elderly, and few children. What will the costs be later?
Not only China
The arm waving over population growth/decline is overblown, but China does have a real problem with its gender imbalance. Back when they could only have one child, many families wanted that child to be boy, with far reaching consequences.
Tens of millions of guys who mathematically cannot find a local bride is a real problem, one that would even prompt war in the future as a means of cutting down on superfluous male population.
Housing Bubble China grows
On again,off again,deal or no deal,maybe,maybe not,dude can’t make up his GD mind!Tariff’s be off again in…one…two……then on again in one….two.then off again in…one…two mofo joke!
It’s like the show deal or no deal but Trump never takes the deal and always goes for more. In the end he will be left with no good choices.
I will say it here because it is true. China is effectively a colony of the USA. They would have had anarchy if not for manufacturing being offshored by the US and others. So let them try to do whatever. The US consumer still drives 70% of of global GDP. Kill the US consumption and the global economy including China dies. This may not go on forever but given the Chinese buy debt and fund our consumption and their production they are at a subservient position in the supply chain. Demand is still driving the economy last I checked.
By the way if you wanted to solve the GDP growth problem it is easy. Tell China that they have to buy more debt and fund our crack habit. We need ZIRP in order to get more GDP. We really have China by the barrel but we dont realize it. They have to quell a population of over 1B. Work and trade are the peaceful way to do that.
Demand drives national economies, in exactly the same way a crying baby laying there doing nothing but screaming, drives household economies.
I’m an importer of many Asian countries including China. When I first visited China in 1993 there were no cars and rudimentary roads. The average worker pay was $40. month. Now when I visit they are far passed USA infrastructure and cities. This was funded by Americans giving over jobs and buying low cost Chinese products. China also gets lowest shipping and mail costs in the world and uneven competition.Trump standing up for fair global treatment long overdue. One question is why there has been almost no improvement in America in 50 years??
Improvement? You just need to know how to look for it. For example, our opiods are much stronger and more addictive these days. Most of our government buildings (public schools, hospitals, etc.) are all practically brand spanking new with the latest and greatest green technology. We get to carry a heck of a lot more debt than ever before. And, most importantly, all our banks are super sound according to the numerous stress tests they always seem to pass!
Manufacturing jobs? You can keep ‘em. That’s so last century!
Where do you live ? Must be somewhere rural where there is always little to no improvement.
“One question is why there has been almost no improvement in America in 50 years??”
You just need to know where to look. There has been a tremendous improvement in the wealth of those to whom the Fed and government has handed the loot they have stolen from the rest.
You can’t have both. If zero value add leeches on Wall Street and elsewhere are to be made wealthy, in return for producing no value at all, the wealth they get, has to be taken from alternative uses, like infrastructure, competitive industrial capital etc.