Trump met with his top trade advisers on Thursday to discuss the China tariffs, including Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer, the people said. Mnuchin has led a recent overture to the Chinese to re-start trade talks.
The public comment period for a list of tariffs on about $200 billion in Chinese goods closed last week, and Trump said the duties would be imposed “soon.” The new round would be in addition to $50 billion in Chinese goods that already face a 25 percent duty. U.S. stocks erased gains on the news.
The Chinese have retaliated with tariffs on an equivalent amount of U.S. exports, and have promised to match future rounds of U.S. duties.
Before his meeting on Thursday, Trump boasted on Twitter that he has the upper hand in the trade feud with Beijing and feels “no pressure” to resolve the dispute.
Damn the Insanity, Full Speed Ahead
I commented yesterday Trump Gets Cold Feet on More Tariffs: US Proposes More Talks With China.
My rationale was that Trump was concerned about the midterm elections and he was looking for face-saving way to back off.
Here's more from the Wall Street Journal report U.S. Proposing New Round of Trade Talks With China.
>The new outreach to Beijing comes less than a week after Mr. Trump threatened not only to go forward with the planned tariffs but to add another $267 billion, effectively putting duties on all of China’s shipments into the U.S.
>On Wednesday, organizations representing thousands of companies in industries including retailing, toy manufacturing, farming and technology said they are cooperating on a lobbying campaign called Tariffs Hurt the Heartland to oppose Mr. Trump’s duties.
>Retailers in particular have ramped up warnings that further tariffs, especially those aimed at consumer goods, are threatening to disrupt supplies for the year-end holiday shopping season.
>“The tariffs are coming so fast and furiously, they’re giving retailers large and small whiplash,” said Christin Fernandez, vice president for communications for the Retail Industry Leaders Association.
Questioned Answered - Possibly
It now appears that was the correct position, but Trump has been known to change his mind.
As a negotiating tactic, pressuring countries has a 100% failure rate. Think Russia, Iran, Venezuela, and Turkey, all ongoing at the moment.
So forget about this being part of the "art of the deal", except perhaps in Trump's head.
Big Fluffy If
Efforts to end the dispute with China have fizzled four times so far. The most recent attempt was last month.
If Trump reverses again and there is a deal, expect it to be of the same fluffy deal as with the EU, where there are no hard numbers. Supposedly the EU will buy more soybeans.
In the NAFTA talks, Mexico placed new demands unless it gets a buy-in from Canada.
Curiously, the existing NAFTA deal is arguably better than the one Trump just negotiated.
In regional Fed reports assembled yesterday, the word "tariff" came up 37 times, most of them showing concern. I posted 26 comments. Here are a few.
- A sizable number of contacts in manufacturing and distribution sectors noted that recent hikes in tariffs have raised their overall input costs, and some have expressed concern about the effects of changes in trade policy on various aspects of their business.
- Philadelphia Fed: Nearly two-thirds of the firms that offered general comments noted that price hikes and/or supply disruptions had already occurred or were anticipated because of tariffs and the threat of tariffs.
- Philadelphia Fed: For those firms already impacted, contacts often cited double-digit price increases; some typical responses were that tariffs “have put us out of business” on certain products and “are a cloud on every facet of our business planning.”
Shades of Smoot-Hawley
So far China tariffs are at $50 billion. Trump said today he will up that to $250 billion.
The total tariff threat (with China alone) is $512 billion (all imports from China).
The supply chain disruptions have me thinking about shades of Smoot-Hawley.
Here's Trump's attitude: What, Me Worry?
For further discussion, please see:
- Fed's Beige Book Shows Tariff Concerns, Agricultural Weakness, Price Pressures.
- Lagarde Warns of Emerging Market and Low-Income Shocks by Trade War With China
Mike "Mish" Shedlock