Trump Threatens New Tariffs In Expanding Trade War
President Trump once said that "trade wars are good and easy to win." It's only been three months since he started this war and we're already finding out just how wrong he is about that.
President Trump is threatening additional tariffs against China in what is increasingly looking like a trade war that could end up having a serious impact on world financial markets and, potentially, the American economy:
WASHINGTON — President Trump further escalated his trade fight with China on Monday, saying his administration was prepared to impose tariffs on another $200 billion worth of Chinese goods and potentially even more if Beijing continues to fight back.
Mr. Trump’s threat, in response to retaliatory measures by China, was the latest volley in a dizzying trade dispute that has pitted the world’s two largest economies against each other and resulted in a seemingly endless game of one-upsmanship. The president called it punishment for what he said was an attempt by Beijing to keep the United States “at a permanent and unfair disadvantage.”
“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology,” Mr. Trump said in a statement. “Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong,” he added, calling China’s response “unacceptable.”
The president left little doubt that the United States would continue to hit back even harder if China counters, adding tariffs to another $200 billion worth of Chinese goods. All told, the Trump administration is threatening to impose tariffs on as much as $450 billion worth of goods, including an earlier round — a sum nearly as large as the total value of goods China sent the United States last year, which was $505.6 billion.
“The administration is essentially saying it is willing to bring a substantial amount of commercial activity in the Asia-Pacific to a screeching halt,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies.
The tit for tat began on Friday, when Mr. Trump said Washington would move ahead with tariffs on $50 billion worth of Chinese goods, including agricultural and industrial machinery. The action provoked an immediate response from Beijing, which said it would place its own tariffs on $50 billion worth of American goods, including beef, poultry, tobacco and cars.
On Monday, Mr. Trump raised the ante even further, saying that he had directed Robert E. Lighthizer, the United States trade representative, to pursue another $200 billion worth of tariffs.
China’s Commerce Ministry responded swiftly to Mr. Trump’s threat, issuing a statement on its website that warned that if the Trump administration followed through, China would “have to adopt comprehensive measures combining quantity and quality to make a strong countermeasure.”
The rapid succession of trade threats has left little time for negotiations that could potentially defuse tensions between the two countries.
Whether President Xi Jinping of China agrees to bend to Mr. Trump’s demands remains an open question. With his latest move, Mr. Trump has escalated his trade threats to such a level that China can now no longer issue a proportional response. Last year, the United States exported only $130.4 billion of goods to China in total.
But trade experts say there are plenty of ways beyond tariffs that the Chinese government could retaliate — including slowing approvals for acquisitions made by American companies or stalling products at its ports. And Mr. Trump’s aggressive challenges may have left the Chinese president with little room to back down without looking weak to his own population.
“Mr. Trump seems to be counting on the fact that China will soon run out of room to retaliate with its own tariffs on U.S. exports,” said Eswar Prasad, a trade expert at Cornell University. “This could prove to be a miscalculation since China has other effective levers it can use in a trade war, including disruptions of American businesses’ sales operations and their supply chains that run through China.”
Lawmakers of both parties have criticized the president’s trade threats, but few have advocated taking direct action against him. Last week, Senate Republicans blocked a vote on legislation introduced by Senator Bob Corker, a Tennessee Republican, which would have given Congress the ability to overturn certain tariffs. Senate leaders said such a bill would have simply been vetoed by the president.
The trade conflict with China comes as the administration wages several trade conflicts at once. Rather than forming a coalition of countries to pressure China to change its trade practices, as some foreign leaders and trade officials have urged, the president has put allies on edge with tariffs on metal from Europe, Canada and Mexico and threats to withdraw from the North American Free Trade Agreement.
If they do go into effect, the tariffs would greatly increase the disruption for international companies, which are already anxious about the prospect of higher costs on many goods that move between the United States and China.
This latest announcement is just the latest development in a trade war that has expanded at an alarmingly quickening pace since March when the Trump Administration announced aluminum and steel tariffs that, at the time, were primarily aimed at China and a handful of other nations while exempting, for the time being, allies in Europe as well as Canada and Mexico. Not surprisingly, that announcement was received negatively on Wall Street, which until then had been largely headed upward, on fears that we were witnessing the beginning of a trade war that threatened to undo much of the progress that had been made on international trade since the end of World War Two. Several weeks later, the President announced a series of new tariffs on China, which quickly led China to announce retaliatory tariffs of its own, many of them aimed at industries such as agriculture that had been heavily pro-Trump in the 2016 election. Several days after this announcement, Trump said that the United States was considering additional tariffs against the Chinese amounting to as much as $100 billion dollars. The Chinese Trade Ministry quickly responded to these statements from the President, saying that “We do not want to fight, but we are not afraid to fight a trade war.” Indeed, as Steven Lee Myers noted when these statements were made, the Chinese are confident that they could win a trade war.
After these moves in April, the tit-for-tat trade wars seemed to quiet down a bit, but that proved to be largely illusory. Late last month, President Trump announced that he was revoking the exemption from the steel and aluminum tariffs that had been announced back in March that applied to American allies in Europe as well as Canada and Mexico. Seemingly bizarrely, the president claimed that this was being done for “national security” reasons. Objectively speaking, of course, the idea that these allies are a national security threat to the United States, or that we could not rely on them as a source for aluminum and steel in the event of a national emergency or military threat is absurd, but because of the way American law and applicable trade treaties are worded “national security” is the only ground available to the President to impose tariffs without having to seek Congressional authorization and without violating the applicable treaties. Needless to say, this didn’t go over very well with our allies in Europe and elsewhere. Canada’s Foreign Minister called the new tariffs “absurd,” for example, and European Union officials announced retaliatory tariffs against American goods. Things got even more bizarre in this regard as Trump exchanged harsh words with Canadian Prime Minister Justin Trudeau prior to the G-7 Summit. Once he was at the summit, Trump essentially did everything he could to alienate America’s closest allies, thereby seemingly achieving a goal that Russia and, before it, the Soviet Union had only dreamed of, driving a wedge between the United States and its allies. After the Singapore Photo Op Summit, Trump continued his tirade against Trudeau, while polling revealed that Canadian public opinion about the United States was suffering as a result of American actions and the President’s rhetoric. Finally, it was reported at the same time that the President was considering what would effectively be a ban on German-built luxury automobiles.
The result of this has been entirely predictable. Since Trump announced the first round of tariffs in March, the stock market, which had been on a nearly uninterrupted upward swing since Election Day 2016, began heading downward. While at least some of is likely to represent a natural, expected, and necessary correction after more than a year of going upward, it is also clear that what we’re seeing in the markets represents a negative reaction by investors to the tariffs and nervousness about the impact of a trade war on corporate earnings and world financial markets. With the news of a new round of tariffs against China, and the expected and inevitable Chinese retaliation, we are now at the point where the market has erased all the gains it had made since December 31, 2017. While that still places stock prices in a good place, the prospect of future tariffs is likely to mean that we’ll see gains made since the 2016 election start to erode too, and that’s likely to pose problems for Republicans heading into the midterms.
Of more immediate concern than just the stock market, though, is the impact that these tariffs are likely to have on the economy. While it’s likely that we won’t see an immediate impact on economic statistics, and may not see much of anything in this regard before the midterms, there are already problems related to the tariffs and retaliation from other nations being felt in various parts of the country. In late May, for example, The Wall Street Journal reported that prices for steel and aluminum on the American market were increasing, thus impacting manufacturers that rely on these raw materials for their products. At at a more fundamental level reports are indicating that American pork farmers were increasingly nervous about their overseas business with nations like China. In Iowa specifically, it was reported that Trump’s tariffs and Chinese retaliation could cost soybean farmers $624 million this year alone, with the prospect of larger losses if this situation continues beyond this year. This has led many leaders in Iowa and elsewhere, including Senator Chuck Grassley to express concern about the impact of the trade war on Republican fortunes in the fall. This is especially true given the fact that the tariffs seem to be expressly targeted toward Trump voters and middle-class Americans. President Trump once said that trade wars are good and easy to win. It’s only been three months since he started this war and we’re already finding out just how wrong he is about that.
Well, the Chinese government invested a half-billion dollars in the Trump International Resort and Golf Club in Indonesia, and Ivanka got her 13 trademarks, so the hell with everyone and everything else.
Right?
Speaking with a friend of mine who is big in NYC Finance, and he’s actually surprised that the Market has held up as well as it had, given all the crazy some out of the White House. However, full disclosure, he’s short (via options) the Dow, short the Nasdaq, and short on Apple, Google, Facebook, and many others. He’s on a 9 day winning streak and thinks we’re about to hit a major correction – and it will mostly be caused by institutional investors taking profits.
Heck, looking at the market right now, it’s down another 180 pts.
I’ve missed a large chunk of the recent move up, because I went to all cash in January. But I’m glad I did.
At this point, I’m almost out of f^cks to give on this. Let him burn it down and let his followers take the brunt of the damage. Bye bye family farm, bye bye house, bye bye dying town that’s finally on it’s last legs. You did this to yourself and were too proud to listen to the warnings. Trump’s going to do more to kill rural and Red State America then anything in the last decade. He’s going to be a scourge on farms and ranching they may never recover from.
I can survive $15 avocados and $50lb pork-loin at the grocery store but it doesn’t mean I’m going to like it. Can’t say the same for most Trumpkins but hey, this is what you wanted when you elected an piss-poor extortionist pretending to be a businessman. This is literally how he’s always done his business – starts a fire, acts like he’s the only one who can put it out and gets burned while pretending the ashes are what he was going for. You picked this. Enjoy losing your livelihood all because you fell for the MAGA BS instead of using your eyes. China and the rest of the world are going to profit off your misery and all you got was a stupid red hat (probably made in China as well).
@jr*****@ya***.com:
The market’s been flat since January, you didn’t miss anything.
Health insurance premiums up, coverage down. Gas price up .60 cents a gallon with more hikes likely. Tax cuts for non-millionaires were eaten up by rising inflation. Bonuses turned out to be p.r. stunts. Wages flat. Workforce participation rate flat.
I’m not seeing the MAGA in this. Kind of looks like a continuation of the Obama recovery with a one year run-up in the stock market fueled by tax cuts that went into stock buy-backs and did nothing but worsen income inequality.
@KM:
The MAGA caps Trump peddles through his website are stitched in California. The materials are imported.
The sad thing is that when the full effects of Trump’s trade idiocies are felt, he’ll blame the Democrats and his base will believe him.
It doesn’t seem that long ago when conservative pundits were singing the praises of comparative advantage, demonizing the Smoot-Hawley Tariff Act for making the great depression worse, ridiculing protectionism (except for labor for some reason); and with good reason and sense, too.
And there’s this:
It’s like the old joke, “This animals is vicious. When attacked, it defends itself.”
Whatever wrong China might be committing regarding intellectual property, you can’t possibly expect them not to hit back after slapping tariffs on them. When you go to war, regardless of the reason, you know you’re going to take casualties. America’s military may be so dominant that the casualties it takes are relatively light(*), but the US economy is not that dominant. Casualties are going to be numerous and harsh.
(*) I don’t want to belittle those wounded, maimed or killed in war, or the suffering and hardship endured by their families. But compared to the casualties it inflicts on the enemy, the US military suffers a lower proportion of casualties.
This guy is making enormous mistakes here predicated in the fact that neither he nor his advisors (such as they are anyway) understand the Asian psyche.
He’s putting these people into a position where they stand to lose face / where there isn’t a resolution that doesn’t allow them to save face.
That’s deadly – far deadlier than the Trumpkins realize. They’ll go full blown before they’ll allow themselves to be shamed.
If this continues as its going, there is a point in our future where China starts to really get nasty – manipulation of the dollar, sitting out Treasury auctions to make their point, export taxes imposed only on goods manufactured within China by US corporations, etc. They are better positioned to win a trade war, they have more ammunition, and they’re much more strategic thinkers than this admin is.
I said once here that trade wars amount to, at basis, “which country can continue punching its own people in the face the longest?”
The answer to that question should be obvious
So, did I miss something or did we only get ONE post on the IG report on Hillary’s emails. A 500 page report that other people are STILL writing about and a blog that gave us eight or so posts saying the same thing about family separation, two on a gerrymandering ruling, and one on the freakin’ Columbia election gave us one on the IG report and that one was apparently written without actually reading it?
And while I appreciate that this blog has never been part of the right-wing echo chamber, that’s not what is happening now and for the last two years. What we are talking about is intellectual honesty. We’re talking about posting regularly on Trump’s approval rating when it was going down and then falling silent when it goes up.
Do you actually think this is helping matters? When you read the comments, do you think you are helping people better understand what is happening?
Mike
@MBunge:
Allow me to clarify for you:
No political bias found. No criminality occurred.
Nothingburger, no fries, no soda.
Ergo nobody gives a shit besides you clowns desperately trying to make something out of nothing. If you want to read about it further, I’d suggest hauling your ass on over to Breitbart.
And have a nice day 🙂
@Michael Reynolds:
OT: they indicted Bibi’s wife 😀
@MBunge: This horseshit, again? How about you open up your own blog and quit whining about how this one doesn’t put up the stuff you think is important?
You support Trump, the least intellectually honest–actually, the least honest in every possible sense–President in American history.
@MBunge:
Why don’t you go see if you can find some brown children to throw into cages?
@Mikey:
Fark. My Irony Meter wasn’t even turned on, and it just went critical and took out my shed. 🙁
@Michael Reynolds: You mock, but I’m pretty sure that crying 2-year-old girl is MS-13.
@Mikey:
Mbunge likes to hate watch this blog, which some people do with shows like The Bachelor, me…I just pass on shows I know I will not enjoy watching. I also watch way too many shows to have a whole slate of shows I like to hate watch.
The meltdown when Mbunge realizes that the only way to only read the stories that MBunge wants to read about is to indeed create their own blog or just stayed glued to Breitbart’s screen (or head over to Hot Airs blog umbrella, same thing) is coming.
@jr*****@ya***.com: Once@jr*****@ya***.com: Stock prices run on sentiment, not fundamentals. Bullish sentiment is high at the moment and that’s why stocks are struggling: all the money is already in.
Once sentiment moves to bearish we’ll see the averages climbing again. If there were to be a major correction it will be short-lived because the federal government is on track to spend $5 trillion this year.
@MBunge: “And while I appreciate that this blog has never been part of the right-wing echo chamber,”
As opposed to you, who have pledged yourself to being a fully committed part of it. Love the Powerline links.
OT, but Melania Trump made a surprise visit to one of the detention centers (run by the Lutheran Church) to see for herself what’s happening there. She told Trump she was going last night. Her spokewoman said Trump was supportive, but what else is she going to say?
Either Melania is sincerely concerned, or she’s extending a yuuuge metaphorical middle finger to her hubby. Maybe both.
She should be careful. If it’s a real Zero Tolerance policy they’ll grab her up. IIRC her immigration history is not 100% copacetic.
@teve tory:
Her own immigration lawyer objected to the detention of children. But you’re right, I think, about there being something dicey with her status. And yes, it would be funny if they nabbed her as an illegal.
@MBunge:
The only people STILL writing about it are the people who are STILL writing about BENGHAZI!! and countless other baseless conspiracy theories.
Cliff Notes:
The investigation into Clinton was properly done, the decision not to prosecute was appropriate, and Comey acted improperly. In doing so aided the Trump campaign.
Without Comey you probably wouldn’t get to throw brown babies into cages…so maybe you should write him a thank-you note?
@jr*****@ya***.com: Remember how in 2017, a big talking point of Trump supporters was, “Have you seen your 401k lately!” The idea being, 401k’s were soaring because the market was soaring because Trump.
Well, I always read my quarterly 401k statements. My 401k had been steadily increasing at a modest pace since 2012. And in 2017, it continued to increase at the same modest pace.
In first quarter 2018, my 401k declined for the first time in 6 years. In a few weeks, I’ll see how it performed in the 2nd quarter. And I no longer hear Trumpians crowing, “Have you seen your 401k lately!”
“Mr. President, Barron has been shipped, we think to a foster family in Grand Rapids Michigan. Or maybe Dothan Alabama. As you know there’s no program for keeping track of where the Terrorist Toddlers go.”
@teve tory:
It must be very convenient to have your ex deported in the event that a better trophy comes long. No settlement, no custody issues.
@Monala: Yeah the DJIA is down 2,111 from its peak.
I’ve actually seen some Trumpers go back to “He won the Lection!!!!11” lately, I presume because that was his last actual accomplishment.
@Kathy: If Melania got deported Trump would blame the Democrats and I’d go to winn-dixie and buy 7 Party Packs of Orville Redenbacher and sit back and watch the evangelicals and the mental defectives at Breitbart and Gateway Pundit etc try to justify and excuse it.
Ho ho ho. I suspect total going-by-the-book when it comes to Chinese trademark applications from US applicants.
Amazing how just “following the rules” can gum up the works.
@Michael Reynolds:
I think it means limiting Americans to the kinds of products and technologies that were available back when America was great in the ’50’s. Its quite possible he’ll achieve that.
@teve tory:
I think they’d be fine if the Cheeto divorced her first.
I would like to know what she says to Dennison about Stormy and all his other affairs. Maybe she even thanks him.
Uncertain if this off-topic but it’s at least a chance to fit in an observation and a question.
The Shanghai Composite Index was supposed to be an important ‘vital sign’ of the Chinese/Asian economy back during the scary days of the Great Recession. For the past year or so it’s been sliding steadily and has consistently been at 12month lows for the past several months.
I understood the Chinese economy to be credit-driven beyond the imagination of even current Republicans; total debt there is supposed to be multiples of the GDP. Yet there’s no decline in the RMB.
No snark. No partisan point. Just someone trying to be insightful, scratching bald head and going WTF?
Anybody?
@Kathy:
As long as we are talking about that nice lady Melania …
https://twitter.com/meridithmcgraw/status/1009868675829129216
.
http://www.dailymail.co.uk/femail/article-5871221/Melania-Trump-wears-jacket-REALLY-DONT-CARE-U-visit-immigrant-children.html
@CSK: Did you see what the back of Melania’s jacket said?
@JohnMcC:
Most observers believe that China has – despite theoretically asserting that the RMB is allowed to float – essentially re-pegged the RMB, hence the relative lack of movement. They have the foreign reserves to make that possible.
@Jen:
I have seen that so many places it must have gone viral.
If Melania is trying to put the blocks to Trump and the GOP, props to her.
@Charon: @Jen:
@Charon: I honestly can’t decide if it’s a message for her husband or if it’s a cynical attempt to get everyone talking about her clothing choice instead of jailed babies who might not ever see their parents again.
@Jen: @Charon: @Jen:
Speechless. I’d like to think it’s a message for her husband. Maybe she’s not the zombie I thought she was.
@Jen:
Indeed. At last reading, these kids are being warehoused in no fewer than 7 states – as far away from their parents as Michigan and Pennsylvania. What are the odds that at least one of them is going to go missing?
@CSK: Even so, going to one that is operated by a social services agency as opposed to one operated by, say ICE or DHS, only helps the administration and it’s toadies with the “see, it’s not as bad as everyone has been saying” part of the message that restores the faith of the waverers.
Not as much of a middle finger as I would like, but she’s got a son (and a prenup) to think about.
@Jen:
Apparently the visit lasted about 45 minutes, and not to a facility with recently separated kids, unaccompanied kids from earlier.
From the Mail story:
People don’t know, I guess, the actual intent of the jacket message. But the visual will stick in people’s minds, and it is not a good look.
@Monala: My stock portfolio is lackluster, too, and small. On the other hand, my bonds are doing fine. Not going up in value, but I don’t buy them to trade them, I buy them for the interest generation. Best part of the portfolio for the past 2 years.
@teve tory: If Melania got deported, Trump would throw her under the bus.
Remember, this is the guy who consoled Hope Hicks–his trusted ally–by reminding her that “[she] was the best piece of a** [Lewandowski] was ever going to have.” Truly a class act!
@Just nutha ignint cracker: Yeah he’s a quality human being.
You know, there’s an old italian phrase, “After a fat pope, a lean pope.”
After Barack Obama, we get this piece of trash.
@Just nutha ignint cracker:
Yep. Be good if she went to one of the real detention centers.
@teve tory:
I suppose she could have worn it just to troll people…but why? To what end? When you’re going to visit a group of detained kids, separated from their parents, why would you wear a cheap coat that, literally, blasts the message “I Don’t Give a Fu*k”? About what would you not give a fu*k? The kids you’re visiting? The kids about whom you claim to be so concerned? Drum is right. Clothing is this woman’s life. The message on the jacket was blatant. But what’s the context?
@CSK:
Possibly the message was directed to someone who knows. More people, I think, have seen the visual than know she changed to different clothes before she disembarked the plane.
Agreed. There was no hidden message. It was out there in plain view.
This guy might be lying, I am pretty sure he is because he does not like the truth.
https://pbs.twimg.com/media/DgP84dJUcAEhSKn.jpg
Think about it, this claim makes no sense.
I like drum’s guess. It was a message about Donnie. In her mind, she’s done with him.
@Charon: Josh Barro in response to that tweet said something like “It’s amazing how juvenile these people are.”
@CSK: Melania’s spokesperson: “It’s a jacket. There was no hidden message.”
Trump: “‘I REALLY DON’T CARE, DO U?’ written on the back of Melania’s jacket, refers to the Fake News Media. Melania has learned how dishonest they are, and she truly no longer cares!”
Which, of course, is yet another lie. But he still stepped all over her. He simply can’t not be a complete ass.
@teve tory:
Lots of good responses in this thread:
https://twitter.com/realDonaldTrump/status/1009916650622251009
@Mikey:
Sort of squid ink, sort of gaslighting.
@Charon: Those are hilarious. When I checked that an hour or two ago the top comment was “Suck a Dick, Donny.” 😛
@HarvardLaw92:
I believe I heard on Bloomberg a few weeks ago that China had over $3 trillion in foreign exchange reserves. Trump is playing with dynamite.
@Charon:
1) Apparently she was wearing it again – IOW, after it began to trend – when she deplaned at Andrews AFB. 2) The company that made the jacket (Zara) apparently has a long history of racism, anti-Semitism, and homophobia. They are the company that created the concentration camp t-shirt with the yellow Star of David, and the Pepe the Frog skirt.
@al Ameda:
Correct. China holds hard currency reserves of over $3 trillion, in addition to greater than an additional trillion in Treasuries.
Contrast that with US foreign reserves of some $42 billion and a government which functions in a perpetual structural deficit.
He’s playing with nitroglycerin. Pushed hard enough, China has the means to gut the US economy. They’d do serious harm to themselves as well, no doubt, but we’d buckle long before they did.
@HarvardLaw92: China cannot gut the U.S. economy. China can buy another currency with its dollar reserves and appreciate its currency relative to ours. Nothing else.
@Blue Galangal:
A very interesting fashion statement then. Thanks.
@Ben Wolf:
China can also dump Treasuries, sit out Treasury auctions, and/or start depreciating the yuan against the dollar in earnest (among other options) if it chooses to do so. Doing so would harm them, to be sure, but in a war of attrition they have far greater reserves than we do. Would you like to explain to the rest of the class what effects those options would have on the US economy, on US manufacturing in particular, and on a US fisc entirely dependent on continuing foreign assumption of US debt to function?
The real risk here is that China has been taking steps to position the yuan as a reserve currency in competition with the dollar. A unilateral “America against the world” trade war just helps that effort along.
@Blue Galangal:
What the Washington Post says on this
@teve tory:
Isn’t that what he went to Singapore for?
@HarvardLaw92: If China really wants to get tough, they can release some of the communications that came before they granted all those copyrights and building loans to Trump businesses…
@HarvardLaw92: China can’t dump treasuries any more than I can dump a stock. Someone else has to buy it. And if China doesn’t want to purchase on the secondary market the system is designed so the auction cannot fail. That’s why the dealers always have more reserves on-hand than are needed to take down the auction in its entirety.
I hope China does do something that stupid because it will be an excellent opportunity fo a contrarian trade.
@Ben Wolf:
So according to Ben, China can drastically expand the quantity of treasury bonds available for trade in the secondary markets, but that will magically have no effect at all on the market, because – Ben.
Gotcha 🙄
If I dump a sizable block of a particular equity onto the market, it’s a fungible injection. The overall price drops because supply, even temporarily, outstrips demand.
If I am China, and I decide to release a sizable portion of my Treasury holdings in conjunction with, say, a Treasury auction, but I simultaneously decline to buy as I normally would, well, you can explain to the class what effect that would have.
@HarvardLaw92: Ah-Ha! That would be the key. Thanx ever so much.
(edit:) Thought someone would have fun with that little factoid.