Trump pushes China to the limit

Never mind Mueller’s report, Trump has his sights set on China this week, and as usual he has been tweeting about it. On 6th May he tweeted: “The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!”

The President appears to be determined to escalate the US-China trade war and it appears to be ‘personal’, although he portrays it as a move in the national interest. He’s raising the trade tariff on Chinese imports to 25% this Friday, a large hike up from 10 percent.

Trump says that Chinese exports to the USA worth $200 billion will be slapped with this tariff. Furthermore, the same tariff will be imposed on other Chinese goods worth $325 billion, which are currently untaxed.

What effect has the announcement had?

Obviously there have been more than a few very miffed Chinese. And Chinese investors had a wobble, because they dumped stocks following the announcement. As a result, China’s major stock indexes plunged by the highest level since February 2016. Stock indexes also took a beating: the Shanghai Composite Index and the CSI 300 index fell by over 5 percent. Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong told Reuters, “The market is re-pricing the situation, as investors had thought trade negotiations were coming to an end.”

Why escalate a trade war now?

Trump’s decision to raise the tensions between two of the world’s biggest economies came at a moment when the US economy is in boom mode. As Mark Emem writes at Forbes: “The non-farm payrolls jobs report which was released Friday indicated that the unemployment levels had fallen to 3.6 percent. This was the lowest figure since 1969.”

Some commentators have suggested that the positive state of the US economy has led the President to believe that the country is in such a strong position that he has the upper hand in any trade negotiations. One Twitter user, Jim Cramer tweeted: “Is this the art of the deal? Or a recognition that our economy is stronger than theirs is and we don’t need them???”

And to quote Trump from his book “The Art of the Deal”: “MY STYLE of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after.”

As Emem writes, Trump smells blood, because China has more to lose than the USA, therefore Trump is following his own philosophy of simply piling on the pressure wherever he can. It was thought that a trade deal between the two countries would have been agreed by the end of this week, but that looks unlikely now. And unless they agree a deal on 9th May, China will have to start paying the higher tariffs from the following day. That doesn’t leave much time for the negotiations, which are supposed to start on 8th May.

Will the talks collapse due to Trump’s game play, or will he get what he wants from China? We don’t have to wait long to find out.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s