Skip to comments.Is President Trump already winning the trade war with China?
Posted on 07/06/2018 9:26:25 AM PDT by gattaca
After months of threats and gamesmanship, President Trump's tariffs on $34 billion worth of Chinese industrial imports took effect a minute after midnight Friday. It's the latest in a line of protectionism aimed at the U.S. trade deficit with China, which totaled nearly $600 billion in 2017, and includes tariffs on imports of steel and aluminum as well as items like washing machines and solar panels.
And much more has been threatened. Mr. Trump said on Thursday that another $16 billion worth of tariffs against China are coming in two weeks -- and U.S. total alone could reach $550 billion in the next few months.
The actions appear to be having the intended effect, if at the cost of pushing up inflation (prices for washing machine in the U.S. have spiked 16% in recent months, for example). The U.S. trade imbalance with China in May totaled $43.1 billion, down from the $47.2 billion posted in March; it's the smallest monthly deficit since October 2016 and caps the largest three-month reduction in 10 years.
China responded early Friday with its own tariffs on a $34 billion range of American goods including soybeans and pork. The risk now is that the tit-for-tat that marked the verbal standoff will translate into escalation in action, as each side tries to one-up the other.
There are reports that American imports into China are being slow-walked through customs. Moreover, China's currency has weakened markedly in recent weeks in a possible bid to offset U.S. tariffs -- a strategy Trump frequently called out as "currency manipulation" on the campaign trail.
Much depends on how President Trump and the communists in Beijing play the next round in the trade war game. According to calculations by Goldman Sachs, if the full scope of Trump's proposed protectionism is implemented, it would raise the total amount of goods subject to tariffs to nearly $800 billion. Or about four times the cumulative amount proposed just a few months ago.
China appears more vulnerable, with Societe Generale economists estimating that the Chinese economy could lose 1 percentage point of GDP growth and upwards of four million jobs while the U.S. would suffer a modest 0.2 percentage point drag on GDP growth.
While U.S markets are taking this in stride, Chinese share prices are down 12 percent over the past month on reports that U.S. export orders have shrunk as customers wait to see what happens with tariffs and thus the cost of sourcing.
According to a report by the AP, Ningbo Top East Technology, which makes soldering irons south of Shanghai, has suffered upwards of a 50 percent drop in U.S.-bound orders, which used to make up roughly a third of its total order book. The problem is that the company is asking customers to split the cost of the tariff hike. But few are willing.
Another wrinkle to the China trade war story is a Reuters report that the European Union flatly rejected a proposal by Beijing to form a strategic alliance to take on the U.S. on trade. This is possibly because Europe knows deep down that China's mercantilism is real -- and that they have been guilty of similar behavior in the past. German Chancellor Angela Merkel, who just barely survived a recent internal political spat over immigration, warned Germany's lower house of parliament that trade tensions risk reversing the multi-lateralism that quickly quelled the global financial crisis after the U.S. housing bubble popped.
As the trade rhetoric turns to trade actions, business surveys suggest commerce is already being impacted. JPMorgan's Global Purchasing Managers' Index (PMI) data show that new export activity has nearly stalled, returning to a low ebb not seen since the middle of 2016 as China was coming off a destabilizing round of currency volatility.
If this impacts U.S. corporate earnings estimates in coming quarters, investors will have no choice but to pay attention. But for now, hope springs eternal that a de-escalation is coming -- or, if the trade spat worsens but remains contained, that U.S. equities will fare the best.
Put another way: That America has the most to gain from taking a firmer stance on trade terms. Small-cap stocks, which rely less on trade trends than large-cap stocks, in particular are hot lately, with the Russell 2000 up more than 9 percent for the year-to-date with the bulk of the gains coming since the beginning of May.
A lot of pearl clutching and vapors over at FN this morning.
Real serious looking analists saying the trade war is going to kill us all.
The Chinese and the Europeans need US more than we need them and they know it.
It’s about time we had an American President that acts like a President of the United States of America instead of President of the New World Order.
I hope the Chinese stop taking USA pork ( Smithfield is owned by the Chinese) Should help Bacon prices in the USA. The bulk Bacon I like at the local Stator Bros Market used to be $3.99 lb, less on Sale. Now $5.99 is the normal price with the rare sale down to $4.99. initially the price increases was blamed on the the virus which was killing piglets about five years back. The price never came back down. More supply should help that.
Neil Cavuto is a never Trumper establishment spokesperson.
Charlie Gasparino is simply anti-Trump. No other way to see it.
What Free Traitors don’t want you to know is the there is a domestic market for all the products we ship overseas. That means a boon for the consumer. Bacon is a good example.
Please all move, Liberals. So tired of you.
Certainly you don't think that U.S. pork producers will continue to produce the bacon the Chinese won't buy?
“Its about time we had an American President that acts like a President of the United States of America instead of President of the New World Order.”
Amen to that.
The reports now are the Chinese targeted cheese to hurt Paul Ryan and something in Florida to hurt Rubio.
Did the Dems collude with China on which products to target? I would be surprised if they didn’t actually.
Either way, I’m going to take a look at the list and see if I can support any of these American industries. Call it a reverse boycott.
patience will be paramount. we will need a few months to a few years to get our local industries back up and running at speed. of course, the America last’ers will be screaming at the top of their lungs trying to get the President to lose his nerve until that happens.
Our industries are currently up and running just fine. The current unemployment rate is at or nearly at full employment.
In many areas there are not workers for available jobs.
“Did the Dems collude with China on which products to target? I would be surprised if they didnt actually.
Either way, Im going to take a look at the list and see if I can support any of these American industries. Call it a reverse boycott.”
Canada is doing the same thing...targeting products from certain states...meeting with Dem politicians first.
Also, I just bought a number of small items; had a choice between China goods or US...I paid an extra $2, but it felt good.
Well, it’s not like they can stockpile the hogs until a more
favorable market arises. Gotta love perishables. ;)
The problem is that many American employees think that they are married to their employers — they are reluctant to look for a better-paying job.
many American employees think that they are married to their employers “
I dont get that part either but we are all wired differently. However, I have spoken to a lot of people and the ONLY thing they are afraid of losing are their benefits. I’m self employed and dont like taking orders from someone I know Im smarter than. God knows how many asshole bosses and office managers I worked for I knew were stupid and clueless on their jobs...
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