US President Donald Trump continued his attempt to show off his negotiating prowess late Thursday, throwing a bomb into potential talks with China, after Beijing neutralized his starting position with equally steep tariff proposals.
China, in fact, had their US$50 billion in levies lined up to throw at Trump almost immediately after the White House released the US list of products. Beijing’s pledge that they would match Trump’s first round of tariffs took the negotiations straight back to the starting position. A willingness to go tit-for-tat completely nullified Trump’s initial threat.
Yesterday, with a new threat of US$100 billion in tariffs, Trump doubled down on his number one rule of negotiating: “think big.”
“Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers,” Trump said in a statement. “In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs.”
Though China did not have matching tariffs at the ready this time – Trump seemed to catch everyone off guard – they were ready to take a page out of the US president’s negotiating treatise. The second key element that Trump touts in his negotiating style is “protect your downside.” That is exactly what China did in response to Trump’s second round of tariffs, which it should be emphasized have not been formally proposed yet.
China is calling Trump’s bluff, saying they won’t even come to the negotiating table under these circumstances.
“Finance and trade officials from the two sides have not conducted any negotiations on the trade issue,” Chinese Commerce Ministry spokesperson Gao Feng was quoted by the Associated Press as saying. This is, despite Trump economic advisor Larry Kudlow’s insistence Wednesday that talks were ongoing.
“If the US side announces the list of products for $100 billion in tariffs, the Chinese side has fully prepared and will without hesitation counterattack with great strength,” Gao said. “Under these circumstances, the two sides cannot possibly conduct any negotiations about this issue,” he added.
Beijing’s options are limited for matching such a big number of tariffs. They have already proposed tariffs on imports that could hurt at home. One oft-cited avenue for retaliation, dumping US Treasuries, is also likely off the table. As China’s Caixin points out on Friday, “dumping US treasury bonds, would erode China’s ability to stabilize its own currency. As this would hurt China even more than the US, it won’t happen unless all other options are exhausted.”
But, looking at the White House’s existing US$50 billion in proposed tariffs, which appeared crafted to be as painless as possible for the US consumer, China seems to be betting that Trump’s new threat is just more bluster. Members of Trump’s own party are hoping that China is right. Republican Senator Ben Sasse of Nebraska ridiculed the president’s threat in a statement Thursday night.
“Hopefully the president is just blowing off steam again, but if he’s even half-serious, this is nuts,” Sasse said. “The president has no actual plan to win right now. He’s threatening to light American agriculture on fire.”
US stocks fell Friday morning, after closing higher for three-consecutive days, with investors stuck digesting another dose of bellicose trade rhetoric. The president’s statement Thursday gave no timetable for trade officials to furnish a proposal on US$100 billion in additional tariffs.
There are a number of factors to consider:
- Was China smart to go after Trump’s base by targeting soybean imports? In interview after interview, supporters of the president say they agree with his own conclusion that he “could stand in the middle of Fifth Avenue and shoot somebody and [he] wouldn’t lose any voters.” In fact, support from his base seems to be galvanized anytime he ignores the advice of those seen as “the establishement,” or “globalists.” Will that continue even if Trump hits their pocketbooks?
- With the escalating back and forth between Trump and China, perhaps more than ever before in his presidency, his reputation as a negotiator is on the line. He has been saying for decades he is the only person who will be able to drive a hard bargain with Beijing. China has to give him something that he can tout as a win. But, so far, possible pledges to open up the financial sector and buy more US liquefied natural gas don’t seem to have appeased the White House. Concessions on high-tech products, the foundation of Beijing’s plan to move up the value chain, don’t appear to be on the table. It is a red line for China, and the minimum that the Trump administration is asking for.
- On the other hand, though Trump’s base might stick with him, he would be otherwise isolated if a trade war weighs on the global economy. China can count on support from the rest of the world.
Never fear. US elections are in November.
I can see Trump blundering into this without any strategic plan, but I cannot see China doing that. The odds are that Trump will be forced to retreat, but the Chinese will allow him to save face somehow. They are good at that sort of thing while dealing with barbarians. Millenia of experience, I guess. 🙂
Threat is not part of the art of deal. When someone uses threat, he wants war, not a deal.
ha..ha..ha..now I know of massive corruption in the PLA. the purged corrupt chinese were executed by this government. I wonder how competent militarily are the leftovers given the numbers of senior officers’ residence forcibly relocated 6 feet below ground. maybe taiwan is having a lot of laughs watching clowns across the strait.
Trump is just a plain gangster.
Want Trump to roll over, send a porn performer with a magazine to spank him. Stormy figured that out when she was only 27.
https://www.quora.com/Who-would-win-a-trade-war-between-China-and-America/answer/Vince-Cheok?share=764b7f6a&srid=YlBl
meanwhile wto , which US was main founder, crashes into irrelevance .
Back In 1962, China was a VERY, VERY VERY poor country.
If Xi is smart he will circle Donald John Trump not looking to make a sticky situation worse———lets be real ———the Chinese have already WON so a humble Chinese would be the right and smart move. Next week Xi will give a impotant speech and what he says will decide where this sticky situation is going . I have read that Xi is a big time admirer of the wise Sun Tzu (544BC-496BC) A quote from the master—"All men can see these tatics where by I conquer, but what no one can see is the strategy out of which victory is evolved."
Trump’ bully tatics in negotiation with China will eventually hurt the pocketbook of the ordinary Americans more than anyone else and it may lead to a great recession eventually.
The simple fact is this ongoing trade dispute initiated by the Trump’s administration is reminiscent of what happened a century ago when Great Britain used the victory in the opium war to force China to give major concessions including ceding territories to not just Great Britain but also other Western powers, such as, France, Germany, Italy, Japan, and Russia.
The Chinese call this period as the Century of Humilation, so the style of Trump’s negotiation unfotunately just hardens the Chinese determination NOT to give in because they know that if they make any concessions to Trump, the other nations will make similar demands, and they are now strong enough to withstand it. In short, the history just repeats itself at different time and different form as it plays out.
US alone has no chance, China is rising and is already too strong to be bullied. It is number one manufacturing and trade nation and going still fast up. What US should do is to invest more into its own competitivnes and make structural reforms…their system reached peak, it is mature post industrial society and if they want to stay on top they need to do big adjustments… With Trump I see their trend downard speeding up on all levels.
China should stop immediately buying gold instead of T bills, gradually swaps T bill in reserve for gold as well as hedging USD to fall in as inasurance.
Excellent exposition.
And he was 72 then ????.
If tgat happens Saudis will be riding camels!
Silence is golden.
Perry Kamath It was 2006, he would have been a less senile 59.
Nowdays, anybody with a magazine might be able to do the trick.
USDollar as reserve currency naturally leads to huge trade deficit because US can just issue USD to "’pay " for imports without giving up goods and resources in exchange. In this sense, the US has been freeloading and scrounging off the backs of countries like China and Germany. And as Colin Powell said, the exporting countries recycle the USD back to US by purchasing US securities and supplying the US with liquidity to finance cheaply, the next round of imports. All this is summarized in the " Triffin Dilemma " but so called economists like Navarro and the politicians do not discuss this.
The USD as reserve currency makes it very easy for the US to spend freely and painlessly leading to an excess of spending/investment over savings. A symptom of this is the numerous wars which the US inflicts on others. This excess is the trade deficit. This equation is an economic law. The exporting countries are financing US wars of killing and destruction.
China needs to slowly move away from exporting to the US and export more to others. But easier said than done.
The economist named R Wolff explained that Trump and other politicians are blaming foreigners for the US’s self generated problems to distract from real fundamental issues.
The US wants its cake and eat it too. It is a greedy monster. And Trump is a gargantuan monster. China may need Stormy Daniels to deal with him. Hahahaa.
Anthony Martin.. Who cares as his was sin of the flesh and not that of soul. Evangelical church has pardoned him!
US$100 billion plus in tariffs backed by rhethoric without having any manufacturing base could have negative effect on her consumers lifestyle! what would happen if chinese consumers refuse to buy overpriced US made cars?As regards technology US industrial foundation is sabotaged by her own people that own USA!