It seems to be the conventional wisdom that the tariff war between the US and China is not good for anybody, least of all the two countries concerned. And yet, here we are with China having tariffs of 125% on US goods and the US having tariffs of 145% on Chinese goods, rates that would have been thought utterly preposterous before this trade war started. Trump must have thought that China would quickly come to him seeking to make a deal, but they have not, even though the tariffs will undoubtedly hurt their economy and their long range plans, according to Yasheng Huang, an expert on China who teaches at M.I.T.’s Sloan School of Management.
I think it’s clear they [China] don’t want a trade war. Their economy is struggling, and the export sector has been one of its few bright spots. Last year, they had almost a trillion-dollar trade surplus. The property sector is not doing well. The technology sector is doing well, but it’s not really adding that much to G.D.P. growth. So this was purely a trade war that was initiated by the United States, and not by China.
I don’t think they want to cave in. That would make the Chinese leadership look very bad. And, moreover, I don’t think they trust the Trump Administration. Even if they were to give concessions this time around, I don’t think they believe that the concessions would hold. So there are multiple motivations on their part not to quickly come to an agreement if that agreement requires significant concessions.
…I think, if I had to place a bet, my bet is that they still want to continue with the current model. They don’t trust Trump. They don’t believe that his tariffs are credible. And I have to say I agree with them. And they think that he is going to make concessions. If he is going to make concessions, then I think they prefer to stay with the current model, which is a lot of investments, a lot of production, and then relying on the export markets. I think that’s their preferred option.
China is even increasing its response, warning other countries that they will look very unfavorably on those countries who make deals with the US that are aimed at hurting China.
China has warned it will hit back at countries that make deals with the US that hurt Beijing’s interests, as the trade war between the world’s two biggest economies threatens to drag in other nations.
The comments come after reports that the US plans to pressure governments to restrict trade with China in exchange for exemptions to US tariffs.
…“Appeasement cannot bring peace, and compromise cannot earn one respect,” a Chinese Commerce Ministry spokesperson said.
“China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will never accept it and will resolutely take countermeasures”.
The remarks echoed an editorial last week in the state-controlled China Daily, which warned the European Union against trying to “appease” the US.
The comments came after reports that the US plans to use tariff negotiations to pressure dozens of countries into imposing new barriers on trade with China.
Given that the size of China’s economy is now nearly on a par with the US and they are the major trading partner and investor in many countries, this is no idle threat. In fact, countries will be wary of making concession to the US for the same reason that China will not, because there is no guarantee that Trump will not try the same extortion tactic the following week. Only the very weak economies that have little or no reliance on China will do so in the hope that the deal will hold.
So China has not blinked and has refused to deal with Trump, causing him to cave and eliminate the tariffs on phones and computers and other high tech goods, since the sharp prices on those would anger a lot of people. They clearly think that he will cave even more, and now they have even more reason to think so. The stock market soared on Tuesday following reports that treasury secretary Scott Bessent had said to a group of investors that the tariffs on China would be coming down soon. Then today Trump further backtracked.
Stock markets have risen around the world after Donald Trump said his tariffs on China would come down “substantially” and he had “no intention” of firing the chair of the US central bank, Jerome Powell.
Weeks of tough talk on trade from White House officials have rattled investors and Trump now appears to be softening his tone. The president told reporters in Washington on Tuesday he planned to be “very nice” to China in trade talks and that tariffs could drop in both countries if they could reach a deal, adding: “It will come down substantially, but it won’t be zero.”
So he is promising to be ‘very nice’ to China. He does not seem to have a clue that the Chinese play a long game and are not as susceptible to flattery and sweet talk as he is.
Trump has also, after threatening to fire the fed chair Jerome Powell (though it is not clear that he has the power to do so), now says that he wont, because that threat also rattled the stock markets who see in Powell the one element of stability in these chaotic times.
Investor confidence also grew after Trump told reporters he would not fire Powell, the chair of the US Federal Reserve, reversing the previous day’s losses triggered by the president calling the central bank boss a “major loser”.
The president has criticised the Fed chair repeatedly for refusing to cut interest rates and last week hinted that he believed he could dismiss Powell before his term as the head of the central bank comes to an end in May next year.
Trump wrote on his social media platform, Truth Social, last week that Powell’s termination “could not come fast enough”, after the Fed chair raised concerns about the impact of trade tariffs on the American economy.
However, the suggestion from the White House that the US central bank will remain independent helped stocks to rise on Wednesday, as well as the prospect of lower tariffs on Chinese imports to the US.
I think that as far as the Chinese government is concerned, Trump is the embodiment of a paper tiger, “a person or organization that appears powerful but is actually powerless and ineffectual”, an old Chineses idiom that was quoted in 1956 by Mao Zedong when referring to the US.
Saturday Night Live had its take on the Chinese reaction to Trump’s tariffs.
I think China made a mistake issuing threats to other countries instead of using the fact that Trump is erratic and unreliable so that any agreement with the US is not worth the paper it’s written on. I think most countries are already leaning this way. So instead China could have claimed that it can be a reliable and consistent partner and that could have been a better way to make gains against the US in the global trade. I don’t think that having two giants threatening everyone else is going to be beneficial for anyone. One thing is certain is that everyone is going to try to be less dependent on either one of those giants in the future, as difficult as this may be.
It’s been a fascinating craziness to watch from abroad. Was there a point to any of this? Was it a convoluted scheme to lower the US dollar? Or was it to provoke China to put up tariffs against the US? 3D chess indeed if China don’t lower their tariffs after Turnip’s inevitable backdown! I need a popcorn refill.
“Investor confidence grew after… ”
Have these people been paying attention? The only thing i have confidence in here is that Trump will pull the same sort of BS again
dangerousbeans @ 3
Indeed he will.
Crossposted with Pharyngula
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Richard J. Murphy (emeritus professorof accounting at Sheffield University):
“The USA will have a crash, and the world will follow. What do we need to do to prepare for that?”
.https://youtube.com/watch?v=xJ1WQzqzaao
The reason it’s so hard to ascribe a genius motivation to any of this is that it’s much simpler: Trump and everyone around him are simply so inept at their jobs that their ignorance fuels delusional power trips.
This is what you get when you deprioritize competence and prioritize people who will agree with anything you say. Everyone knows this, even Trump. But he’d rather prioritize his comfort than… well, anything else it seems.
@lanir:
More to the point, he’d rather prioritize his immediate comfort than potential long-term comfort. Because he’s completely useless at long-term planning.
One of the bad things about this situation is that China’s trade policy is abusive. Trump’s solution doesn’t work though, it’s a simple minded wrong solution to a complex problem.
China is trying to export it’s way out of a bad economic situation. That works for a small country but for a country as big as China it doesn’t. Other countries won’t buy that much at fair prices, so China artificially keeps it’s prices low. It subsidizes export businesses, it keeps the Rembi low and it suppresses wages in China.
When talking about China don’t get caught in the trap of thinking their government is more effective and efficient then the US. The reality is that China’s government is more authoritarian the US government, breaks treaties and looks more effective because it lies more. The Chinese government doesn’t treat it’s neighbors any better then the Trump administration and isn’t any more trustworthy. They are just better at putting on a show of respect.
And to Russia.
And to Ukraine.
And to Saudi Arabia.
And to Iran.
And to the EU.
And to the rest of the world, pretty much.
The USA looks weaker now than it looked on December 8th 1941, and this time it didn’t need any Japanese help. The only nations it seems able to push around are relative minnows, geopolitically speaking.
On the other hand, the USA volunteered for this. No need for messing about with the electoral college, this was a convincing win on the popular vote -- you CHOSE this, democratically. Hope you enoy the consequences. And if you think the damage self-inflicted in the last (is it really only?) three months is repairable AT ALL, you’ve not been in any of the sorts of meetings I’ve been during that time where large international companies are working out how to do business without having to involve the USA at all. It’s not easy, and it won’t be quick or cheap to implement, but ultimately it’s going to be worth it just to not have to depend on the flaky US any more for important stuff. These meetings are happening, now, all over the world. Plugs are being pulled, and once pulled they won’t go back in.
I’ve said it before -- US economic hegemony had to come to an end sooner or later. I’m just surprised I lived to see it. Particularly in the 1990s, it felt like we’d tested politics and the answer had come in -- America wins. End of. But that was obviously not the case. I’m surprised I lived to see it turn around, but I’m even more surprised that the end didn’t come because China or Russia or Australia or Japan were better, it came entirely self-inflictedly.
I was pretty down on Trump before the election, but even at my most pessimistic I wouldn’t have believed he could achieve so much, so fast, to destroy the USA on an international level. It’s mindblowing.
Other countries would be right to not trust any deal with Trump. Mexico and Canada are operating under the trade deal we signed with the US the last time he was in office and tore up NAFTA. Nothing changed in his four year absence, but somehow we’re now taking advantage?
And it’s not just Trump. Why would any nation make any long term deals with the US now when you’re one election away from incompetents coming in and throwing everything out the window?
I said this on BlueSky but this isn’t going to end when the Hamberdler isn’t around anymore. It’s going to take a full scale remake of the US from the ground up to avoid someone like him taking power again.
Yes, it’s almost enough to make one believe either than he really is an out-and-out Russian asset, or that he’s long been a secret Marxist revolutionary determined to bring on the Final Crisis of Capitalism. But not quite.