President Trump ordered his chief trade negotiator to consider imposing tariffs on an additional $100 billion of Chinese products Thursday, in a dramatic escalation of his trade war with China.
The threat from Trump is the latest volley between the White House and Beijing in an exchange of trade attacks that continue to broaden in scope and severity.
Trump’s latest move would impose tariffs on a significant share of imported Chinese goods that enter the United States — $505.6 billion last year.
It comes a day after China issued a list of tariffs against $50 billion in U.S. goods, including soybeans and small aircraft, in response to recent actions from Trump.
Trump’s economic adviser Larry Kudlow has insisted that we are not in a trade war. And it is true that U.S. Trade Representative Robert E. Lighthizer hastened to add on Thursday night, “No tariffs will go into effect until the respective process is complete.” It is still possible we can negotiate back from the brink of this standoff. However, China’s leadership has every right to refuse to negotiate with the proverbial gun to the head.
Moreover, China’s negotiators should be wary that Trump’s trade negotiators don’t actually speak for the president. Trump is entirely capable of reneging on agreements or backtracking on proposals — in fact, he specializes in it! If there is any doubt, look at his on-again-off-again agreement with Minority Leader Sen. Charles E. Schumer (D-N.Y.) on the exchange of a wall for a deal to help the “dreamers.” Even after he signed the omnibus spending bill, Trump wants to cut more spending. The art of the deal requires that both sides have a modicum of integrity. (Europeans eyeing Trump’s threat to pull out of the Iran deal are no doubt struggling with the same dilemma: Do they believe him? Does Trump even know what he wants to do?)
The rat-tat-tat of tariff threats is precisely the sort of behavior that puts one smack in the middle of an unwinnable trade battle. That’s why the markets have been spooked. Thursday night the Wall Street Journal reported:
Stock-market swings in the past week have many investors scrambling to profit from the return of turbulence after a prolonged period of tranquility.
Rising interest rates, budding fears of inflation, the prospect of a trade war and a rout in technology stocks have dragged U.S. stocks lower and spurred one of the most sustained bouts of market volatility in years. Before Thursday, the S&P 500 index had gained or lost at least 1% during eight of the previous nine trading sessions.
The return of volatility was on display Wednesday when the Dow Jones Industrial Average swung by 741 points, plunging at the start amid fears of trade disruptions between the U.S. and China before reversing course with a gain of almost 1% as those fears subsided.
Major stock indexes continued their rebound on Thursday, when the S&P 500 advanced 0.7%, while the Dow gained 1%. The tech-heavy Nasdaq Composite Index rose 0.5%. Traders are bracing for another active day of trading Friday, after President Donald Trump late Thursday said he was considering slapping tariffs on another $100 billion in Chinese imports, sending stock-index futures tumbling in after-hours trading.
You do wonder how long it will take the GOP donor class to tell Trump to knock it off. Trump’s antics are costing them money in the market and making it that much harder to make business decisions. In other words, their indulgence of Trump — for the sake of tax cuts and some deregulation (puny though it may be, despite GOP crowing) — may come to nothing if the markets slide and business and consumer confidence is sapped. Moreover, Trump’s self-generated economic derailment will be one more burden for Republicans to carry into the midterms. Maybe Democrats will seize the opportunity to shed their own protectionist views. It would be good politics and good policy.
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