The Washington PostDemocracy Dies in Darkness

The Finance 202: Trump floats more China tariffs, piercing trade war's relative calm

with Brent D. Griffiths


So much for the U.S.-China trade war's summer vacation. 

President Trump on Tuesday pierced the relative calm that’s developed since the two nations declared a truce at the G-20 summit last month by renewing his threat to impose tariffs on $325 billion of Chinese imports. 

“We have a long way to go as far as tariffs where China is concerned, if we want. We have another $325 billion we can put a tariff on, if we want,” Trump said at a Tuesday morning cabinet meeting. “So, we’re talking to China about a deal, but I wish they didn’t break the deal that we had.” 

The comments spooked the market, knocking stocks off record highs and snapping a five-day rally by the S&P 500.

But the president’s remarks were just the latest in a series of recent signals he’s given indicating he wants to keep the heat on the Chinese government. Trump has sent several tweets this week, for example, suggesting the tariffs he has already imposed on Chinese imports has Beijing on the ropes: 

And Tuesday morning, he tweeted that his administration will “take a look” into whether Google is guilty of treason for working with the Chinese government, despite no evidence to support the claim besides an accusation leveled by billionaire investor and Trump backer Peter Thiel: 

While Trump plays bad cop, others in his inner circle are promoting the potential resumption of negotiations. Treasury Secretary Steven Mnuchin said Monday the two sides are set to hold a “principal-level call” this week. If all goes well, Mnuchin said, he will travel to Beijing with U.S. Trade Representative Robert E. Lighthizer to continue talks. 

But some China watchers say there may be less to the administration’s latest China maneuverings than meets the eye. “I think our side is gradually coming to recognize that they’ve painted themselves into a corner here,” says Bill Reinsch, a trade expert at the Center for Strategic and International Studies. “The Chinese are not going to do everything we want. And the president’s choice at some point is going to be accept an agreement that’s weaker than he wants or restart the trade war… Those are not great options and they’re certainly not great political options.”

Given the stakes, the Eurasia Group in a Tuesday report pointed to “the rising probability that trade negotiations do not produce a deal in 2019 and the parties instead maintain an uneasy status quo that keeps tariffs in place but avoids further escalation.” The firm sees a “muddle-through strategy” as “the new base case for 2019, and perhaps through the US presidential election cycle.”

Then again, the direction of U.S. trade policy toward China remains entirely in Trump’s hands. And the president has demonstrated his willingness to turn that policy on a dime, most recently in May, when he blew up expectations of an imminent deal and ramped up existing tariffs on Chinese imports instead. 

If Trump makes good on his Tuesday threat to slap levies on as-yet-untaxed Chinese goods, consumers would see higher prices on staples including apparel, electronics and furniture. So the move would invite considerable political peril. “That said, we have seen [Trump’s] affinity for tariffs, and we have seen how he likes to use plenty of leverage in his negotiations,” Claire Reade, senior counsel at Arnold & Porter in Washington and a former assistant U.S. trade representative for China, tells me in an email. “Perhaps he would choose a subset of products out of the $300 billion and wait until after major seasonal sales were over to impose tariffs, or perhaps he would impose a low level tariff.”

Despite Trump’s argument that a slowing Chinese economy is stoking urgency among its leadership to cut a deal, Beijing has taken a harder line toward the U.S. in recent days. That includes the promotion of Commerce Minister Zhong Shan, considered a trade hawk, to a more prominent role in negotiations. Plus, the Chinese have balked at making major purchases of American agricultural goods, leaving Trump hanging on a commitment believe he secured at the G-20. Those developments have stirred concern among Trump allies that “the Chinese are digging in and avoiding firm commitments,” my colleagues Bob Costa and David Lynch reported last week. 

If that is in fact the case, Trump imposing more tariffs in an attempt to break the Chinese could backfire. Says Reade, “China’s interest in a deal seems likely to depend on a strategic calculus about the costs versus the benefits, understanding that China will not enter an agreement where there is a serious risk of losing face.”


Trump's policies could help him secure Fed cuts. The New York Times's Jeanna Smialek: "Trump lacks official power to make the Federal Reserve cut interest rates, but he may have found a way to force its hand: stoking economic uncertainty. The Fed’s chair, Jerome H. Powell, has signaled that he and his colleagues could cut interest rates at their upcoming meeting as inflation remains stubbornly low and risks, including Mr. Trump’s trade war with China, threaten economic growth. Mr. Powell, speaking in Paris on Tuesday, reiterated that the Fed would act as appropriate to sustain the economic expansion."

And the Fed appears to be ignoring encouraging news. The Wall Street Journal's Justin Lahart: "As the Fed has been busy sharpening its shears, its reasons for cutting rates have become less and less compelling. A couple of reports Tuesday added to the evidence. First, the Commerce Department reported that retail sales rose 0.4% in June from May. That was better than the 0.1% economists had expected... Consumer spending now looks to have grown at a 4.3% annual rate in the second quarter... which would count as the fastest pace since 2014. Meanwhile, the Federal Reserve reported that manufacturing output increased by 0.4% in June from May."

Dallas Fed prez: One rate cut could be enough. The Post's Heather Long: "Dallas Federal Reserve President Robert Kaplan has joined the chorus of central bank leaders hinting strongly that an interest-rate cut is coming at the end of July, but he does not see the need for additional cuts this year. Kaplan said Tuesday that he could support a 'modest tactical adjustment' down in interest rates. 'Not the start of a rate-cutting cycle, but a tactical adjustment that’s restrained and modest? That might be appropriate. I could see an argument for that,' Kaplan told The Washington Post in an interview Tuesday."



Lighthizer struggles to sell USMCA. WSJ's Natalie Andrews: "Despite winning friends in Congress, [Lighthizer] is struggling to overcome resistance to ratifying the deal struck by [Trump] last year. 'We’re all frustrated,' House Ways and Means Committee Chairman Richard Neal said on Tuesday after leaving a meeting with Mr. Lighthizer where lawmakers presented their objections to the agreement...

"Democrats, who took control of the House this year, are asking for stricter enforcement provisions—especially for new labor rules aimed at Mexico—and stronger environmental protections, as well as a shorter term on the 10-year exclusivity for costly biologic drugs. Lawmakers say that while Mr. Lighthizer has listened to their concerns, he needs to start taking concrete steps to reopen negotiations with Mexico and Canada."

NAM swarms Hill to push USMCA: The National Association of Manufacturers is hosting a fly-in on Capitol Hill today featuring more than 132 participants taking over 120 meetings with key House Democrats and Republicans to push for the passage of Trump's NAFTA 2.0 deal. Per the group, NAM president and CEO Jay Timmons will be on hand as well."


— Consumer lending boost big banks: "U.S. consumers are taking advantage of low interest rates to borrow and spend, boosting banks that cater to Main Street and leaving behind those that don’t," WSJ's David Benoit, Liz Hoffman and Rachel Louise Ensign report.

"Booming consumer businesses drove quarterly profits higher at JPMorgan Chase, Wells Fargo and Citigroup Inc. while trading and deal fees shrank. Goldman Sachs Group Inc., which lacks a big consumer operation, was the only large U.S. bank to report lower profit in the second quarter than it did a year ago."

Meanwhile, lower interest rates are weighing on their revenue. Bloomberg's Michelle Davis and Elizabeth Rembert: "Jamie Dimon compared the fickleness of banks’ biggest revenue source to the wind. For the first time in years, it’s blowing against them. Dimon’s bank, JPMorgan Chase & Co., snapped a three-year streak of quarterly increases in net interest income -- revenue from customers’ loan payments minus what the bank pays depositors -- and said it will fall further in the second half of 2019. Wells Fargo & Co. posted its smallest lending income since 2016, while Citigroup Inc.’s net interest margin hit the lowest in five quarters."

Steve Cohen’s Point72 Loses Long-Tenured Money Managers (WSJ)

On Path to ECB, Lagarde Resigns as IMF’s Chief (WSJ)

Abigail Disney is taking her family’s company to task over ‘intolerable’ working conditions at Disneyland (Taylor Telford)


— Pelosi 'hopeful' budget deal will happen this month: "House Speaker Nancy Pelosi suggested on Tuesday that she and Treasury Secretary Steven Mnuchin may be within striking distance of a two-year agreement to avoid billions in automatic spending cuts and a default on the nation’s debt," Politico's Caitlin Emma and Sarah Ferris report.

“'We have a clear understanding of what we want to agree to and I think that’s progress,' the California Democrat told reporters after speaking by phone to Mnuchin. The two plan to talk again on Wednesday after days of ongoing negotiations ... Pelosi's comments to reporters — just hours after she said she was 'hopeful' for a deal by next week — come amid a flurry of negotiations with Mnuchin, who has led the talks for Republicans, over the last week."

— Big Tech on the hot seat: “House lawmakers grilled executives from Amazon, Apple, Facebook and Google in a hearing Tuesday as part of their wide-ranging investigation into big tech companies and the threats they may pose to competition,” my colleagues Marie C. Baca and Cat Zakrzewski report

“The hearing, held by the House Judiciary Committee’s subcommittee that deals with antitrust, allowed for a bipartisan showing by lawmakers as they quizzed executives on the size and scope of their businesses and put on public display the increasing frustration in the nation’s capital with Silicon Valley... Lawmakers asked about a range of topics from digital piracy to the disappearance of Facebook competitor MySpace to Amazon’s competition with sellers that do business on its website -- all with the aim of uncovering how the big tech companies have become so dominant."

Facebook also faced a Senate grilling over Libra. The Post's Renae Merle: "Skeptical lawmakers on Tuesday questioned Facebook’s plan to help create a global currency, arguing that the Silicon Valley giant is seeking unprecedented influence over the financial system. 'Facebook is dangerous,' Sen. Sherrod Brown (D-Ohio) said during a Senate Banking Committee hearing on the cryptocurrency project. 'We would be crazy to give them a chance to experiment with people’s bank accounts.' Sen. Martha McSally (R-Ariz.) added: 'I don’t trust Facebook. … Instead of cleaning up your house, you are starting a new business model.' ...

"Some Republicans came to the company’s defense... Still, Facebook faces a tough task winning over many lawmakers."

See highlights here: 

Lawmakers voiced concerns at a Senate hearing on July 16 about Libra, Facebook’s cryptocurrency, stating worries that the company will mishandle user data. (Video: The Washington Post)

Facebook shocked regulators with shoddy Libra defense. The Post's Elizabeth Dwoskin and Damian Paletta: "Two days after Facebook announced plans for the creation of a new cryptocurrency for its 2.7 billion users last month, the tech giant presented its 12-page white paper to more than a dozen officials from the Treasury Department, the Securities and Exchange Commission and other agencies.

"Some of the regulators came away from the meeting in a Treasury conference room stunned that Facebook wasn’t more prepared to address concerns about money laundering, consumer protection and other potential financial risks caused by Libra, the cryptocurrency, three people familiar with the meeting said. The early encounter shows how Facebook, despite several years of run-ins with policymakers, is paying the price in Washington for the lack of trust resulting from its many privacy scandals."

— Presidential candidates are going broke: “Months of bleak polling couldn’t stop the parade of lower-level Democrats crowding into the presidential primary,” Politico's David Siders, Zach Montellaro and Scott Bland report. “But bankruptcy might.”

“Eleven Democratic presidential candidates — nearly half of the sprawling field — spent more campaign cash than they raised in the second quarter of the year, according to new financial disclosures filed Monday. Eight contenders active in the spring limped forward with less than $1 million in cash on hand, and several top-tier contenders were already spending multiples of what their lower-profile competitors raised.”

Senators call for crackdown on cocoa imports made with forced child labor (Peter Whoriskey)



  • The House Financial Services Committee holds a hearing on Facebook’s proposed cryptocurrency.
  • Netflix, Bank of America, Alcoa, eBay and  International Business Machines are among the notable companies reporting their earnings on, per Kiplinger.


  • Capital One Financial, Morgan Stanley, Novartis, Philip Morris International, UnitedHealth, Union Pacific and Honeywell are among the notable companies reporting their earnings on Thursday, per Kiplinger.
  • American Express and BlackRock are among the notable companies reporting their earnings on Friday, per Kiplinger
View this post on Instagram

A cartoon by @kuperart. #TNYcartoons

A post shared by The New Yorker Cartoons (@newyorkercartoons) on