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Trump’s trade war retreat gives lie to his rhetoric

Stocks on Wall Street dropped more than 1% as tensions spooked equity investors while the U.S.-China trade war stoked fears of an impending recession. (Video: Reuters)

Economic forecasts are increasingly warning about the threat of a recession, often citing the new China tariffs President Trump announced two weeks ago. The stock market has taken hits during that span. Inflation is starting to tick up.

It’s against that backdrop that the Trump administration on Tuesday announced that it would be pulling back on the recently announced tariffs. And the timing is conspicuous, to say the least.

It was just 12 days ago that Trump announced the tariffs — 10 percent on $300 billion worth of imports — in reaction to disappointing talks between his representatives and the Chinese in Shanghai. And now, the U.S. Trade Representative has announced that it’s delaying tariffs on many of the big-ticket items that were included — most especially, electronics, tariffs on which could have created sticker shock for U.S. consumers.

The USTR said it was removing some items from the planned tariffs list because of national security and other reasons, without naming the items. More notably, it said it was also delaying tariffs on several others until Dec. 15, including “cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”

While we don’t have many specifics, these account for many of the signature items from the new round of proposed tariffs, meaning the initial indication is that this is a significant retreat. Trump has repeatedly argued that the tariffs are good because China winds up paying for them, but this move gives lie to that talking point. With increasing signs of economic strain, the Trump administration was forced to withdraw much of what it announced less than two weeks ago, apparently because of the trade war’s impact on the United States. The timing of the delayed tariffs seems geared toward righting the markets and avoiding consumer backlash ahead of the Christmas holiday season. It’s difficult to read it any other way.

This is not the first time these tariffs have been delayed; Trump initially said these tariffs would be implemented by early July, before backing off after meeting with Chinese President Xi Jinping in June. But while that move could have been explained as a gesture of good faith or even progress, there have been no signs of those things today. The newly introduced variable is the economic strain.

It’s become increasingly apparent that the Chinese might be content to wait out Trump, perhaps hoping they’ll be able to work with a Democrat who might replace him after the 2020 election. This is a conclusion Trump has alluded to himself. Unofficial Trump economic adviser Stephen Moore recently conceded that, “We’re learning that maybe China has a higher pain threshold than we thought here.”

The question from there has been how high the U.S. pain threshold will be. If the trade war lingers late into the 2020 election and has the negative impact on the economy that analysts increasingly fear, that undercuts what is almost inarguably Trump’s biggest asset in his reelection campaign: the economy. I’ve argued that this is increasingly looking like a very unnecessary risk for Trump, as history suggests a recession would likely be fatal for a president who is already unpopular.

Tuesday’s action seems to be a clear acknowledgment that Trump has bitten off more than he can chew, at least with the latest round of tariffs. And it’s the clearest acknowledgment that the trade war isn’t going as swimmingly as he’d like you to believe.