Yesterday, the Dow was flying-- celebrating the interest rate reduction-- and reached 27,188 before Trump announced another round of tariffs against China. Markets immediately plummeted, the Dow crashing nearly 300 points to 26,700. World markets continued trending downwards today, the Dow off 90 points as we prepared to publish and the NASDAQ down 110. Yesterday the orange-hued monkey in the White House said he'll target $300 billion in Chinese products with a 10% tariff in exactly one month if they don't bend to his will by then. He then told reporters that if he wants to he might increase the tariffs to 25% or more. (Bloomberg News reported this morning that Trump ignored Mnuchin's advice to warn China in advance of what he was about to do.) One frustrated member of Congress told me this morning that he's a "disgusting, dangerous pig" and, at the same time, "a bull in a china shop... Remember, this is a sales tax Trump is making American consumers pay; the only person who doesn't seem to understand that is the self-proclaimed Wharton graduate in the White House."
The new tariffs could hit US consumers harder than the earlier rounds. It would tax goods like iPhones and other consumer electronics, sneakers and toys. Last year, Trump imposed tariffs on about $250 billion in Chinese-made goods, targeting industrial materials and components.As he has many times before, Trump claimed-- falsely-- that the tariffs have cost China rather than American consumers."We're taking in many billions of dollars. There's been absolutely no inflation and frankly it hasn't cost our consumer anything. It cost China," Trump said in his remarks, adding that companies are now moving out of China to avoid the tariffs.In fact, economic studies show that US consumers, not China or other foreign importers, are bearing the weight of the duties. The White House's most recent Economic Report of the President, released in March, acknowledged that any benefit from the tariffs is offset by "costs paid by consumers in the form of higher prices and reduced consumption."Trump issued his new threat of tariffs on China following a mid-morning meeting in the Oval Office with his trade team meant to update him on talks that wrapped this week in Shanghai, according to an administration official familiar with the matter.The team includes Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer.Trump wasn't pleased that China had not offered concrete promises to purchase American agricultural products during the talks, something he believed was agreed to when he met with Chinese President Xi Jinping in June at the Group of 20 summit in Japan, according to the official.At the time, Trump said he'd put off imposing new tariffs indefinitely."We won't be adding an additional tremendous amount of-- we have, I guess, $350 billion left, which could be taxed or it could be tariffed. And we're not doing that," Trump said at the time.While trade officials told Trump Thursday they believed there is still the potential for a deal to be struck with China, they said they were still far off from coming to any kind of agreement.Trump issued the four-tweet message announcing new tariffs starting in September with input from Mnuchin and Lighthizer, according to the official.In his tweets, the President called the talks "constructive," but said the Chinese have not restarted buying American agricultural products as they had promised. He also claimed that China had failed to live up to its commitment in stemming sales of fentanyl, a powerful opioid, into the United States.American farmers have been hit hard by China's retaliatory tariffs. Once the biggest market for US soybean farmers, the Chinese stopped buying the American product last summer in retaliation to Trump's tariffs. By the end of 2018, the amount of American soybeans sitting in storage hit record levels.The move to apply new tariffs is sure to increase anxiety among businesses and Wall Street that the trade war is nowhere near its end.Equity and oil markets took a downward turn after Trump's tweets."The business community was surprised by the President's announcement of new tariffs," said Doug Barry, communications director for the US-China Business Council."We are concerned that today's actions will drive the Chinese away from the negotiating table," he added.About 85% of the toys sold in the United States come from China and would be hit by the new tariff. In June, Hasbro president John Frascotti told US trade officials at a hearing that the duty would cause "significant and disproportionate harm" to the company and the broader US toy industry.Tariffs that go into effect on September 1 could hit some of the toys that companies have already ordered for the holiday season, said Steve Pasierb, president and CEO of The Toy Association."We're worried about how much of the 10% tariff will get passed on to consumers across all categories. A lot of things are going to get more expensive, and toys aren't essential goods," he said.
A spokesperson for the Chinese foreign ministry told the media that China isn't looking for a fight but that Trump's move is a "serious violation" of the agreement Trump made with Xi Jinping in June and that China will take "countermeasures" if he follows through with his threats. "We don't want to fight, but we are not afraid to figh. China will not accept any extreme pressure, intimidation and blackmail." She said Trump should "abandon [his] illusions, correct mistakes, and return to consultations based on equality and mutual respect." Even before Trump made his announcement, his former Chief Economic Advisor, Gary Cohn, happened to do an interview with the BBC, where he asserted that Trump's trade war with China has had a "dramatic impact" on US manufacturing and capital investment and that the trade war was "a very convenient excuse" for China to slow down its overheated economy. Cohn warned that warned that "everyone loses in a trade war. We are an 80% service economy. The service side of the economy is doing very well, because, guess what, it's not being tariffed."
Cohn said the tariffs had made it expensive to import vital products from China, counteracting the effects of Mr Trump's tax cuts, which were designed to stimulate the US economy.He said: "When you build plant equipment, you're buying steel, you're buying aluminium, you're buying imported products and then we put tariffs on those, so literally the tax incentive we gave you with one hand was taken away with the other hand."So we are not seeing the manufacturing job creation. And I think if we get through this tariff situation, there's a real opportunity to see it here in the United States."...He thinks the trade wars have created geopolitical uncertainty, which is stopping businesses from investing. Strikingly he also thinks that, for all the rhetoric, the trade war with China is hurting the US more than it is the Chinese.Mr Trump won't like reading that. Mr Cohn though delivered for the President on tax cuts and deregulation, one of the things that has given boosters to the US economy-- unemployment at record lows, wages rising, consumer confidence increasing.Yes, the tax cuts have disproportionately helped the rich, and handed massive tax windfalls to corporate America-- but with a growing economy, and interest rates falling-- that doesn't seem to be a big concern.
