Trade Wars

Tariffman!

Prznint Tariffs  announced on Twitter(!) that he will impose 10 percent tariffs on the remaining $300 billion of imports from China.

…during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%…

— Donald J. Trump (@realDonaldTrump) August 1, 2019

And of course, China responded:

“China’s government has threatened unspecified ‘necessary countermeasures’ if Trump’s planned tariff hike goes ahead.

“The Commerce Ministry said Trump’s announcement is a violation of his agreement with President Xi Jinping in June to revive negotiations aimed at ending their fight over Beijing’s trade surplus and technology ambitions.

“The ministry said if the U.S. measures took effect, ‘China will have to take necessary countermeasures to resolutely defend its core interests.’ The statement issued Friday continued, ‘All the consequences will be borne by the United States.’”

And of course, the stock market responded (WSJ):

“The Stoxx Europe 600 fell 1.5%, led by losses in the basic resources sector. AMS, the semiconductor company, was the worst performer in the region with a drop of 13%.

“In Asia, most regional stock markets declined. Benchmarks in Japan and Hong Kong retreated more than 2%. In mainland China, the Shanghai Composite dropped 1.4%. Equities in Australia also weakened.”

The Dow Jones index dropped 300 points within minutes of the announcement, despite the Fed rate cut yesterday.

So how did Prznint McDeals get us here? Last we heard—JUST LAST WEEK—he was crowing that China was about to buy boatloads of US agriculture products?

I had a great meeting with President Xi of China yesterday, far better than expected. I agreed not to increase the already existing Tariffs that we charge China while we continue to negotiate. China has agreed that, during the negotiation, they will begin purchasing large…..

— Donald J. Trump (@realDonaldTrump) June 29, 2019

….amounts of agricultural product from our great Farmers. At the request of our High Tech companies, and President Xi, I agreed to allow Chinese company Huawei to buy product from them which will not impact our National Security. Importantly, we have opened up negotiations…

— Donald J. Trump (@realDonaldTrump) June 29, 2019

So, consistency is not his strong suit!

But wait! There’s more! “Trump tariff threat pushes up chance for Fed rate cuts as recession risks rise”

• President Donald Trump’s threat of new tariffs creates a new risk for the markets and increases the chances of recession, economists and strategists said.
• But the president may also get the reaction he has been seeking from the Fed — a deeper round of rate cuts.
• The odds of a September rate cut jumped to nearly 100% in the futures market after Trump’s tweet on the tariffs Thursday, up from just over 50% earlier in the day.

So is this really all about getting the rate cuts he wanted from the Fed to stimulate the economy right before the 2020 Goat Rodeo?

“If he follows through on that threat, that is the fodder for recessions,” said Mark Zandi, chief economist at Moody’s Analytics. “Recession odds probably go over even, and I think it would be pretty hard to avoid a downturn, regardless of what the Fed does.The Fed will have to respond and the Fed will have to cut rates. The bond market will get what it is anticipating, and that is four rate cuts.”

Jeebus, this seems accurate to me:

It’s simpler than that. He didn’t do it to ensure a rate cut later – he’s not that smart of a man. He did it just to stick his finger in Powell’s eye for not doing 50 bases points yesterday. That’s the sickness about Trump. He doesn’t care who he hurts, only that he punches back.

— Zachary (@zachgraeve) August 1, 2019

No matter how you slice-n-dice it, we’re totally eff’ed in the dark.