Yesterday afternoon, Donald Trump ratcheted up trade tensions again by announcing, in a four-tweet thread, that despite “constructive talks” in Shanghai, 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.”
- “If they don’t want to trade with us anymore, that would be fine with me,”Trump added in comments to reporters, per the Wall Street Journal.
- “Unlike previous rounds of tariffs, which have focused largely on industrial goods, the $300 billion tranche is set to include a host of consumer products, from electronics and cellphones to apparel,” the Journal says.
- “We are in all-out trade war territory,” MacroPolo Associate Director Joy Dantong Ma said on Twitter, adding that “China will retaliate, beyond tariffs and exports.” Ma has previously written helpful analyses on “China’s trade war tools and their effects on the US economy” and the question “Is China running out of retaliatory ammunition in the trade war?”
Beijing was caught by surprise. Since it was the middle of the night in Beijing when the news hit, the homepages of state media were frozen in mildly optimistic mode.
- “The negotiations, which were stalled by the U.S. tariff increase in May, are overcoming this estrangement and getting back on track,” a Xinhua commentary featured on the homepage of the People’s Daily said.
- “China, U.S. to intensify trade consultations in August” was the main other trade-war-related headline featured in state media (English; Chinese).
- That article expressed hope “that the U.S. side will…show sincerity and goodwill.”
Markets were also caught by surprise, as “a more than than 1% gain in U.S. stocks evaporated within minutes, U.S. crude fell more than 8% and emerging market stocks tumbled to a six-week low,” per Reuters. Because the new tariffs would hit consumer retail, the “SPDR S&P Retail ETF dropped more than 3%,” CNBC said.
WHY DID TRUMP ESCALATE NOW?
We would bet that the change has to do primarily with the 2020 election. Since the trade talks last broke down, in early May, Trump has tended to combine his talking points about China with attacks against his potential Democratic opponents, particularly former vice president Joe Biden. He most recently did this on July 30, as his negotiating team was in Shanghai.
Two pieces from the Atlantic and the New York Times show that the Democrats in this week’s primary debates didn’t talk much about China nearly as much as they should have, and that when they did talk about China and trade, they didn’t have a unified message to contrast with Trump:
- In debates, Democrats sounded as if China doesn’t exist / The Atlantic
Peter Beinart writes, “To treat great-power competition as an afterthought is irresponsible, even dangerous. The 2020 presidential candidates did just that.”
- Echo Trump’s tough talk, or lift tariffs? Democrats clash over trade / NYT (porous paywall)
By doubling down on being tough on China, rather than doing anything that could be perceived as concessionary toward China, Trump can at least claim to be “strong” and consistent on this issue.
On the Chinese side, Bill Bishop in Sinocism points out that the new escalation “probably will give Xi more cover, if he even needs it, against any grumbling that he has mishandled the U.S. China relationship. It should be an easy argument to make that no one can manage Trump and so those trying to blame Xi have other, ulterior motives, and that even if China agrees to humiliating concessions there is no guarantee the U.S. side will keep its word.”
OTHER TECHNO-TRADE WAR REPORTS:
People to whom Trump is not listening
- Trump tariffs ‘backfiring’ on the U.S. economy / BBC
Comments from Gary Cohn, Trump’s former chief economic adviser who resigned in March 2018 over relatively small-scale steel and aluminum tariffs.
- China buys U.S. soybeans for first time since June / Reuters
“The U.S. Department of Agriculture on Thursday confirmed a private Chinese company bought 68,000 tonnes of soybeans in the week ended July 25… Large purchases are not expected as China’s hog herd, the largest consumer of the soybean meal produced from raw beans, has been decimated by the deadly African swine fever.”
- Global Times on Twitter: “China has approved Russian barley to enter the Chinese market, and this new approval shows closer collaboration in the agricultural sector between the two countries amid a bruising China-U.S. trade war.”
- Hu Xijin 胡锡进 on Twitter: “China-U.S. trade war has spurred agricultural cooperation between China and Russia and promoted further modernization of Russian agricultural sector. Trade war has created strong competitors for American farmers. Global agricultural export pattern may undergo permanent changes.”
Canada and Huawei
- Canada puts off decision on Huawei’s 5G role until after election / Caixin (paywall)
“Ottawa will not make a decision on whether to ban China’s Huawei Technologies Co. Ltd. from the country’s construction of next-generation 5G wireless networks before the federal election in October, a senior government official said. Canada needs more information from the United States about the nature of the perceived security threat of Huawei, and it most likely won’t come before campaigning begins in early September…”
OTHER IMPORTANT PIECES TO READ ON U.S.-CHINA RELATIONS:
The China engagement debate
- What America’s China debate gets right and wrong—and what it’s missing/ World Politics Review
Howard French compares the two open letters, and comments, “Beyond getting its own house in order, it is far from obvious what else Americans should do about the challenge that China presents.”
- How America can both challenge and coexist with China / Foreign Affairs (paywall)
Kurt M. Campbell and Jake Sullivan write, “The rapid coalescence of a new consensus has left these essential questions about U.S.-Chinese competition unanswered. What, exactly, is the United States competing for? And what might a plausible desired outcome of this competition look like? A failure to connect competitive means to clear ends will allow U.S. policy to drift toward competition for competition’s sake and then fall into a dangerous cycle of confrontation.”
Chinese students in America
- A welcome message, or a warning? / Inside HigherEd
“A State Department official says Chinese students are welcome. She also speaks of Chinese propaganda and influence activities on U.S. campuses, and of academic espionage.”
- Assistant Secretary Royce remarks at the EdUSA Forum / Department of State
- How should the U.S. government treat Chinese students in America? / ChinaFile
A ChinaFile conversation.