Trump Ignites China Trade War With No Endgame

(Bloomberg) --

President Donald Trump started this trade war. He’ll determine how it ends.

As the clock passed midnight today, tariffs on $34 billion of Chinese goods took effect in customs houses around the U.S. In Beijing, officials immediately slapped levies on an equal amount of U.S. imports, setting the stage for an economic battle of attrition.

The actions follow six months of threats, probes and failed negotiations as Trump reshuffled his advisers and reverted to the pugilistic trade approach he promised during the campaign. The push has helped buoy his poll numbers, easing Republican fears of a Democratic rout in the November Congressional midterms.

But the strategy will grow increasingly risky for Trump, who last night suggested his tariffs list could eventually reach $550 billion — exceeding all U.S. goods imports from China. The fight is already influencing retailers’ buying decisions, and Americans could feel price hikes just as they’re heading to the polls.

With China and the rest of the world urging caution, the decision to escalate lies with Trump. As Robert Holleyman, former deputy U.S. trade representative under President Barack Obama, put it, “If we don’t find an exit ramp, this will accelerate like a snowball going down a hill.”

Global Headlines

​Pompeo’s challenge | U.S. Secretary of State Mike Pompeo arrived in North Korea today with the daunting task of ensuring that Pyongyang’s nuclear commitments line up with Trump’s promises. Pompeo struck a cautious note while en route to the isolated nation — his third trip since April — saying he's seeking to firm up pledges that North Korean leader Kim Jong Un made during last month’s summit with Trump.

Brexiteers revolt | Prime Minister Theresa May is engaged in a decisive battle with her Cabinet over the U.K.’s future ties to the European Union, in a showdown that will either see her emerge emboldened or throw divorce talks into disarray. Tensions rose late yesterday as Foreign Secretary Boris Johnson and six other Brexiteers gathered to plot their opposition to May’s plan, which she will present to her team today at her Chequers country residence.

Art of the summit | Kremlin officials are working hard to ensure Trump gets at least one deal from Russian President Vladimir Putin that lets him declare their July 16 summit a success, Henry Meyer reports. Amid intense negotiations with U.S. counterparts in Washington, atop the list is a possible agreement on Iran’s role in Syria that would justify steps by Trump to repair tattered relations with Russia.

New EPA boss, old policy | Scott Pruitt’s departure as head of the U.S. Environmental Protection Agency won’t mean a dramatic shift in policy. If anything, Trump’s EPA could become even more effective at undoing Obama-era policies under its new boss, Andrew Wheeler. He’s a former Senate staffer and lobbyist who’s crusaded behind the scenes for decades to quash climate-change legislation and promote coal.

NATO demands | Trump’s criticism of the North Atlantic Treaty Organization has shaken seven decades of U.S. defense policy. Jonathan Stearns takes a closer look at what the president wants from NATO (besides for its other members to boost military spending) ahead of his visit to the alliance’s summit next week.

What to Watch

• Look for hints of who Trump might be leaning toward for a Supreme Court nominee ahead of his planned announcement Monday.
• Iran warned European foreign ministers gathering in Vienna that words alone won’t be enough to counteract renewed U.S. sanctions and salvage the landmark 2015 nuclear accord.

And finally...Whichever nation lifts the trophy, Putin’s already the big winner of the soccer World Cup. Russia has earned universal praise for its efficient hosting of the globe’s most-watched sports event, while foreign fans who’ve partied in the streets of Moscow and other cities say they’ve been surprised by the warm welcome from Russians. The joyful scenes are in stark contrast to Russia’s usual menacing image abroad. Even the national team’s exceeded expectations, sparking a patriotic frenzy by reaching the quarterfinals.

--With assistance from Kathleen Hunter, Anthony Halpin and Flavia Krause-Jackson.

To contact the editor responsible for this story: Karl Maier at kmaier2@bloomberg.net

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