Trump Shatters Trade Truce in Big 2020 Gamble

(Bloomberg) --

Donald Trump has always touted himself as a hard negotiator in business. That approach with countries can bring bigger risks than a failed deal.

Negotiators have been unable to strike an agreement after the U.S. president shattered a six-month truce in his trade war with China, with tariffs kicking in today on Chinese imports ranging from cooked vegetables and Christmas lights to highchairs for babies.

Beijing has vowed to retaliate, and the news whipsawed markets.

The White House said talks will continue today in Washington between Vice Premier Liu He and top U.S. officials. But as our team in Washington reports, it's far from clear what might happen now: Can a deal still be reached? Does Trump go ahead with his promise yesterday to widen tariffs to all Chinese imports – worth about $540 billion last year?

While the latter move would take weeks to deploy, it would have significant repercussions for the U.S., Chinese, and global economies. Economists at Moody’s Analytics said an all-out trade conflagration could tip the U.S. into recession by end-2020, just as Trump comes up for re-election.

China’s Foreign Ministry offered no details today on how the government might respond, but while President Xi Jinping wants a deal to end the trade war he also cannot risk being seen as weak at home, and Trump's actions may force a strong reaction. Spokesman Geng Shuang had one message: “stay tuned.”

Global Headlines

Stopping the rot | South Africa's ruling party scored a victory in this week's election just big enough to give President Cyril Ramaphosa a mandate to pursue his economic and anti-graft programs. But the African National Congress’s majority fell well short of its showing five years ago, signaling the enduring damage caused by the scandal-ridden administration of predecessor Jacob Zuma.

Kurdish factor | Turkish President Recep Tayyip Erdogan may have a trump card in his bid to keep control of Istanbul: jailed Kurdish militant leader Abdullah Ocalan. The Turkish state’s public enemy No. 1 is seeking a compromise over a semi-autonomous Kurdish area in Syria after he was allowed to meet his lawyers for the first time in eight years. As Selcan Hacaoglu reports, Erdogan may want Ocalan’s help in next month's rerun vote for Istanbul mayor after the key city was originally won by the opposition.

Bypassing Congress | Many of the Democrats running for president are vowing to use executive action to deliver on campaign promises from gun control to raising the minimum wage, breaking with a tradition of paying lip-service to bipartisanship on the stump. Commitments to unilateral action have become a go-to campaign tool this year in response to a gridlocked political landscape, Sahil Kapur reports.

EU Inequality | What makes Algis Milasius special isn’t his lack of a flushing toilet or that he survives by raising chickens and chopping wood. It’s that the former sawmill worker lives in Lithuania, a euro-area nation heralded as a model for economic integration. As Milda Seputyte reports, crushing inequality is dominating the debate on the country’s future as voters choose a new president this month.

Climate clash | Vancouver is the wellspring of Canadian environmentalism — and the heart of its climate dilemma. In the last installment of a three-part series on coal, Josh Wingrove reports how British Colombia, the birthplace of Greenpeace and once home to progressive Prime Minister Justin Trudeau, is struggling with its role as an energy hub for Canada, one of the world’s top crude producers, coal exporters and per-capita emitters of carbon. Read the other stories in the series here and here.

What to Watch

• French President Emmanuel Macron and Facebook’s Mark Zuckerberg meet in Paris today, a year after the social media company pledged to open its doors to a government team to keep online hate speech in check.
• U.S. Commerce Secretary Wilbur Ross is in Luxembourg where he will discuss space cooperation.

And finally...Federal prosecutors are expected to charge former rap star Pras Michel as soon as today with campaign-finance violations related to President Barack Obama’s 2012 re-election campaign. Michel, who was a member of the band the Fugees, will be accused of contributing funds to pro-Obama organizations without disclosing their foreign origin — specifically Jho Low, who is accused of masterminding a massive diversion of cash from Malaysia’s 1MDB wealth fund.

--With assistance from Kathleen Hunter and Selcan Hacaoglu.

To contact the editor responsible for this story: Michael Winfrey at mwinfrey@bloomberg.net

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