China’s Ace in the Hole May Be the Tariff Christmas Card
As U.S. trade officials prepare to host their Chinese counterparts for the 13th round of negotiations starting Thursday, there’s been plenty of focus on the extra pressure President Donald Trump is applying heading into the talks.
But don’t forget the indirect leverage that Beijing wields, too: Christmas, and the love Americans have for the season of receiving.
Barring a deal this week, the U.S. plans to raise tariffs to 30% from 25% on $250 billion of Chinese imports starting Tuesday. The real wallop to American wallets would come Dec. 15, when a 15% import tax hits the rest of Chinese products including smartphones, laptops and kids toys. It’s a shot fired by Trump that could ricochet economically and politically. Largely spared tariffs so far, Made-in-China consumer items would get pricier in the middle of the busiest shopping month of the year.
So as the U.S. economy slows, the trade war intensifies and an impeachment probe swirls around the president, a question arises that should worry Trump’s advisers: How much more can the American psyche withstand before all the gloom dulls the urge to spend?
Recent measures of consumer confidence have stumbled but not fallen that much, so there’s an argument for resilience. But a weak September employment report last Friday might be a sign of a crack in a tight labor market that could widen if consumers retrench. With manufacturing soft and business investment tentative, Morgan Stanley economists have warned that U.S. consumers are all that stand in the way of a recession.
On the eve of the talks, both sides are jockeying for position. The Trump administration blacklisted Chinese companies and is slapping visa bans on officials linked to the mass detention of Muslims. Chinese officials say they’d accept a limited deal as long as no more tariffs are imposed. Whether Trump accepts the terms of a little agreement after saying he wants a big one may depend partly on how worried he is about spoiling his nation’s Christmas.
Beijing sounded stoic on Wednesday, likening Trump’s latest moves to an overly aggressive poker player whose game is best met with patience and a solid defense.
“China has already seen many U.S. cards,” according to an editorial in the Communist Party-run Global Times newspaper, published Tuesday evening in Chinese and English. “It is completely unrealistic for the U.S. to surprise China with a new card.”
Charting the Trade War
After steadily rising for much of the past decade, trucking employment in the U.S. has started to decline in a way that’s reminiscent of slumps in 2015 and 2016 — a period dubbed by some observers as a mini recession.
Today’s Must Reads
- Rough week | This was supposed to be the week U.S.-China trade talks got back on track and the two sides found a way to avoid sending more unsettling signals to financial markets.
- Targeted tariffs | Beijing’s strategy has hit areas of the U.S. most exposed to trade with China such as the agriculture-dependent states, but had a much lower effect on other parts of the nation.
- Environment fight | The European Union is poised to bring trade policy into the fight against climate change, a move that risks stoking global commercial tensions.
- Domestic supplies | Don’t let looming 25% tariffs on Scotch get you down, not when there are plenty of distilleries turning out single malts in the U.S.
- Fertilizer levies | The EU imposed five-year tariffs on a liquid nitrogen fertilizer from Russia, the U.S. and Trinidad and Tobago to curb competition for producers in the bloc.
- Japan recession fears | It’s still unclear whether the economy in Japan — whose business cycle is still largely tied to the manufacturing sector — can hold up to further weakness in export markets.
- Aircraft exposure | A trade war between the U.S. and Europe over aircraft would be messy and put about $47 billion of Airbus' backlog at risk, more than the $30 billion for Boeing.
- Oct. 10-11: U.S.-China talks in Washington
- Oct. 10: German, U.K. trade balance
- Oct. 14: China trade balance for September
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