Trump Says China Wants to Talk After Hectic Tit-for-Tat Weekend

(Bloomberg) --

U.S. President Donald Trump has thrown another twist into his trade war with China, telling reporters that Chinese negotiators have called his own and asked to resume talks. The pronouncement seemed to confound Chinese officials. It also came just days after he angrily raised tariffs in response to retaliatory duties the day after his aides insisted talks were underway and progressing.

Step back from the fog of the past few days and it’s worth remembering just how much Trump operates on instinct. He repeatedly gravitates — on trade at least — to a pair of guiding ideas that materialized again as he met fellow G-7 leaders.

The first is to always escalate. Trump operates without the restraint of his predecessors, and embraces the extreme.

This emerged twice over the past weekend.

• Asked if he had “second thoughts” about imposing yet more tariffs on China, Trump said that he might indeed be re-evaluating the move. The White House quickly issued a corrective. Trump’s only regret: “not raising the tariffs higher.”

• When Trump on Friday “hereby ordered” U.S. companies to “immediately start looking for an alternative to China,”  analysts pointed out the leader of a free market economy did not have that power. Trump’s response was to invoke a 1977 law that allows him to declare economic emergencies. The simple message: I have the power and I could use it.

The second guiding instinct is to sell everything as a win. He is now claiming that with China, saying they’re coming back to the table because of his tough stance. “They understand how life works,” he said at the G-7.

Trump was also quick to claim that the agreement “in principle” with Japan on the contours of a trade pact was a major victory. That ignored a few awkward truths.

• Japan is only offering the same access for U.S. farm products the Obama administration negotiated as part of the Trans-Pacific Partnership, which Trump pulled out of. 

• The envisioned deal is limited, covering agriculture, industrial tariffs and some digital trade principles. Besides the wide-ranging TPP, Japan has also had a more comprehensive deal with the EU go into effect in the past two years. Replicating either would be a bigger victory. 

Charting the Trade War

Global trade languished for an eighth straight month in June, new figures show, as a tariff battle between the U.S. and China disrupts global commerce. The volume of shipments declined in the three months through June, compared with the previous three-month stretch.

Today’s Must Reads

• Can We Talk? | Trump says U.S. officials received two “very productive” calls from the Chinese on new trade talks and that “they want to make a deal.”
• Big fight | Trump risks picking a fight with the most powerful names in U.S. business if he formally orders American companies to get out of China.
• Missed deadline | The European Union won’t clinch a trade agreement with the U.S. by Nov. 1 as originally targeted, according to the bloc’s chief trade negotiator.
• American horror story | Netflix’s “American Factory,” a documentary backed by Barack and Michelle Obama’s production company, serves as a reminder of the people and complexities involved in the U.S.-China trade conflict. 
• Arctic avoidance | Macron is calling on container lines to avoid using a new Arctic shipping route — the so-called Northern Sea Route being promoted by Russia as a faster way to ship cargo between Asia and Europe — to protect the environment.

Economic Analysis

• The long view | More U.S. tariffs means more pain for China’s economy, but the latest escalation is unlikely to spur Beijing to open the stimulus floodgates.
• Counting the costs | Trump’s latest trade brinkmanship risks U.S. GDP growth below 2% in both the third and the fourth quarter.
• Developing a response | South Korean officials are calculating a response to Trump’s Twitter criticism of the special trading privileges granted to their country and other World Trade Organization members.

Coming Up

• Aug. 29: U.S. merchandise trade balance

To contact the editor responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brendan MurrayZoe Schneeweiss

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