Trump’s Olive Branch Whacks China With More Tariffs

(Bloomberg) --

With President Donald Trump’s trade wars, it’s often worth focusing on where things stand rather than the latest commotion. He has a way of shifting the lens — and expectations — so quickly that it can be hard to maintain perspective on how far things have moved.

And that applies to what happened Tuesday in Washington.

Trump bowed to pressure from companies and delayed imposing a batch of tariffs on consumer goods. It was widely portrayed as a concession, an early Christmas present. Yet his olive branch to Beijing also carried 10% tariffs on its olive imports (fresh or chilled) starting Sept. 1, along with more than 3,200 other product categories. Seemingly lost amid the sighs of relief: He is continuing to escalate the trade war against China and ensuring it will drag on for months.

Along the way he also managed to convince markets that the escalation was somehow a de-escalation and that fears about a slowing U.S. and global economy should be set aside. Stocks surged.

Here’s a reality check:

• Tariffs on more than $110 billion in new imports from China — including kids’ clothes and sports gear ranging from lacrosse sticks to golf carts — will take effect Sept 1. Before Aug. 1, when Trump tweeted a threat to put tariffs on almost $300 billion in imports from China, that $110 billion hit would have been a major escalation in itself. Twelve days later markets cheered it as a peace offering. 
• Duties on the remaining $160 billion in other imports from China, including toys and smartphones, will go into effect Dec. 15, making for an escalation in two chapters. That may have saved Christmas for many retailers and parents. But in the middle of the holiday season, virtually all U.S. imports from China will face new border taxes.
• U.S. and Chinese officials spoke Tuesday and will speak again in two weeks. But that doesn’t mean they are closer to a truce. There remains a chasm between what the two sides expect from each other. As the U.S. demands profound economic reforms, China wants an end to all tariffs. Neither is bending.
• Trump framed his decision to delay some new tariffs as a way to avoid consumers being hit by higher prices before Christmas. That was an odd admission for someone who insists — despite howls of protest from companies and economists — that China is bearing the entire cost of his new taxes. It also came as inflation data Tuesday showed price pressures emerging. 

The economic costs aren’t yet drastic. But they are building, along with the uncertainty about tariffs, and that’s the reality businesses face for at least four more months.

Charting the Trade War

Here’s the latest rundown of  the various stages of the U.S.-China trade war, with the next rounds of American tariffs set to take effect Sept. 1 and Dec. 15.

Today’s Must Reads

• Caution flags | Another day, another round of bad news spotlighting the risk that the global economy is headed for a downturn as caution signals flash in Germany and China.
• Factory recession | America’s manufacturing output has declined in consecutive quarters and hiring momentum is starting to fade, undermining Trump’s effort to revitalize the Rust Belt.
• Leaving China | Laptop maker Inventec said it will to shift production of notebooks for the U.S. market out of China, the latest technology company to leave the country to avoid U.S. tariffs.
• Internal rebel | Philip Hammond warned Prime Minister Boris Johnson he’ll work with other former Cabinet ministers to try to stop the U.K. leaving the EU without a Brexit deal.
• Online army | China’s most powerful weapon may not be tariffs or riot police, but consumers at their keyboards pointing out the pitfalls of multinational companies.

Economic Analysis

• The uncertainty factor | Why Bloomberg Economics thinks the U.S. tariff delay won’t fix the trade war problem.

Coming Up

• Aug. 16: EU trade balance

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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