ADVERTISEMENT

Trump’s Latest Tariff Threat Betrays Impatience for a China Deal

Trump's Latest Tariff Threat Betrays Impatience for a China Deal

(Bloomberg) --

With his latest tariff threat, President Donald Trump has shown he’s growing impatient for a deal and is prepared to risk denting his economy and American consumers’ wallets to break the deadlock with an increasingly obstinate Beijing.

China has repeatedly decried such pressure tactics, meaning the latest salvo threatens to extend the impasse should Beijing respond by stepping back from the negotiating table. Already, there are signs officials there are girding for a prolonged confrontation.

Trump’s Latest Tariff Threat Betrays Impatience for a China Deal

Speaking to reporters as he left the White House for a rally in industrial Ohio on Thursday, Trump complained that while he liked China’s President Xi Jinping “frankly he is not going fast enough.’’ At the evening rally in Cincinnati, he said he would be "taxing the hell out of China" until there’s a deal.

Behind Thursday’s decision to impose a 10% tariff on a further $300 billion in imports from China -- ranging from smartphones to children’s clothing -- is a view that China is slow-walking the talks, people close to the administration say. They see China reverting to a strategy it has used effectively to wait out U.S. administrations as elections near, with the go-slow only getting worse since Trump and Xi struck a tentative truce in Osaka at the end of June.

That view was reinforced after this week’s talks in Shanghai during which Chinese officials offered nothing new and insisted that they would not deliver on any commitments until after U.S. tariffs were removed, according to people familiar with the discussions.

"They’d like to see a new president in a year and a half so they can continue to rip off the United States like they’ve been doing for the last 25 years,” Trump said at the Cincinnati rally. "They’d love to see a guy like sleepy Joe Biden who has no clue what the hell he’s doing. They’d say to sleepy Joe, ‘Sir, just sign right there.’ ‘Oh OK, I’ll sign,”’ he said, mocking Biden.

Read More on U.S.-China Trade War

  • Here Are the Numbers on What Trump’s Tariff Threat Will Affect
  • As China’s Economy Slows, Why the World Should Care: QuickTake
  • Terms of Trade: Powell Learns First Rule of Tariff Fight Club
  • Asia Stocks Slide on Fresh U.S.-China Tariff Shock: Markets Wrap
  • Trump Resisted Mnuchin Proposal to Warn China of New Tariffs

With the latest volley of tariffs, Trump may be playing one of his final cards. Most importantly, China also appears to have decided it can wait Trump out and weather an economic storm starting to cause plenty of harm in the U.S. as well.

“New tariffs will by no means bring closer a deal that the U.S. wants, it will only make it further away,’’ Hu Xijin, the editor of the state-run Global Times, offered on Twitter. “I think the Chinese will no longer give priority to controlling trade-war scale, they will focus on the national strategy under a prolonged trade war.’’

Damien Ma, a China expert who leads the Paulson Institute’s in-house think-tank, said one message emerging from a Chinese politburo meeting on the economy earlier this week was that officials were already preparing for a worst-case scenario and ready to cope with more tariffs and a further slowdown in growth.

“If the feeling in Beijing is that they can withstand this because they’ve already priced it in, then I think that’s not a good outcome for negotiations,’’ Ma said.

Trade Demons

Trump, meantime, is presiding over a U.S. economy that everyone from Federal Reserve Chairman Jerome Powell to CEOs have said is slowing as a result of the trade demons he has unleashed. While Trump on Thursday continued to insist China was paying the cost of his tariffs, CEOs have in earnings calls over the past few weeks repeatedly detailed the rising direct and indirect costs to their businesses.

The president on Thursday shrugged off the tumble in markets that followed his announcement, which included the steepest fall in the price of crude oil seen in four years on fears over global growth. He is likely to have a harder time dismissing further falls, or a more precipitous slowdown in growth as the 2020 election nears.

Indeed, the impact of his trade wars on the manufacturing sector are growing increasingly evident. A few hours before Trump announced his tariffs on Thursday, the Institute of Supply Management released its July factory gauge showing its fourth straight decline and its worst result since 2016.

“If the President’s goal is to bring manufacturing back to the United States, then doubling down on tariffs makes about as much sense as bowling cleats,’’ said Kip Eideberg of the Association of Equipment Manufacturers. “At the end of the day this means smaller profits, selective price increases, and supply chains moving from China to countries such as Vietnam and Mexico. It does not mean more American manufacturing jobs.’’

Promises, Promises

Another reason the lack of tangible progress at the Shanghai meetings hit a political nerve was Trump’s growing frustration that Xi hasn’t delivered on what he took to be a deal in Osaka to ramp up purchases of U.S. agricultural products. Trump has repeatedly promised farmers, many of whom voted for the president in 2016 and who blame the trade war with China for contributing to the worst farm crisis since the 1980s, that he would deliver them a mountain of purchases that has yet to materialize.

People inside and near to the administration complain Chinese officials have become increasingly arrogant since talks broke down in May over Beijing’s refusal to enshrine agreed reforms in law.

Michael Pillsbury, a China expert at the Washington-based Hudson Institute who has advised the Trump administration, pointed to a statement earlier this week by a Chinese foreign ministry spokesman that the U.S. shouldn’t “give medical advice when you are the one who is sick."

“Calling the US president ‘sick’ from the spokesman podium in front of fifty reporters takes us back fifty years,’’ Pillsbury complained.

There are those in and around the administration who still see a steady escalation of tariffs as a valid policy objective in its own right.

“We love tariffs. Tariffs are a wonderful thing,’’ White House trade adviser Peter Navarro told Fox Business News ahead of the announcement. Dan DiMicco, the former Nucor steel CEO who led Trump’s trade transition team and has been pushing for an across the board 25% tariff on imports from China, urged Trump to raise tariffs to the “full 25% NOW!’’

Others suggest Trump may be revealing his real hand with the latest escalation.

“What if, all along, President Trump was never really interested in a deal? What if he simply wanted to fulfill his campaign pledge of imposing tariffs on all of Chinese imports?’’ said Chad Bown, a former member of President Barack Obama’s Council of Economic Advisers now at the Peterson Institute for International Economics.

Trump has long sought to project an air of insouciant strength. If we get a deal, great; if we don’t, that’s ok too.

“He sees the play here as ‘either I break the Chinese stall or I’m the toughest president ever on China,”’ said Derek Scissors, a China expert at the American Enterprise Institute who occasionally has advised the administration. Thursday’s tariff move “fits his behavior: All or nothing. It’s not desperation. It’s exasperation.”

--With assistance from Jennifer Jacobs and Justin Sink.

To contact the reporters on this story: Shawn Donnan in Washington at sdonnan@bloomberg.net;Jenny Leonard in Washington at jleonard67@bloomberg.net

To contact the editors responsible for this story: Simon Kennedy at skennedy4@bloomberg.net, Malcolm Scott, Margaret Collins

©2019 Bloomberg L.P.