Trump Is Pushing China Ever Closer to the Edge

(Bloomberg) --

Where do we go from here?

Only days after the U.S. and China described their first return to the trade negotiating table since May as constructive, Donald Trump shattered the truce by announcing new 10% tariffs on Chinese goods ranging from smartphones to children’s clothing.

In doing so, the president resisted Treasury Secretary Steven Mnuchin’s proposal to give China advance warning, Bloomberg’s Washington bureau exclusively reports. The sudden tensions sent stocks tumbling globally.

China’s response was robust. A Foreign Ministry spokeswoman warned that Beijing will take counter measures if Trump goes ahead with the threatened tariffs and made it clear the ball is in the U.S. court.

The renewed standoff throws up in the air how the trade talks can proceed: Both sides were due to meet in Washington in September. Observers said it dims any prospects for a near-term breakthrough and sets the ground for a protracted dispute between the world’s two biggest economies.

Yet Trump’s hawkish stance only extends so far. Asked by reporters on the situation in Hong Kong, he labeled the recent protests “riots,” adopting the language used by Chinese authorities and suggesting the U.S. would stay out of the issue.

The escalation was swift and unexpected. Walking it back may not be as easy.

Global Headlines

Feuding allies | Japan and South Korea struck each other from lists of trusted export markets after U.S. Secretary of State Michael Pompeo failed in an 11th-hour bid to keep their feud from spiraling further. The dispute between the two close U.S. allies, which simmered for months as the Trump administration sat on the sidelines, looks set to worsen amid protests, boycotts and economic warnings.

Disappearing Tories | Britain’s ruling Conservatives lost a special election in Wales to the anti-Brexit Liberal Democrats, reducing Prime Minister Boris Johnson’s majority in parliament to a single seat. It may not be the start of a fightback to stay in the European Union, but it does further complicate Johnson’s promise to quit the bloc by Oct. 31 “no ifs or buts.”

Dead deal | The U.S. plans to test new missile technology soon that would have violated a landmark treaty with Russia that expires today, Josh Wingrove reports. Trump announced in February he was withdrawing from the 1987 Intermediate-Range Nuclear Forces Treaty that banned deployment of ground-launched medium-range missiles, after accusing Russia of breaching its terms. President Vladimir Putin, who rejects the allegation, pulled Russia out of the INF treaty in retaliation last month.

Missed opportunity | Appeals to a key Democratic constituency — auto workers and union members — were noticeably absent from this week’s debates in the Motor City. David Welch writes that the candidates ceded a chance to repair what was widely considered one of the party’s fatal 2016 mistakes: taking for granted the white, non-college-educated workers who instead embraced Trump’s promise to revitalize the Rust Belt.

• Kamala Harris says she would fund her “Medicare for All” plan by rolling back one of the few provisions of Trump’s tax law that Democrats actually wanted.
• Former Vice President Joe Biden defended Obama’s legacy against attacks from fellow Democrats.
• Click here for more on a brewing battle to dump Jim Crow-era election rules in Mississippi.

Haven no more | Mexico City was always a haven from the beheadings and mass graves that beset the country. But as homicides have risen year after year, it’s begun to look more like the rest of Mexico. As Nacha Cattan reports, since leftist President Andres Manuel Lopez Obrador took power in December, crime has become topic No. 1 in conversations in cafes, bars and offices.

What to Watch

• European governments are narrowing the field of candidates to lead the International Monetary Fund, with a decision due later today.
• New York state prosecutors have subpoenaed documents from the Trump Organization as investigators probe the family business’s role in hush-money payments made during the 2016 election campaign.
• Paraguay’s President Mario Abdo Benitez pledged to clean up his government after narrowly avoiding impeachment proceedings over a power deal with Brazil.
• Trump is today due to announce a deal to open up the EU to more U.S. beef exports.

And finally...Ever since Ethiopia announced in 2011 that it was building a vast dam on the Nile River, Egypt’s opposition – including a threat of war – has captured international attention. Yet the bigger risk to a project on which Ethiopia has pinned its hopes for economic transformation comes from within. Marc Champion and Nizar Manek report on an epic power struggle involving a mysterious death, ethnic tensions and an attempted coup.

--With assistance from Brendan Scott and Kathleen Hunter.

To contact the editor responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Anthony HalpinKarl Maier

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