U.S.-China Trade War Ripples Through Markets Again After Trump's Comments

June 11, 2019

By Rebecca Heilweil

After calling off tariffs on Mexico, President Trump has now threatened to impose tariffs on an additional $300 billion of Chinese imports to the United States, should Chinese President Xi Jinping not meet with him at the G-20 Summit later this month.

On Monday Trump told CNBC in a phone call he would add the tariffs if the two leaders cannot come together despite there being no sign that the Chinese president is planning to dodge him at the event.

Trump has repeatedly claimed that tariffs are a key tool of negotiations, pointing to his most recent trade scuffle with Mexico. But, as the New York Times reported, many of Mexico's coming actions to address migration along its border with the United States had been agreed to months ago.

"China does not want to fight a trade war, but we are not afraid of fighting a trade war," Chinese Foreign Ministry spokesman Geng Shuang said. "If the United States only wants to escalate trade frictions, we will resolutely respond and fight to the end."

Meanwhile, Dow Jones saw a seven-day winning streak ー the longest run since May of last year ー which might break as investors respond to Trump's latest comments. During early afternoon trading, the Nasdaq was up less than a tenth of a percent, while the S&P 500 and the Russell 2000 were both down less than a tenth of a percent.

"The markets, I think, are getting tired of the constant threats. I mean, how often can you cry wolf in a theater and have people respond," Robert E. Scott, the director of trade and manufacturing policy research at the Economic Policy Institute, told Cheddar. "At the end of the day, the tariffs are not going to fix our trade deficit with China. They're not going to help improve exports to China. And China will respond and they will punish the U.S. in several ways."

"It's a lose-lose strategy at this point," he said.

"The problem is when you try to apply tariffs to everything that we get from a country like China, you get a response in currency," said Scott. "Tariffs can work when they're focused, and they deal with a specific trade problem, but not as a broad, general strategy."

Scott said that while the U.S. had significant issues with China that need to be addressed, such as currency manipulation, he said tariffs against Mexico bristled Republicans' long-standing anti-tariff sentiments and crossed a 'red line.'

"We are tightly integrated with the Mexican economy," explained Scott.

Dan Geltrude, the managing partner of Geltrude & Co., told Cheddar that China's strategy is to target key states where Trump has support, particularly from farmers.

"Trump's strength is in the middle of the country," said Geltrude. "Whatever they can do to inflict pain on our farmers, and put Trump in a position where he's going to lose support because of the economic reeling they're going to have, that's going to work to China's advantage."

The National Farmers Union has repeatedly criticized Trump's tariff policies and said that Trump's $16 billion trade assistance policy will not be enough to account for farmers' losses.

"Every year, net farming income has been dropping in this country. And then on top of that, you have all this turmoil that's created by this administration around trade," Roger Johnson, the president of the National Farmers Union, told Cheddar last week. 'It's not that we shouldn't hold China accountable. It's that it seems like we feel like we have to pick fights with every major trading partner around the world, Mexico just being the latest example of that."

And on the prospect of whether the tariffs will impact farmers' political support for Trump, Johnson added: "they very much disagree with the approach that he's taken on trade in particular."

For full interview click here.