Saturday, August 03, 2019

Trump has done it again

Barely 1 month after agreeing to a ceasefire, Trump has fired off a sneak attack again using tariff increase to impose pressure on China to make a deal. To escalate the scale of attack, the 10% tariff will now include all imports of goods from China, effective 01-Sep, just when the next round of trade negotiation is going to take place. I still don't think that Trump understand how China works. Pressuring and threatening tactics will only make them hunker down and employ tit-for-tat measures. I believe China will not stay silence. For a start, they will likely pull off September negotiation and impose similar tariff to all USA imports. Let's see how China will response. Equity market are likely to be a downhill from now on.

Update 05-Aug
It is not surprising that Trump's tactics in negotiation: It is his way or the highway.

China is running out of things to tax, primary because they are exporting much more than importing goods or services. They may instead try other ways to punish USA, such as currency devaluation (slowly), control of rare earth export, placing American companies on an “unreliable entities list”, stop buying Boeing planes. It will be interesting how American companies response to such maneuver. Time will tell which methods China will undertake in response.

China Retaliation
Well, China wasted no time in coming out some counter measures.
  1. China asked state buyers to halt US agriculture imports, after Trump threatens fresh 10% tariff. This is going to hurt the USA farmer base, which has actively supported Trump. Ouch! 2020 presidential election coming....
  2. China Hits Back at Trump by Weakening Yuan. The central bank attributed the yuan move to protectionism and expectations of additional tariffs on Chinese goods, while saying it can still maintain a steady currency. Yup, a great excuse and a straight face palm to Trump. In fact, it is like saying, what USA are not buying, we can sell to other country where our goods are now cheaper. We do not depend on USA alone.

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