On Thursday, The Wall Street Journal reported that Treasury Secretary Steven Mnuchin had asked Chinese officials for a new round of trade talks in September, giving Beijing a chance to avert new tariffs on $200 billion in Chinese exports. Some Trump administration officials believe the U.S. has China over a barrel, the Journal says, but there's also "a steady rise in political pressure on President Trump to ease up on trade fights" from farm and business groups, and "Chinese officials said they have grown wary of the Trump administration's unpredictable decision-making process and may be hesitant to accept without a clear sign U.S. negotiators have authority to speak for the president."
Trump validated those concerns with a tweet on Thursday: "The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing."
"The president's expectation that financial hardship will prompt Chinese President Xi Jinping to cave in a fresh round of diplomatic talks is misplaced," The Washington Post reports, citing analysts. Chinese markets have fallen significantly this year while U.S. markets are rising, "but unlike in the United States, the ups and downs of the Chinese stock market affect relatively few people, meaning sell-offs are unlikely to translate into pressure on Chinese leaders," the Post notes. And China's slowing economy — its economy is growing at about 6.5 percent — is due to a lot of factors that have nothing to do with the U.S. trade war.
"There's a lot of overly wishful thinking on the American side," Jeff Moon, a former U.S. trade negotiator, tells the Post. "Every economy has problems. We have trillion-dollar deficits. That doesn't mean either economy is in fundamental danger. It's a massive miscalculation." You can read more about the complexities of the trade war at The Washington Post. Peter Weber
U.S. trade panel strikes down Trump's Canadian newsprint tariffs, in win for newspapers, loss to private equity firm
On Wednesday, the five-member U.S. International Trade Commission unanimously overturned Trump administration tariffs on Canadian newsprint, handing a win to struggling small and midsize newspapers and a loss to the New York private equity firm One Rock Capital Partners. The Commerce Department had levied the tariffs starting in January at the request of One Rock, which purchased the Washington State paper mill North Pacific Paper Co. (Norpac) in 2016. One Rock executives met with Commerce Secretary Wilbur Ross personally to push for the tariffs, arguing that Canadian newsprint was unfairly subsidized.
The ITC, an independent government agency that adjudicates unfair trade practices, disagreed, saying its investigation "determined that a U.S. industry is not materially injured or threatened with material injury by reason of imports of uncoated groundwood paper from Canada." Its ruling means Canadian newsprint providers will no longer have to pay the 20 percent tariff. The levies had caused significant damage to newspapers, prompting layoffs, reduced page counts and publication days, and even closures. Newsprint is typically the No. 2 cost for newspapers, after employee salaries. Lawmakers from both parties and across the country had protested the tariffs.
When Norpac filed its complaint, no other paper manufacturer joined it. "The rest of the industry has blamed the declining print newspaper business, rather than Canada, for its struggles," The New York Times reports. One Rock, "according to people within the paper industry, most likely paid a premium for the business in hopes that it could make the case for tariffs and boost the business's revenue. Now it appears that bet has been lost." Some newspaper publishers said they're not sure the cuts will be fully reversed, given the daunting economics of running a newspaper in the digital age. Peter Weber
President Trump is still pretty pleased with his expanding trade war, but many Republicans in Congress and prominent GOP donors and advocacy groups are not. And Trump's first salvo, tariffs on imported aluminum and steel imposed in June, might start irking American shoppers soon, too. "Consumers are starting to see higher prices for recreational vehicles, soda, beer, and other goods that now cost more to make as a result of recent tariffs on metals and parts," The Wall Street Journal reports. In recent days, Coke, Polaris Industries, Winnebago, and Sam Adams' Boston Beer Co. have all cited Trump's tariffs for coming price hikes.
Minnesota-based Polaris is also shifting some production for its Indian-brand motorcycles to Europe to get around retaliatory EU tariffs, joining its Wisconsin neighbors Harley-Davidson. If you don't buy canned beverages or plan to purchase an RV or motorcycle, you may not feel this round of tariffs, but barring quick resolution to Trump's trade fights, more broader hikes seem imminent. "Tariffs on a host of additional imported products from China this month have added costs for companies that use those components to assemble their products in the U.S.," the Journal reports. You can read more about the impact on consumers at The Wall Street Journal. Peter Weber
Some Senate Republicans are not impressed by the Department of Agriculture's announcement on Tuesday that farmers hurt by tariffs will receive $12 billion in aid.
The program will offer temporary relief as it offsets $11 billion in losses for soybean, cotton, sorghum, wheat, dairy, and pork producers, NBC News reports. Several senators said the Trump administration's tariffs targeting China, Canada, and Europe are harming farmers, and they want to see trade agreements like NAFTA finalized.
The program is "an acknowledgement" that imposing tariffs "has a lot of unintended consequences that creates a lot of collateral damage," Sen. John Thune (R-S.D.) said. "When you start doing this, where do you stop? This is not the right way to do this." Sen. Ben Sasse (R-Neb.) told NBC News the tariffs are "going to make it 1929 again. You choose a war of choice, which is what this trade war is, and then you say afterward, let's just solve it by buying people gold plated crutches? The farmers and ranchers of America, they don't want crutches, they want to work."
Sen. Bob Corker (R-Tenn.) likened the program to "welfare," and said instead of offering money to "farmers to solve a problem they themselves created, the administration should reverse course and end this incoherent policy." Catherine Garcia
President Trump imposed 25 percent tariffs on 800 Chinese products worth $34 billion Friday, and China took little time hitting back. "After the United States imposed unfair tariffs on Chinese goods, our tariffs on part of the U.S. products also took effect immediately," Chinese Foreign Ministry spokesman Hu Chunhua said Friday. China's Commerce Ministry accused Trump of launching "the biggest trade war in economic history" and said "China is forced to strike back to safeguard core national interests and the interests of its people." Beijing's retaliatory tariffs will affect 500 U.S. products, including soybeans, seafood, electric cars, and meat.
Economists say if the U.S. and China stop at $34 billion in tariffs, or even $50 billion, "the overall impact on both economies will be minimal even though some industries will suffer," CNNMoney says. But Trump threatened tariffs on up to $550 billion in Chinese goods Thursday — an amount "bigger than the $505 billion of goods that the United States imported from China last year," CNNMoney notes — and if he made good on his threat, the trade war would cause some serious damage to the U.S. and global economies.
China's state-run China Daily said in an editorial Friday that "the Trump administration is behaving like a gang of hoodlums with its shakedown of other countries, particularly China," and "its unruliness looks set to have a profoundly damaging impact on the global economic landscape in the coming decades, unless countries stand together to oppose it." Peter Weber
On Monday evening, after the Dow Jones Industrial Average closed down more than 300 points as the market digested the fallout from President Trump's growing trade wars, Trump tweeted that he was "surprised that Harley-Davidson, of all companies, would be the first to wave the white flag" by moving production of its iconic motorcycles offshore to avoid paying the European Union's retaliatory tariffs. The EU, Harley's No. 2 market, slapped tariffs on motorcycles, orange juice, bourbon, and other politically sensitive goods after Trump levied steep tariffs on imported aluminum and steel.
“Harley owners are not happy with it, I assure you, but what do you do to compete?” The Harley-Davidson community reacts to the iconic brand moving some jobs overseas to offset tariffs pic.twitter.com/MyWGGbvjbc
— TODAY (@TODAYshow) June 26, 2018
"If Trump's trade policies are leading an iconic company like Harley-Davidson to move production out of the United States, then who exactly is benefiting?" asked Edward Alden, a senior fellow at the Council on Foreign Relations. "This will pose a real challenge to the president's core claim that his policies will lead companies to build more things in the U.S."
But Harley isn't the first U.S. company reacting negatively to Trump's tariffs — on June 15, the last major U.S. nail manufacturer, Missouri's Mid-Continent Nail Corp., cut 60 contract jobs, warning that 200 more layoffs could come by the end of July, and without an import tariff exemption, the entire company could be out of business by Labor Day. There will be winners as well as losers if the trade war escalates, The Washington Post notes — the Tax Foundation predicts that 48,585 American jobs will be lost under the tariffs Trump has already enacted, and more than 250,000 jobs could vanish if he follows through on his China threats. But his steel tariffs have encouraged U.S. steel and aluminum plants to restart production, salvaging hundreds of well-paying jobs. Peter Weber
European Union counterpunches with $3.3 billion in new U.S. tariffs, and China dials up the rhetoric
The European Union retaliated against President Trump's steel and aluminum tariffs Friday with tariffs on about $3.3 billion worth of American goods, including bourbon, orange juice, peanut butter, and motorcycles. The tariffs, mostly 25 percent, are designed in part to "make noise" by targeting politically important states like Kentucky, Florida, and Wisconsin, EU trade commissioner Cecilia Malmstrom said. The EU implemented the tariffs a week earlier than expected, "a signal that the EU is striking back and taking this seriously," said economist Holger Schmieding at Berenberg Bank in London.
The EU is just one region counterpunching against the Trump administration's tariffs. Turkey is targeting U.S. products and India has announced tariffs on 29 U.S. products, including steel and iron, almonds, walnuts, and chickpeas. Trump is also looking at new tariffs on auto imports, opening a new front in the trade war. The big trade conflagration, however, is with China. The U.S. will start imposing new levies on $34 billion in Chinese goods on July 6, with $16 billion to come later and then up to $400 billion more; China vows immediate tariffs on soybeans and other agricultural products. By the first week in July, $75 billion in U.S. products will be hit by new foreign tariffs, according to the U.S. Chamber of Commerce's John Murphy.
"We've never seen anything like this," at least not since the 1930s, said Mary Lovely, an economist at Syracuse University. Trump is wagering that his tariffs will inflict more pain than they cause, forcing trade partners to capitulate. China, which has started fashioning itself as the global defender of free trade, is starting to escalate its rhetoric, too. "We oppose the act of extreme pressure and blackmail by swinging the big stick of trade protectionism," China's Commerce Ministry said Thursday. An editorial Friday in the state-run China Daily newspaper called the protectionist "trade crusade of Trump and his trade hawks" a self-defeating "symptom of paranoid delusions." Peter Weber
President Trump will announce tariffs on about $50 billion worth of Chinese imports as soon as Friday, administration official told several news organizations, and China said it is reluctantly prepared to retaliate; Beijing has already drawn up its own list of $50 billion in targeted U.S. goods, including beef, soybeans, and orange juice. Trump threatened to levy the tariffs in March, and his administration is finalizing a list of $100 billion more in Chinese goods, Reuters reports. Administration officials say the tariffs are in response to China forcing U.S. companies to share technology secrets with Chinese business partners, but Trump mostly focuses on America's trade deficit with China.
On Thursday, Secretary of State Mike Pompeo was in China to brief leaders on Trump's North Korea summit. Standing by his side, Chinese State Councilor Wang Yi told reporters that Trump has two choices, "cooperation and mutual benefit" or "confrontation and mutual loss. China chooses the first," he added. "We hope the U.S. side can also make the same wise choice. Of course, we have also made preparations to respond to the second kind of choice." Beijing has also said recent U.S.-China trade agreements won't go into effect if Trump follows through with the new tariffs.
Scott Kennedy, a specialist on the Chinese economy at the Center for Strategic and International Studies, says China isn't bluffing. "I don't think they would cower or immediately run to the negotiating table to throw themselves at the mercy of Donald Trump," Kennedy told The Associated Press. "They see the U.S. is isolated and the president as easily distracted." Tariffs will almost certainly raise prices for consumers, though White House officials say their list is designed to minimize that impact. Peter Weber