Trade war whiplash; Central conference on work related to neighboring countries; Premier meeting on economic situation; No H20 ban

My neck is sore from all the head spinning today.

Earlier Wednesday Beijing matched the US tariff increase with a 50% increase as well as new entity and export control listings and the filing of a lawsuit at the WTO.

After some turmoil in the US Treasury market Wednesday, President Trump announced a tactical retreat from the global trade war with every country except China:

I believe that means he raised the tariff rate by another 21% on China, and then hours after the post he said he did not think he would need to raise the rate anymore, and that “China wants to make a deal. They just don’t know how quite to go about it”.

So will Xi Jinping take a breath, wait a few days and try to arrange a call to figure out of there is a way to walk things back at least part way? Or will he decide he needs to respond one more time?

Whatever he decides to do, Trump’s singling out of China will likely reinforce the view in Beijing that there is a coherent strategic plan to contain and suppress China, even if one does not appear to exist.

Summary of today’s top items:

1. Tariffs and retaliation - The PRC has now added 84% tariffs since January 20. Given the tariffs from the first Trump Administration, that continued through the Biden Administration, I think the PRC tariff rate on US imports is now somewhere around 125%?

2. White paper on “Some Issues Concerning China-U.S. Economic, Trade Relations” - The State Council Information Office on Wednesday released a white paper titled "China's Position on Some Issues Concerning China-U.S. Economic and Trade Relations." It contains six sections. One argues that China has “scrupulously honored the phase one economic and trade agreement”, and another one argues that the US has “failed to meet its obligations under phase one economic and trade agreement”. The target audience is clearly not the US but a domestic audience and the rest of the world.

3. Premier Li meets with with experts and entrepreneurs - Premier Li held a symposium with economic experts and entrepreneurs to listen to opinions and suggestions on the current economic situation and upcoming economic work. Among the named attendees were

• Zhang Bin 张斌, Deputy Director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences;

• Li Xunlei 李迅雷, Chief Economist of Zhongtai Securities;

• Shen Jianguang 沈建光, Vice President of JD.com and Chief Economist of JD Digits;

• Wan Min 万敏, chairman and Party Secretary of Cosco Shipping;

• Zheng Jin 郑津, chairman of Liu Gong Group;

• Peng Zhihui 彭志辉, founder and CTO of AgiBot;

• Wang Zuan 王钻, President of Zongteng, a global cross-border e-commerce infrastructure service provider

Premier Li told the group:

Li Qiang emphasized the need to implement more proactive and effective macro policies, push forward the implementation of established policies as soon as possible, and introduce new incremental policies in a timely manner according to the needs of the situation. We must expand and strengthen the domestic economic cycle, treat expanding domestic demand as a long-term strategy, intensify efforts to stabilize employment and promote income growth, and lead and create demand with high-quality supply. We must fully stimulate the vitality of various market entities and strive to provide a better development environment and policy services for enterprises.

Does "we must expand and strengthen the domestic economic cycle, treat expanding domestic demand as a long-term strategy, intensify efforts to stabilize employment and promote income growth, and lead and create demand with high-quality supply" mean more supply-side stimulus measures?

According to the readout, Li:

hopes that the vast number of entrepreneurs will deeply cultivate their patriotism, actively adapt to changes, and contribute more to the overall development of the country. He also hopes that experts and scholars will provide more forward-looking and constructive opinions on new situations and problems in economic operations

In an April 8th interview with Caixin, Zhang Bin said that in the face of the tariffs “Stimulus policies in the tens or hundreds of billions of yuan scale would have limited help for the current situation. Trillion-yuan level countermeasures are needed, which can only be achieved through relatively significant interest rate cuts or fiscal efforts to increase public investment.”

4. Central conference on work related to neighboring countries - It looks like the reason for the closure of subway entrances near the Jingxi Hotel was a big meeting. Xi chaired the central conference on work related to neighboring countries. There was a symposium on this topic in 2013, but eleven years later it has been upgraded to a central conference. Xi Jinping will soon visit Malaysia, Vietnam, and Cambodia.

According to the readout:

China's relations with its neighbors are currently in the best period since modern times, while also entering an important stage of deep interaction between the neighborhood pattern and global changes. It is necessary to adhere to Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as guidance, closely focus on the central tasks of the Party and the state, coordinate domestic and international situations and development and security issues, uphold the banner of a community with a shared future for mankind, take the construction of the 'five homes' of peace, tranquility, prosperity, beauty, and friendship as a common vision, follow the concepts and guidelines of being a good neighbor, securing the neighborhood, enriching neighbors, amity, sincerity, mutual benefit, inclusiveness, and shared destiny, take the Asian values of peace, cooperation, openness, and inclusiveness as the basic principles, take high-quality joint construction of the 'Belt and Road' as the main platform, take the Asian security model of sharing weal and woe, seeking common ground while reserving differences, and dialogue and consultation as strategic support, and work with neighboring countries to create a better future together.

5. Nvidia gets a reprieve from H20 ban - There had been chatter recently that the Trump Administration would soon ban the sale of Nvidia’s H20 chips to China. NPR reports that after Nvidia’s CEO paid $1 million to attend a dinner with Trump and promised new investments in US data centers, the ban is no longer happening. If the Trump Administration really had a coherent strategic plan to contain and suppress China, would it be backtracking on banning the sale of these chips?