President Trump announces new tariffs on imports from China

The opening of the newsletter earlier today

China made a US soybean order and both sides will continue working-level talks through August. So for the next month at least perhaps the current trade status quo will be stable.

did not even hold up for 15 minutes before President Trump announced new tariffs. Sorry about that.

If Trump is hoping the Chinese will cave in the face of this September 1 threat for new tariffs I expect he will be disappointed. This goes against two of China’s core demands -sincerity and removal of existing tariffs-and is humiliating once again to its top negotiators.

It should make any upcoming Beidaihe discussions about the US-China relationship even more interesting, and probably will give Xi more cover, if he even needs it, against any grumbling that he has mishandled the US China relationship. It should be an easy argument to make that no one can manage Trump and so those trying to blame Xi have other, ulterior motives, and that even if China agrees to humiliating concessions there is no guarantee the US side will keep its word.

Given the trade imbalance China can not match this move 1:1. We should expect an intensification of non-tariff measures that penalize American firms and executives.

Such measures include but are not limited to: an accelerated rollout of China’s unreliable entities list; licensing problems; increased inspections; canceled deals, especially with SOEs; enforcement actions; media attacks; nationalist outrage, and harassment or worse of employees of US firms.

I guess the new status quo in US-China relations is that there is no status quo and we are in an increasingly unstable and unpredictable New Era.