One of the cited reasons behind today's market slide which started in Asia and promptly swept the rest of the globe, is a belated appreciation of Tuesday's news that the Trump administration is now considering more than doubling proposed tariffs on a further $200 billion worth of Chinese goods to 25%, up from an original 10%. But what exactly prompted Trump to push for the sharp reset in Chinese tariffs?
The answer was actually first given by Trump himself three weeks ago, when in a candid CNBC interview the president said that he was not only watching the US trade deficit with China, but also its currency, which was "Dropping like a rock", suggesting that trade war was morphing into currency war after he berated the Fed for hiking rates and pushing the dollar higher.
Whatever the reason, the longer the trade war continues, the more Trump will find himself in a bind: on one hand he wants lower rates and a weaker dollar, on the other he keeps escalating by enacting ever bigger tariffs on China, which are sure to prompt a broad inflationary response in the US economy requiring even higher rates, as we discussed previously.
Starting with the latter, and continuing the tit-for-tat retaliation in the trade/currency war, higher-than-anticipated tariffs will encourage Beijing to let the yuan slide even more, exacerbating the currency war and potentially making Trump dictate monetary policy to the Fed.
Then there is what China says and on Thursday, Beijing urged the United States to "Calm down" and return to reason after news that Trump may hike the tariffs from 10% to 25%. Wang Yi, the Chinese government's top diplomat, said U.S. efforts to pressure China would be in vain, urging its trade policymakers to "Calm down".
Finally, when it comes to what China does, look no further than the Yuan, whose sharp devaluation started in mid-June, when Trump formally launched the trade war, announcing that new tariffs on $50BN in Chinese products will come into effect, followed just days later with the launch of the next, $200BN round of tariffs.
All Trump has to do, is help them do it and watch as China's economy crumbles from the inside.
https://www.zerohedge.com/news/2018-08-02/heres-why-trump-hiking-chinese-tariffs-25
The answer was actually first given by Trump himself three weeks ago, when in a candid CNBC interview the president said that he was not only watching the US trade deficit with China, but also its currency, which was "Dropping like a rock", suggesting that trade war was morphing into currency war after he berated the Fed for hiking rates and pushing the dollar higher.
Whatever the reason, the longer the trade war continues, the more Trump will find himself in a bind: on one hand he wants lower rates and a weaker dollar, on the other he keeps escalating by enacting ever bigger tariffs on China, which are sure to prompt a broad inflationary response in the US economy requiring even higher rates, as we discussed previously.
Starting with the latter, and continuing the tit-for-tat retaliation in the trade/currency war, higher-than-anticipated tariffs will encourage Beijing to let the yuan slide even more, exacerbating the currency war and potentially making Trump dictate monetary policy to the Fed.
Then there is what China says and on Thursday, Beijing urged the United States to "Calm down" and return to reason after news that Trump may hike the tariffs from 10% to 25%. Wang Yi, the Chinese government's top diplomat, said U.S. efforts to pressure China would be in vain, urging its trade policymakers to "Calm down".
Finally, when it comes to what China does, look no further than the Yuan, whose sharp devaluation started in mid-June, when Trump formally launched the trade war, announcing that new tariffs on $50BN in Chinese products will come into effect, followed just days later with the launch of the next, $200BN round of tariffs.
All Trump has to do, is help them do it and watch as China's economy crumbles from the inside.
https://www.zerohedge.com/news/2018-08-02/heres-why-trump-hiking-chinese-tariffs-25
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