On Trump’s Tariff Tweets
Monday, May 6, 2019
This is how deals are done. Trump has to act crazy and scare markets, or he won’t scare Xi.
Trump tweeted Sunday that the deferred increase in tariffs on $200 billion of US imports from China from 10% to 25% will take effect Friday, and that 25% tariffs on untaxed imports are on the table. This should not necessarily be seen as a deal falling through, but rather entering the chaotic final stages when threats, retaliations, recriminations and walk-aways are to be expected. This is a negative-sum game in which China participates only because it is threatened. Trump must make threats, and appear crazy enough to carry them out even if they are costly to the US. It is scary to markets, but that’s collateral damage – if it doesn’t scare markets, it won’t scare China. When this is done, the risk of a China hard-landing and associated global recession will be off the table, and a less protectionist China would be the core of a global boom.