Futures Tumble After Trump Calls For Additional $100 Billion In Chinese Tariffs

Update (8:30 pm ET): Barely two hours after Trump offered yet another trade war "tit" to China's "tat", the Chinese leadership released a statement foreshadowing its next inevitable retaliation in the escalating trade war between the world's two largest economies.

In a report published by the state-run Xinhua News Agency, Beijing vowed to defend China's national interest against US trade actions and protectionism, and said that Trump’s latest threats to introduce an additional $100bn in tariffs on imports from China "seriously violates the rules of international trade."

In short, we're sure a deal to quash the trade beef once and for all is right around the corner...

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Yesterday, just as the market soared by over 700 points from session lows because some 17-year-old hedge fund manager somewhere created the idiotic narrative that both China and the US publishing their lists of $50 billion in tariffs, that this somehow indicated easing trade tensions, we said the opposite, namely that "A green close is just what Trump needs to launch another round of tariffs" followed by the hypothetical: "Seeing favorable market response, Trump next raises China tariffs to $100BN."

Just over 24 hours later, we were proven correct because moments ago - emboldened by the market surge on Wednesday and Thursday - Trump just ordered the US Trade Representative to consider doubling the amount of Chinese import tariffs to $100 billion - or from $50 billion to $150 billion.

Putting this number in context, a 25% tariff increase on $150 billion in total goods would block close to 30% of China’s $505 billion in exports, a number which had been originally proposed several weeks ago before getting watered down to the $50bn range.

In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs."

As Bloomberg shows, the bulk of US tariffs focus on Chinese Industiral tech and machinery.

Trump also instructed the Agriculture Secretary “with the support of other members of my  Cabinet, to use his broad authority to implement a plan to protect our farmers and agricultural interests” while adding that the US is “still prepared to have discussions in further support of our commitment to achieving free, fair, and reciprocal  trade and to protect the technology and intellectual property of American companies and American people."

Trump's full statement below:

Statement from President Donald J. 'Frump on Additional Proposed Section 301 Remedies

Following a thorough investigation under section 301 of the Trade Act of 1974, the United States Trade Representative (USTR) determined that China has repeatedly engaged in practices to unfairly obtain America's intellectual property. The practices detailed in the USTR's investigation have caused concern around the world. China's illicit trade practices — ignored for years by Washington — have destroyed thousands of American factories and millions of American jobs. On April 3, 2018, the USTR announced approximately $50 billion in proposed tariffs on imports from China as an initial means to obtain the elimination of policies and practices identified in the investigation.

Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers. In light of China's unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs. I have also instruct. the Secretary of Agriculture, with the support of other members of my Cabinet, to use his broad authority to implement a plan to protect our farmers and agricultural interests.

Notwithstanding these actions, the United States is still prepared to have discussions in further support of our commitment to achieving free, fair, and reciprocal trade and to protect the technology and intellectual property of American companies and American people. Trade barriers must be taken down to enhance economic growth in America and around the world. I am committed to enabling American companies and workers to compete on a level playing field around the world, and 1 will never allow unfair trade practices to undermine American interests.

And this is what Trade War officially looks like:

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In support of Trump's decision, the US Trade Representative Robert Lighthizer issued a statement, saying that "China has chosen to respond thus far with threats to impose unjustified tariffs on billions of dollars in U.S. exports, including our agricultural products.  Such measures would undoubtedly cause further harm to American workers, farmers, and businesses.  Under these circumstances, the President is right to ask for additional appropriate action to obtain the elimination of the unfair acts, policies, and practices identified in USTR’s report."

And perhaps due to concerns that it may crash the market, the USTR also clarified that "any additional tariffs proposed will be subject to a similar public comment process as the proposed tariffs announced on April 3, 2018. No tariffs will go into effect until the respective process is complete."

Full statement below:

USTR Robert Lighthizer Statement on the President’s Additional Section 301 Action

Washington, D.C. – U.S. Trade Representative Robert Lighthizer today released the following statement in support of the President’s direction that the Office of the United States Trade Representative (USTR) consider additional measures under Section 301 of the Trade Act of 1974 regarding China’s unfair acts related to technology transfer, intellectual property, and innovation:

President Trump is proposing an appropriate response to China’s recent threat of new tariffs.  After a detailed investigation, USTR found overwhelming evidence that China’s unreasonable actions are harming the U.S. economy.  In the light of such evidence, the appropriate response from China should be to change its behavior, as China’s government has pledged to do many times.  Economies around the world – including China’s own – would benefit if China would implement policies that truly reward hard work and innovation, rather than continuing its policies that distort the vital high-tech sector.

Unfortunately, China has chosen to respond thus far with threats to impose unjustified tariffs on billions of dollars in U.S. exports, including our agricultural products.  Such measures would undoubtedly cause further harm to American workers, farmers, and businesses.  Under these circumstances, the President is right to ask for additional appropriate action to obtain the elimination of the unfair acts, policies, and practices identified in USTR’s report.”

Any additional tariffs proposed will be subject to a similar public comment process as the proposed tariffs announced on April 3, 2018. No tariffs will go into effect until the respective process is complete.

Commenting on the news, Bloomberg’s Chief Asia Economist Tom Orlik wrote that Trump’s order "raises the possibility of an alarming escalation in the trade conflict between the world’s two biggest economies." However, "it’s difficult to tell the difference between a rhetorical flourish from a president known for bombastic remarks and a meaningful shift in policy," Orlik added.

David Loevinger, a former senior Treasury official who is now managing director of emerging markets at TCW Group Inc., said the move casts doubt on the direction of U.S. policy

“It’s just not clear what the connection is right now between what the president says and what will actually become policy,” Loevinger said. “Markets increasingly have to discount White House statements on trade issues.”

Unless of course, it is people like David who are wrong, and Trump is dead serious on following through with his threat.

Meanwhile, the market - dominated by algos and pre-pubescent math PhDs who have no idea what a trade war looks like, or even a bear market for that matter - was again dead wrong, and the result is that the world is now on the verge of "nuclear" trade war.

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"Shockingly" the market isn't surging on this news - perhaps because it's nap time for the 17-year-old hedge fund managers and algos who sent the Dow 1000 points higher because "trade tensions de-escalated" in the past two days - and instead the S&P is down over 1% to start the overnight futures session.

And since it is after midnight in Switzerland and the SNB is not out there buying everything to prevent a panic, all other risk assets are plunging too.

And now we wait for China to retaliate. It took it about 9 hours on Wednesday to revert. We expect this time it will be faster.