White House Plans More Tariffs On China, Confident Threats Are Working

It appears that what we have here is another failure to communicate.

President Trump said this morning that China is negotiating with US over trade "very hard" and "very long."

Which is odd, since Gao Feng, China's commerce ministry spokesperson, complained President Donald Trump’s government has “shown no sincerity,” according to the official Xinhua News Agency, and said that the two sides have yet to start and trade negotiations.

However, despite China's claims that negotiations are impossible under “unilateral coercion” by the United States, The Wall Street Journal reports  that the Trump White House, confident that its hard-line strategy is succeeding, is planning to ratchet up the pressure on China by focusing on new tariffs and threatening to block Chinese technology investment in the U.S., according to officials familiar with the strategy.

Administration officials familiar with the U.S. strategy say that the U.S. trade representative, as early as next week, will detail which products are on the list of $100 billion in Chinese goods subject to 25% import tariffs.

Ironically, US equity markets are poised back at the level reached right before Trump's calls for $100 billion in tariffs...

Which perhaps gave The White House the confidence to push further?

Business groups in Washington, D.C., have been lobbying hard, telling the White House that tariffs are counterproductive. But administration officials have come to the opposite conclusionThey believe the threats are working.

“China basically surrendered [with the Xi speech] and he [Trump] is probably going to put even more pressure on them before he accepts whatever their bottom line becomes,” said a person familiar with White House views.

Administration officials argue the Chinese are already bending to the U.S.’s will:

“It was the most conciliatory thing we’ve heard since the whole discussion began,” said a White House official. “Up to then, it was mean, nasty, cruel name-calling.”

WSJ notes that for its part, China is looking to line up other countries against the U.S., Chinese officials said - especially in Europe, whose companies could benefit should China react to the stepped up pressure by retaliating against the U.S. Beijing has already responded to early volleys from Washington in the trade conflict with retaliatory tariffs of its own.

But, U.S. Commerce Secretary Wilbur Ross told reporters in Lima, Peru - on the sidelines of the Summit of the Americas - that with Cina trade talks:

“It’s not a question of fighting back. These are longstanding issues. We have taken action. They will take action. We will see how it ends. This is an administration you should judge by its end results, not by theories about what may be the results.”

And Ross shrugged off Chinese President Xi Jinping’s recent comments on trade

“We’ll see what he delivers. Hopefully he’ll make some of the moves that he’s been promising to do. About automotive and more imports. We need actions. Not just words.

To try to limit domestic opposition to its tough line, WSJ notes that the administration now is working on a program, which could cost billions of dollars, to compensate farmers suffering from Chinese retaliatory tariffs on U.S. crops. Mr. Trump also said he would consider joining a reconstituted Trans-Pacific Partnership, a trade group of 11 Pacific Rim nations, including Japan, which could give the U.S. additional leverage in any talks with China.

While markets seem ready to shrug off any looming trade war - which The Fed's Kashkari called "enormously bad" for the US economy - it seems we are not even out of the first inning in this fight.