US Futures Plunge After Trump Calls For $200BN More In Chinese Tariffs, Beijing Vows To "Hit Back"

Update 2:China has just made it clear that the relentless tit-for-tat trade war escalation isn't stopping any time soon:

  • CHINA SAYS TO HIT BACK IF U.S. ROLLS OUT NEW TARIFF LIST

  • CHINA MOFCOM SAYS U.S. TARIFF DECISION AGAINST MARKET RULES

  • CHINA WILL TAKE STRONG COUNTERMEASURES IF U.S. ISSUES NEW LIST

  • CHINA COMMERCE MINISTRY SAYS IF U.S. PUBLISHES ADDITIONAL IMPORTS TARIFF LIST, CHINA WILL HAVE TO ADOPT COMPREHENSIVE MEASURES TO FIGHT BACK FIRMLY: RTRS

  • CHINA COMMERCE MINISTRY SAYS U.S. THREATS ON $200 BILLION TARIFFS LIST DISOBEYS NEGOTIATION AND CONSENSUS REACHED PREVIOUSLY BETWEEN TWO COUNTRIES: RTRS

The only silver lining in all of this is that so far, China hasn't invoked the nuclear options: dumping FX reserves (either bonds or equities), or devaluing the currency. If Trump keeps pushing, however, both are only a matter of time. In fact, as we suggested last Friday, Russia's unexpected April liquidation of half of its US Treasurys may have been a market test and dress rehearsal for the real thing, when Beijing eventually starts selling.

US equity futures took another leg lower - The Dow is down 250 points from the close...

And Chinese stocks tumbled below 3,000 to their lowest since Aug 2016...

* * *

Update 1: While US equity futures are languishing at the day-session lows (ready for the machines to ramp them back to green tomorrow morning), Chinese stocks are suffering with Hang Seng's China Enterprise Index breaking below a critical uptrendline...

And USTR has just issued a statement in support of Trump's tariff direction.

*  *  *

Just minutes after the US Senate passed its ZTE-Deal-killing amended-bill, President Trump hit China with a potential double whammy as he directed the U.S. Trade Representative to identify $200 billion worth of China goods for additional 10% tariffs.

"Further action must be taken to encourage China to change its unfair practices, open its market to United States goods and accept a more balanced trade relationship with the United States," Trump said in a statement.

US Equity markets tumbled on the headlines erasing the day's exuberance rebound...

At the same time, China's offshore Yuan broke below its 200DMA...

The Dollar Index is down very modestly but 10y TSY yields dropped 2bps to 2.89%...

Further warning China that after these new measures are in place - on top of existing tariffs on USD 50 billion in Chinese imports -  punitive measures on another USD 200 billion of Chinese goods would go forward "if China increases its tariffs yet again."

"These tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced."

Anyone who now claims that this is not a 'trade war' is kidding themselves - this is Trump's retaliatory trade tariffs due to China's retaliatory trade tariffs which were due to Trump's trade tariffs which he imposed due to China's non-fair trade.

As an ominous reminder,  Goldman recently warned  that...

 "it is unlikely that the White House can convince trading partners that tariff threats are credible without also convincing financial markets."

In other words, for Trump's trade negotiations to be successful, and for US trade partners to take a flip-flopping Trump credibly, the market has to crash. 

Comments

tmosley BaBaBouy Mon, 06/18/2018 - 21:21 Permalink

Eventually the chinks are going to run out of shit to put tariffs on, while the US will have plenty.

That is how you win a trade war.

Again, Trump teaching us all a thing or two about what is and isn't possible.

In reply to by BaBaBouy

BaBaBouy tmosley Mon, 06/18/2018 - 21:26 Permalink

Careful What You Wish For ...

China will find ready and happily willing new buyers around the whirld for their Products.

If Pushed, They will drop the US trade like a Dead Catfish.

US Consumers will pay Much Much Higher Prices.

Eventual Outcome will be De-dollarization within the large foreign trading blocks...

In reply to by tmosley

new game BaBaBouy Mon, 06/18/2018 - 21:50 Permalink

who, name em and put a price on it. make sure you are talking billions. you don't get. we are being screwed and we hold the buyer cards at about a hundred to one ratio. ever bought something when there are many other options, like not buying it?

In reply to by BaBaBouy

PrayingMantis IridiumRebel Tue, 06/19/2018 - 00:15 Permalink

 

   ... it would be frustrating for Americans looking for “Made in USA” stuff for their favorite  “US-name-brand” items such as these popular brands ...

 

      ...   >>> http://archive.whitefishbaynow.com/blogs/communityblogs/43800917.html ... “There is NO Milwaukee in Milwaukee Tools - - - Now Made in China” 

      ...   >>> https://www.caterpillar.com/en/company/global-footprint/apd/china.html ... “25 key Caterpillar factory facilities in China, including Tianjin, Suzhou and Wuxi.” ...

      ...    >>> https://dewaltchina.en.ecplaza.net/ ... “DEWALT Industrial Tool (China) Co., Ltd” ...

      ...     >>> https://www.made-in-china.com/products-search/hot-china-products/Stanley_Tools.html ... “Stanley tools” ...

      ...     >>> https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=46948883 ... “Black & Decker (Suzhou) Co., Ltd. manufactures hardware tools such as hand jigsaws. The company is based in Suzhou, China.”

      ...      >>> https://www.axecentral.com/fender-china-10831119.html ... “Fender China” ...

      ...     >>> https://abcnews.go.com/International/photos/inside-apples-factories-china-15750239 ... “Inside Apple’s Factories in China” ...

 

       ... these are just a sample of hundreds or even thousands of ex-made-in-USA “name-brand” products that moved their factories and American jobs to China in favor of low Chinese production expenses ... the nagging questions are .... can the US compete with China’s very low production costs? ... can these US corporations survive the sales competition if their products are made in the USA against lower and affordable prices of goods and products from low-cost-manufacturing countries ? ... will the American workers and their Unions accept lower wages in order for their companies to be able to offer affordable products ? ...

        ... millions of Americans shop at places like Walmart, Amazon or eBay mainly for affordable products usually made elsewhere ...  and part of the reason you have multi-billionaires like Bezos and others is due to majority of Americans prefer lower-priced items ...

 

      ... those who are die-hard US-made patrons can still continue to buy US-made items ... that’s their prerogative ... it’s their wallets ... but it’s total hypocrisy to blame China when it was presidents Nixon and Clinton who opened the floodgates for US companies to move their factories and jobs to China ... 

 

In reply to by IridiumRebel

Oldwood PrayingMantis Tue, 06/19/2018 - 01:03 Permalink

God damned corporations put their boot on our necks and FORCED us to buy Japanese, no, Chinese, no, Vietnamese, no mexicanese.

Awe fuckit. It will always be the other guys fault. Just keep telling yourself that corporations wouldn't bring manufacturing to America if we simply demanded it....but we don't.

We want our cake and eat it too. We want cheap imports and illegal labor because we aren't WILLING to pay our neighbors to do it...and why should they given they are TOLD its work beneath them, when in our history the only thing we were to good for is set and charity (or entitlements as we now like to call it). We want what we have never had in human history, cheap imports AND good jobs, or better still, paid to do nothing.

In reply to by PrayingMantis

Adolfsteinbergovitch p4424119 Tue, 06/19/2018 - 05:50 Permalink

It's almost comical that the rotten and malevolent pitch you use to sell your online porn site to gullible young ladies contains the same misspellings over and over again whereas you adjust the price on a daily basis. 

Almost a sure and easy way to tell you are not a woman because this is a typical masculine behavioural pattern. 

But who knows, maybe you are an easily triggered gender confused lost character. What do i know after all?...

In reply to by p4424119

infotechsailor Oldwood Tue, 06/19/2018 - 04:04 Permalink

This isn't really true. There were massive protests against allowing China into the WTO, as well as against NAFTA and other job sucking one sided trade agreements that benefitted only large import corporations and foreign trade partners, screwing American workers and overall US production capacity. Msm and corrupt politicians, like bill Clinton, set this in motion. China should be allowed to compete on the world market but it was stupid or corrupt politicians who signed deals with countries that weren't playing by the same labor and environmental and quality control rules that American businesses had to play by. Trump is fixing that

In reply to by Oldwood

new game BaBaBouy Tue, 06/19/2018 - 06:17 Permalink

bad example, i don't do tv. plus s korea has very fine stuff. and yea i'd be happy to buy american and pay more. see you don't get it. you are an example of why we got to where we are. are you an american? do you take pride in quality stuff? i do and have been stuck buying china shit as the alternatives are not available...

in fact i do look for old stuff made in usa that can be used for another 40 years(at flea markets and garage sales). craigs list too.

i do not like ikea type cheap euro style modern garbagy libtard looking crap...

sorry to offend you...

In reply to by BaBaBouy

FrankDrakman BaBaBouy Tue, 06/19/2018 - 11:03 Permalink

Because Americans aren't allowed to sell their products into China in return. Thus the money goes one way (guess I have to say "to China", since you're clearly not too bright), and the USA gives pieces of papers to the Chinese called T-bills in return.

If China didn't protect their markets in myriad ways - tariffs, quotas, and especially the demand that you must partner with a local firm, turning over all your proprietary training and IP to them - then China would buy American goods, and the balance of trade would be more or less equal.

If China didn't have tariffs on US goods, Trump wouldn't need to put them on Chinese goods.

It amazes me how many idiots out there who think that there were no tariffs before Trump. He's just responding to them in a way that Americans should have years ago, but were too wimpy or too smug to do so.

In reply to by BaBaBouy

FrankDrakman BaBaBouy Tue, 06/19/2018 - 11:03 Permalink

Because Americans aren't allowed to sell their products into China in return. Thus the money goes one way (guess I have to say "to China", since you're clearly not too bright), and the USA gives pieces of papers to the Chinese called T-bills in return.

If China didn't protect their markets in myriad ways - tariffs, quotas, and especially the demand that you must partner with a local firm, turning over all your proprietary training and IP to them - then China would buy American goods, and the balance of trade would be more or less equal.

If China didn't have tariffs on US goods, Trump wouldn't need to put them on Chinese goods.

It amazes me how many idiots out there who think that there were no tariffs before Trump. He's just responding to them in a way that Americans should have years ago, but were too wimpy or too smug to do so.

In reply to by BaBaBouy

bshirley1968 new game Mon, 06/18/2018 - 22:13 Permalink

You and your but buddy mosley are both idiots.

"The problem is really very simple:

If the dollar - such as it is - is going to be the basis of the world's monetary system, and therefore required by all Central Banks as Reserves, there is only one way that these CBs can obtain those Reserves: their countries are forced to undersell all US producers, in order to be able to sell more to the US, than they buy

The difference between the dollars they get from sales, is more, than the dollars they spend to buy from the US. That difference - known as the US Trade Deficit - flows to the CBs of the world and swells their Reserves."

You can't have both, DUMBASS! You either get to print the world's reserve currency free willy-nilly OR you get trade advantages.....not both. Trade imbalances are built into the system. Want a different system? Fine. So do I. Saddle up for the "transition" pain.

Don't believe it? Sit back and enjoy a life lesson.

In reply to by new game

cbaba bshirley1968 Mon, 06/18/2018 - 22:35 Permalink

You are correct, if China don't have a reserve currency, then it has to sell more to save in US dollars.

The writer mentioned about nuclear options, namely devaluation of Yuan and dumping of US bonds.

In my opinion none of them is nuclear and have limited effect on US economy, the real Nuclear option is China Not accepting US dollars when she sells goods to US or paying in Yuan when buying products from US.

If China stops accepting US dollar in trade, or asks payment in Gold or other currencies, then all bets are off, it creates a real economic war, US dollar collapses since China is the biggest seller of goods in the world and US has no other place to fill in total imports demand, trade volume will collapse, US economy will tailspin into a deep recession, Gold will skyrocket at the end and it will become real money.

And yes, Chinese economy also crashes at the beginning. At the end of this war, gold emerges as a new currency, China wins big, they have a lot of gold reserves. US loses big if the vaults in Fort Knox are empty. 

In reply to by bshirley1968

Oldwood frank further Tue, 06/19/2018 - 01:22 Permalink

I want to see the math. It seems far more likely that they are using their surplus dollars to buy treasuries and more likely still, American assets.

No doubt the reserve currency along with our willingness to accrue massive debt has enabled this deficit, but the reason it must change is the same as it is for all of us....it can't last forever.

The implications of this deficit in trade is not just about dollars. Its about industry and jobs. China is no fool and they're not free market fans. They are using predatory commerce to undermine our industries with the desire to eliminate us from world competition while using our commerce to build their industry. America built most of its economy inside our borders, consuming what WE built. How long would it have taken China to do it that way? The ONLY way they came out of economic hell was through exports of their slave labor.

As this matures we will find we have NO competitive industries as our citizens will never back away from the cheap shit punch bowl until it is too late to do anything about it. The Chinese will by then developed their domestic markets to better balance their production, and have America captured to pay whatever the cost they decide to charge, and our government dependents rioting if they don't get their free shit in a timely way.

The Chinese are COMMUNISTS and the most severe kind of nationalists, and if anyone things China is embracing globalism as some Utopian ideal, THEY'RE FUCKING NUTS. They're out to win the pot, not just make China great again. Communism is and always has been about world domination. The Chinese couldn't give a shit if we have cheap TVs and I phones.

In reply to by frank further

cbaba CashMcCall Tue, 06/19/2018 - 10:56 Permalink

You cannot approve a currency to become a Reserve currency, you have to earn this position by the power of your currency, it has to be accepted / trusted by all major economies and they must be able to save Yuan in their central bank reserves. US dollar is used for savings more than 80% ( that's why it is called World reserve currency) , rest is mainly Euro, some British Pound and Japanese yen but their share is very low. Nobody saves Yuan.

Yuan is only included in a basket of currencies called SDR ( special drawing rights a.k.a XDR) in 2016 which was created by IMF. It is just an average basket for major currencies. It has nothing to do with reserve currency.

SDR is not used in transactions.  You cannot buy Yuan easily even if you want to, this is due to Chinese financial policy, currently Yuan is  not fully convertible. Chinese government has full control of their currency, may be in future they will make Yuan fully convertible and then it may gradually become a reserve currency.

Only a Moron can talk about subjects he doesn't understand and can call others moron, you have to look into a mirror to find a real Moron.

 

http://www.scmp.com/business/investor-relations/article/2024014/chinas-…

 

In reply to by CashMcCall

DemandSider cbaba Tue, 06/19/2018 - 07:02 Permalink

"Chinese economy also crashes at the beginning"

 

It would be the end of The CCP, and The Europeans go into a tailspin, also, without the American market. The dollar and the American market are the linchpin of neoliberalism. Even so, better to get this over with now than after The PRC's military strength is insurmountable.

In reply to by cbaba

SUNKNIGHT2010 bshirley1968 Tue, 06/19/2018 - 01:16 Permalink

Very well said & I am happy that you understand what is going on in this sad world & the folly in it !

Would be nice if you could share the wisdom you have with many people here as they just DON’T GET IT !

Some lessons have to be learned the hard way & the USA is in for some NASTY classes 

Yes. So is China but all of this could have been avoided !

In reply to by bshirley1968

lost username bshirley1968 Tue, 06/19/2018 - 02:29 Permalink

This is Hugo Price's argument. What Price neglects to think about is loans and bailouts -- time to read "diary of an economic hitman"-- all this guy and his people would do is get all these countries to borrow tons of US $$ to build whatever  - hydro electric plants, highways - doesn't matter-- they always take the money - knowing the return on investment will never work. Then we or the IMF bail them out "restructure" and loan them more. Wash, rinse, repeat. So now you have plenty of dollars to go around. If we don't get paid back we get more control or influence.  Am all fine with the return to the gold standard or asset based standard but Trump might just pull off a big win here.

In reply to by bshirley1968

not-me---it-wa… new game Mon, 06/18/2018 - 23:22 Permalink

how 'bout billions and billions in aircraft to iran, both civilian liners and stealthy fighters, how 'bout some more billions in nukular technology, how 'bout a couple nukes while they're at it, or at least a few of those fancy new "airclaft kellier" kirrer missiles....

can be paid for in oil, all of iran's oil, all they can produce.  china can drop completely any purchases of oil in dollars, while sending their infrastructure teams to refurbish iran's decaying oil facilities.

In reply to by new game