It seems like a relief if you have significant wealth in the stock market.
If you're a US business downstream of intermediate goods from China, you're getting hit hard. You'll have no choice but to bump prices. Direct-import consumer goods like shoes or phones aren't even the most concentrated pain points. In addition the situation gives US side of the sup chain license to price-gouge. Impact to main street will be rapid.
If you're a business exporting US tech globally, which typ means high % sales in China, you just got a 9 iron to the nuts. Serious chance you will be forced out of China as soon as they can manage it, which is 2-4 year timeframe, and will then face both higher costs and accelerated competition in the rest-of-the-world, impacting in 3-6 years.
In Washingon, they'll realize what's happening sooner, in 6-12 months, but by then it'll be too late.
PRC playing the part of responsible global citizen, so they will probably continue to abide by that stuff for the sake of relations with EU, ASEAN, etc.
Why do commenters now ignore the 2 main reasons Trump says he is using tariffs in the first place: re-industrialize the U.S.(maybe, but probably not) and bring in revenue so he can cut taxes (definitely)? This whole switch to “he trying to get better tariff deals” completely undermines those primary drivers for the tariffs. There is plenty of credible reporting that other countries offered to eliminate all tariffs before his tariffs took effect but those were rejected by the admin — discounting the “free trade” argument. A more logical explanation for what happened yesterday is he got spooked by the bond markets. I think Trump is more likely to respond to fear than anything else.
Re industrial - not to put too fine a point on it, but that was just cheap talk. In backing down vs the rest-of-the-world, Trump admin threw away the mechanism by which US could collect the benefit from the dislocations they caused. Also not a trace of the required *increase* in education.
tRump was always looking at tariffs to largely replace income taxes, in some sort of post-McKinley revival modality. Nobody seemed able to convince him that the "tariff income stream" contains the seeds of its own destruction, as importers pass on tariff costs as higher prices, demand then falls, importers cut way back on orders, tariff revenue collapses, et voilà — effondrement financier.
The Trump Admin and its enablers in Congress and the federal judiciary is a criminal enterprise; all the rest is noise, not policy. My $ is on insider trading.
Maybe it's because I'm still young (born in the 90s), so I know no other world than China as a global powerhouse, Factory of the World, all that stuff. So while I get that someone who's not paying attention might be stuck on an old image of China as a global backwater, I don't really understand how anyone with even the slightest bit of interest can be blind to China's current capacities, and how it weighs up against those of the US.
(Relatedly, I have also never really understood the obsession with Russia. Besides that they still have quite a bit of natural resources and apparently significant capacity to manufacture weaponry, I never really thought of them as anywhere close to the USA)
I always believed the US China war would be played out in trade blocks. Each trying to commit as many countries to join their block ahead of a complete bifurcation of the world into 2 non-communicating blocks.
It now appears Trump want to play for bigger stakes - everyone else with USA or everyone with China.
Advantages to this game: no military war (which US would lose or everyone would lose if it went MAD).
No US bullying and bribing of country leaders, or Chinese bribing of populations
Only one country in the world loses and it all finishes very rapidly.
Still slim odds on USA winning. 15 years too late - Bush/Obama lost it during their adventures in Iraq and Afghanistan.
I don't know if that is what Trump is trying, sounds too complicated for him.
But I don't know if your '2 non-communicating blocks' future will work out that way either. Definitely not if, hopefully, the EU is moving away from the US, beyond rhetorics. But that is to be seen, wouldn't surprise me if our EU political class would be more than happy to align again when the next US president turns out to be a Democrat. A more optimistic scenario could be the US and the China block, and a larger third 'block' that is the rest of the world, albeit more as a 'third world' coalition of both larger and smaller political units that aren't aligned nor in opposition to the rest (with in that block at least the EU, India and a few of the larger Asian/Latin American countries). If that third block is large enough it can probably resist the need for political alignment with either one of the two others.
I used to think that Europe had been bullied into war with Russia, but their determination to continue after Trump pulled out suggests that there is a European momentum to a lot of the madness.
The rest of the world I am quite certain actually wants to be part of BRICS which (at least for last 10 years) has shown itself to be very respectful of individual nations' rights. BRICS seems far more attractive than a non-China non-alligned vague grouping.
And of course the shenanigans in S Korea, Romania, Pakistan, and other places show that the knives are out and there is a real battle for control of any independent state of any significance - mostly local democracy vs USA (though France in Romania).
So the bond market seems to have survived Tuesday night's ominous developments. But...there's going to be lots of opportunities for things to go haywire in the coming days and weeks. Great! I have to start reading Professor Tooze hours earlier in my day. I have enough Trump-derived sleep challenges at bedtime, as it is. :-)
“At the next stage, in the negotiations with those who are willing, there is nothing to prevent the White House from demanding conditionality on trade with America’s other partners, to further target China.”
Sane-washing is an understatement. Even if this really were the strategy, doing so with total chaos (how can any business readjust?), no allies (where are businesses supposed to go), and no planning for second-order consequences (what about the rare earths?) undermines the ostensible goal you're somehow divining in the plans.
I like your links and economics, but your political analysis leaves a tremendous amount to be desired.
There are no secrets with Trump, and there is no secret plan. Just listen to what he says. He thinks everyone is ripping the US off because of trade deficits, especially China (which is why it's at the top). He levied these tariffs because he thinks they will somehow fix it. The markets got the yips. He backed off when treasury yields spiked, except he is trying to escalate as China enacts counter-measures.
And he counts on people like you to treat this like a serious game of four-dimensional chess.
The ultimate target of Trump’s trade war with China is the American people. He is using the pain inflicted on us by cutting off trade with China to force us to reshore manufacturing that left America because it can only be run profitably by paying labor at levels that do not sustain human life in this society. Given that Trump's preferred application of power is coercion, what does a suitable American workforce look like in that future? What does an America that must create and control such a workforce look like in that future?
Economic [modelling](https://theconversation.com/this-chart-explains-why-trump-backflipped-on-tariffs-the-economic-damage-would-have-been-huge-253632) suggests employment and real consumption will drop by ~2% this year, for China the hurt is ~0.4%% but more likely concentrated in the light industries. however they do need FDI to grow past the ghost housing so a lesser Asia co-prosperity sphere with KR & JP that includes services (AI doing so-so job of language translation) might be the tactical response where Canada is not in mood to be 51st state.
A substantial advantage for China in a trade war is, the US is a democracy. What a great excuse for Trump to suspend democratic norms, if he brings on a "war" against an "enemy" that most Americans have been trained to hate.
I think we may be underestimating how much Bessent’s views on China have evolved since 2013—becoming even more hawkish. Back then, my impression was that while the business class was growing more skeptical of China, it remained confident that the American model was superior and destined to prevail. But since then, China and its business ecosystem haven't collapsed under their own weight—instead, they've succeeded in many objective ways, even outperforming their American counterparts in some areas.
This has forced figures like Bessent—conservative financial actors—to reconcile with the uncomfortable fact that they may have been wrong. Rather than engage in self-reflection, the narrative has shifted: China's success isn't attributed to strategy or competence, but rather to cheating.
I worry that the constant specter of China has infected American policymakers' and business leaders' ability to conduct clear-eyed analysis. Instead of turning inward to find real solutions, we look outward, assigning blame. What concerns me more is that when faced with evidence contradicting our assumptions—like China’s technological progress—we’re not adjusting our course, but doubling down.
Bessent, a patriot and a student of history, may see himself too much as a warrior, and not enough as an engineer.
It seems like a relief if you have significant wealth in the stock market.
If you're a US business downstream of intermediate goods from China, you're getting hit hard. You'll have no choice but to bump prices. Direct-import consumer goods like shoes or phones aren't even the most concentrated pain points. In addition the situation gives US side of the sup chain license to price-gouge. Impact to main street will be rapid.
If you're a business exporting US tech globally, which typ means high % sales in China, you just got a 9 iron to the nuts. Serious chance you will be forced out of China as soon as they can manage it, which is 2-4 year timeframe, and will then face both higher costs and accelerated competition in the rest-of-the-world, impacting in 3-6 years.
In Washingon, they'll realize what's happening sooner, in 6-12 months, but by then it'll be too late.
... and I assume China now has zero incentive to protect US intellectual property. How much could that be worth?
PRC playing the part of responsible global citizen, so they will probably continue to abide by that stuff for the sake of relations with EU, ASEAN, etc.
Why do commenters now ignore the 2 main reasons Trump says he is using tariffs in the first place: re-industrialize the U.S.(maybe, but probably not) and bring in revenue so he can cut taxes (definitely)? This whole switch to “he trying to get better tariff deals” completely undermines those primary drivers for the tariffs. There is plenty of credible reporting that other countries offered to eliminate all tariffs before his tariffs took effect but those were rejected by the admin — discounting the “free trade” argument. A more logical explanation for what happened yesterday is he got spooked by the bond markets. I think Trump is more likely to respond to fear than anything else.
Re tax cuts - yep that's happening
Re industrial - not to put too fine a point on it, but that was just cheap talk. In backing down vs the rest-of-the-world, Trump admin threw away the mechanism by which US could collect the benefit from the dislocations they caused. Also not a trace of the required *increase* in education.
tRump was always looking at tariffs to largely replace income taxes, in some sort of post-McKinley revival modality. Nobody seemed able to convince him that the "tariff income stream" contains the seeds of its own destruction, as importers pass on tariff costs as higher prices, demand then falls, importers cut way back on orders, tariff revenue collapses, et voilà — effondrement financier.
Certainly Trump got bullied, this was a defeat for him.
And yes he is trying to replace taxes on the rich, even capital gains tax, for taxes on consumption by other 90%.
You have just tried to find a rationale and cunning behavior in something that looked totally caotic two days ago.
What are the facts:
1-Wild asset value movements...always controlled or caused by USA administration
2-Who benefits from 1?
Well Bill Ackman mentioned in X that Lutnick had open positions betting on a melt down.
I do think that is the first time that an American Administracion has been playing so much with the value of assets ...caos...cunning ....robbery....
What was it Adam called it before? Sane-washing?
Chartbook 363 Stockholm syndrome in Mar-a-Lago: The belief that "something must be done" and the sanewashing of economic policy in the age of Trump
Remember the short-lived trade war from Trump’s first term?
The Trump Admin and its enablers in Congress and the federal judiciary is a criminal enterprise; all the rest is noise, not policy. My $ is on insider trading.
Maybe it's because I'm still young (born in the 90s), so I know no other world than China as a global powerhouse, Factory of the World, all that stuff. So while I get that someone who's not paying attention might be stuck on an old image of China as a global backwater, I don't really understand how anyone with even the slightest bit of interest can be blind to China's current capacities, and how it weighs up against those of the US.
(Relatedly, I have also never really understood the obsession with Russia. Besides that they still have quite a bit of natural resources and apparently significant capacity to manufacture weaponry, I never really thought of them as anywhere close to the USA)
There are elements of the Western (mis)leadership class for whom the conjuring of phantasmagoric enemies is politically useful ...
Interesting viewpoint.
I always believed the US China war would be played out in trade blocks. Each trying to commit as many countries to join their block ahead of a complete bifurcation of the world into 2 non-communicating blocks.
It now appears Trump want to play for bigger stakes - everyone else with USA or everyone with China.
Advantages to this game: no military war (which US would lose or everyone would lose if it went MAD).
No US bullying and bribing of country leaders, or Chinese bribing of populations
Only one country in the world loses and it all finishes very rapidly.
Still slim odds on USA winning. 15 years too late - Bush/Obama lost it during their adventures in Iraq and Afghanistan.
I don't know if that is what Trump is trying, sounds too complicated for him.
But I don't know if your '2 non-communicating blocks' future will work out that way either. Definitely not if, hopefully, the EU is moving away from the US, beyond rhetorics. But that is to be seen, wouldn't surprise me if our EU political class would be more than happy to align again when the next US president turns out to be a Democrat. A more optimistic scenario could be the US and the China block, and a larger third 'block' that is the rest of the world, albeit more as a 'third world' coalition of both larger and smaller political units that aren't aligned nor in opposition to the rest (with in that block at least the EU, India and a few of the larger Asian/Latin American countries). If that third block is large enough it can probably resist the need for political alignment with either one of the two others.
Well we are only guessing now.
I used to think that Europe had been bullied into war with Russia, but their determination to continue after Trump pulled out suggests that there is a European momentum to a lot of the madness.
The rest of the world I am quite certain actually wants to be part of BRICS which (at least for last 10 years) has shown itself to be very respectful of individual nations' rights. BRICS seems far more attractive than a non-China non-alligned vague grouping.
And of course the shenanigans in S Korea, Romania, Pakistan, and other places show that the knives are out and there is a real battle for control of any independent state of any significance - mostly local democracy vs USA (though France in Romania).
So the bond market seems to have survived Tuesday night's ominous developments. But...there's going to be lots of opportunities for things to go haywire in the coming days and weeks. Great! I have to start reading Professor Tooze hours earlier in my day. I have enough Trump-derived sleep challenges at bedtime, as it is. :-)
“At the next stage, in the negotiations with those who are willing, there is nothing to prevent the White House from demanding conditionality on trade with America’s other partners, to further target China.”
Australia’s about to have an intense few years.
Sane-washing is an understatement. Even if this really were the strategy, doing so with total chaos (how can any business readjust?), no allies (where are businesses supposed to go), and no planning for second-order consequences (what about the rare earths?) undermines the ostensible goal you're somehow divining in the plans.
I like your links and economics, but your political analysis leaves a tremendous amount to be desired.
There are no secrets with Trump, and there is no secret plan. Just listen to what he says. He thinks everyone is ripping the US off because of trade deficits, especially China (which is why it's at the top). He levied these tariffs because he thinks they will somehow fix it. The markets got the yips. He backed off when treasury yields spiked, except he is trying to escalate as China enacts counter-measures.
And he counts on people like you to treat this like a serious game of four-dimensional chess.
The ultimate target of Trump’s trade war with China is the American people. He is using the pain inflicted on us by cutting off trade with China to force us to reshore manufacturing that left America because it can only be run profitably by paying labor at levels that do not sustain human life in this society. Given that Trump's preferred application of power is coercion, what does a suitable American workforce look like in that future? What does an America that must create and control such a workforce look like in that future?
Economic [modelling](https://theconversation.com/this-chart-explains-why-trump-backflipped-on-tariffs-the-economic-damage-would-have-been-huge-253632) suggests employment and real consumption will drop by ~2% this year, for China the hurt is ~0.4%% but more likely concentrated in the light industries. however they do need FDI to grow past the ghost housing so a lesser Asia co-prosperity sphere with KR & JP that includes services (AI doing so-so job of language translation) might be the tactical response where Canada is not in mood to be 51st state.
A substantial advantage for China in a trade war is, the US is a democracy. What a great excuse for Trump to suspend democratic norms, if he brings on a "war" against an "enemy" that most Americans have been trained to hate.
Sh*tting on the one nation that can afford to tell us to f*ck off is true genius.
Arrogant and ignorant. Reminds me of DeBathification in Iraq. That didn’t work either.
I think we may be underestimating how much Bessent’s views on China have evolved since 2013—becoming even more hawkish. Back then, my impression was that while the business class was growing more skeptical of China, it remained confident that the American model was superior and destined to prevail. But since then, China and its business ecosystem haven't collapsed under their own weight—instead, they've succeeded in many objective ways, even outperforming their American counterparts in some areas.
This has forced figures like Bessent—conservative financial actors—to reconcile with the uncomfortable fact that they may have been wrong. Rather than engage in self-reflection, the narrative has shifted: China's success isn't attributed to strategy or competence, but rather to cheating.
I worry that the constant specter of China has infected American policymakers' and business leaders' ability to conduct clear-eyed analysis. Instead of turning inward to find real solutions, we look outward, assigning blame. What concerns me more is that when faced with evidence contradicting our assumptions—like China’s technological progress—we’re not adjusting our course, but doubling down.
Bessent, a patriot and a student of history, may see himself too much as a warrior, and not enough as an engineer.