The Friday moment everyone has been waiting for, namely whether or not Trump would greenlight the next $200BN in China tariffs now that the comment period is over. Moments ago we got the answer when Trump, speaking to reporters on board of Air Force 1, just said that he is ready to impose another $267BN in China tariffs in addition to the $200 billion proposed that his administration is putting the final touches on.
The implementation of tariffs on $200 billion of products from China “will take place very soon depending on what happens,” Trump told reporters on Air Force One on Friday. “I hate to do this, but behind that there is another $267 billion ready to go on short notice if I want.”
This would mean that Trump would be taxing a grand total of $517BN in Chinese exports ($50BN + $200BN +$267BN). Putting China's exports to the US in context, it was $505BN in 2018, suggesting Trump's total proposal would more than cover all of Chinese trade with the US. It was also not clear what tariff rate Trump had in mind for either the new $267BN or existing $200BN in tariffs.
The news comes one day after the Dept of Commerce announced that the US trade deficit with China hit an all time high $36.9 billion in July.
Meanwhile, in terms of actionable developments, there were none, because for all those expecting Trump to launch the $200BN in 2nd round tariffs today, Trump suggested that nothing is imminent, saying that the tariff "will take place very soon depending on what happens"... but not today.
The latest salvo from Trump in the trade war rattled U.S. stocks a day after top American executives made a last-minute push to convince the president to not impose fresh tariffs. Instead, Trump Friday signaled he’s ready to target a sum of goods equal to virtually all imports from China. The tariff drama overshadowed an August jobs report that showed a healthy labor market with signs of wage inflation that could clear the way for two more rate hikes this year.
The reaction on the market was instant, and the Dow Jones tumbled by 100 points in seconds once the headlines hit. The Dow Jones Industrial Average fell the most as multinationals from Boeing to United Technologies and 3M retreated after Trump unveiled the latest shocker.
Additionally, the dollar spiked to session highs, while over in China, the offshore Yuan tumbled to two-day lows as the worst case outcome from trade wars just got even worse.
The question now is how will China respond to this latest provocation? Clearly, the biggest question is weather the PBOC will once again let the yuan depreciate and let the currency go to 7.00 or beyond.
Commenting on the latest developments, Bong-Seok Choi, director of research at San Francisco-based Wetherby Asset Management, told Bloomberg that "the risks are real and there’s increasing evidence that we’re closer to more of a full blown trade war. The trade wars only serve as a catalyst for the turning of the cycle. Things can change rather quickly, so the trade war, if a lot of the threats do materialize, I think things will turn very quickly."