One day after the Chinese press roundly mocked the Trump tariff delay as proof the US was losing the trade war with China, with the Global Times saying that "Chinese experts said the sudden postponing of impending tariffs showed that the maximum pressure tactics of the US are losing their bite when it comes to China", a suddenly emboldened Beijing - perhaps sensing that it is indeed dealing with a weaker opponent - called planned U.S. tariffs on an additional $300 billion in Chinese goods a violation of accords reached by Presidents Donald Trump and Xi Jinping, and warned it would take all necessary measures to impose new tariffs on its own.
Echoing what Global Times editor in chief Hu Xijin said overnight, a short Thursday statement from the State Council Tariff Committee said the new 10% levies have taken the U.S. and China off the track of resolving their dispute through negotiation, and noted that China “has no choice but to take necessary measures to retaliate,”, without specifying what the nation would do. The committee has overseen tit-for-tat retaliatory tariffs on American products.
According to an analysis by twitter China watcher, Trinh Nguyen, the amount China has left under tariffs is about USD10bn (already imposed 110bn) "so not much ammunition & will need curb investment/FX deval/UST/rare earth curb. Chart below ππ» US has plenty left & reflects trade diff w/ China."
China: Will have to take all necessary measures to impose new tariffs.
— Trinh Nguyen (@Trinhnomics) August 15, 2019
The amount China has left is ~USD10bn (already imposed 110bn) so not much ammunition & will need curb investment/FX deval/UST/rare earth curb. Chart below ππ» US has plenty left & reflects trade diff w/ China. pic.twitter.com/eieW5WF2MM
But what is most troubling, is that contrary to Trump's implied expectation that China would respond with an olive branch of its own and according to Steven Englander, "will expect China to reciprocate by buying US agricultural products in the coming weeks", not only does China not plan on doing so but - as we warned yesterday - will send relations between the two nations into even greater turmoil with escalation of its own.
As far as I know, the Chinese side requests that both sides respect the consensus reached at Osaka summit, which is removing all additional tariffs, not delaying some. I doubt Chinese side will resume large-scale purchase of US farm products under current circumstances. pic.twitter.com/74vf9PrKXo
— Hu Xijin θ‘ι‘θΏ (@HuXijin_GT) August 14, 2019
In kneejerk response to the apparent escalation, European stocks declined and U.S. equity futures pared a gain. The Stoxx Europe 600 index fell while the three main American equity contracts trimmed an earlier jump after China’s move.
And with the ball no longer in China's court now that Beijing has spat in Trump's coy attempt at quasi-appeasement, we look closely at Trump's twitter feed where the US president has two options: either offer even more concessions to China (unlikely), or escalate tensions even more and potentially remove the proposed tariff delay, sending stocks plunging.
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