Trump wants China to “feel more pain”

Via Axios which has good sources on this stuff:

President Trump has no intention of easing his tariffs on China, according to three sources with knowledge of his private conversations. Instead, these sources say he wants the Chinese leaders to feel more pain from his tariffs — which he believes need more time to fully kick in.

What we’re hearing: “He wants them to suffer more” from tariffs on $200 billion of Chinese goods, said a source with direct knowledge of Trump’s thinking, and the president believes the longer his tariffs last, the more leverage he’ll have.

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Why this matters: Trump’s trade war with China is at the “beginning of the beginning,” according to a source familiar with Trump’s conversations. And his team doesn’t expect much from the tentatively planned meeting between Trump and Chinese President Xi Jinping on the sidelines of the G20 summit in Buenos Aires next month.

  • The Trump economic team has done no substantive planning so far for the bilateral meeting’s agenda, largely because the purpose of the meeting is for Trump and Xi to reconnect, eyeball each other, and feel each other out amid their escalating trade war.

“It’s a heads of state meeting, not a trade meeting,” a source with direct knowledge told Axios.

Between the lines: “Trump is thinking about this meeting as a personal reconnection with President Xi, not a meeting that’s going to evolve into detailed discussions,” said a source familiar with Trump’s thinking. “The sides are very far apart. … Right now, there’s not the common basis for proceeding.”

  • Trump isn’t focused on the details of a potential China deal. He’s focused on creating more leverage, according to another source who recently discussed the U.S.-China standoff with the president.

Behind the scenes: Trump has privately boasted that his China tariffs have driven down the country’s stock market. Experts say the trade war has hurt market sentiment, but the stock market has never been a reliable barometer of Chinese economic strength.

  • The generic point Trump makes to aides, per a source with direct knowledge: “‘We are strong and they are weak.’ … He believes more pressure will bring them to the table to make a deal.”

Treasury officials have had contact with key Chinese negotiator Liu He’s camp to exchange information. There’s been nothing close to real negotiation, according to sources briefed on them. “There is some contact with mid-level Chinese, but not much. … I wouldn’t overestimate the planning process,” a U.S. official with direct knowledge told me.

  • Treasury Secretary Steven Mnuchin’s team has told the Chinese there’s no point in them floating plans to buy U.S. products as the key priorities — structural issues like IP theft and market access — must be addressed.
  • Treasury officials have told the Chinese that the list of U.S. requirements hasn’t changed from the summer, according to sources briefed on their conversations.

The bottom line: All signs suggest the trade war between the U.S. and China is just getting started. I’ve asked sources close to Trump whether he’s ever expressed any private concerns over whether his tariffs could backfire due to Chinese retaliation against American consumers or companies. Nobody I’ve spoken to has heard Trump express anything along these lines. He’s all in.

Sell AUD.

Comments

    • The Mirage of Credit: AFR- Bloomberg.- AP
      At least 144 Chinese companies have more than half their shares pledged( as cash loan) security for approx $US600 bn approx 11 % of the country’s market capitalisation,
      Falling stock prices are triggering a toilet bowl spin of forced selling.
      There’s nothing like margin calls to make a share market selloff turn into a rout.
      China’s $US3 trillion equity rout deepened last week, driving the Shanghai Composite Index to near 4 years low. The country’s top financial regulators sought to reassure investors on Friday that they’re able to keep risks under control.
      But some stocks are more vulnerable than others.
      Of the 12 doz, 144, 5 doz, 60, have seen their share price halve plus this year.
      If the same trend continues till mid 19, china is ruined. Bankrupt Kaput.
      Just like that! Not even the odd angry shot.
      And just where has that cash gone???
      The CCP is looking, now very closely.
      I expect some to be called to the commo embassy for bit of a punch up.

  1. Time to pick a side !
    Global Times (Chinese) editorialised that claims of Chinese infiltration in Australia had spread to New Zealand and Germany like an “infectious disease”.
    “The esteem with which Chinese regard certain Western countries will be downsized, as it becomes necessary for Beijing to retaliate. China needs to figure out tactics that can silently make Western institutions and individuals truly feel the pain.”
    http://www.theage.com.au/world/china-urged-to-make-australia-feel-the-pain-20171213-h03scj.html

  2. Note the SSEC has taken off just in time for the “who’s got the strongest stockmarket” contest.

  3. Prediction: Tariffs eventually hit 100% of Chinese goods.

    Probably the day after Apple and others have completed new factories in SE Asia – probably democratic, and probably allies like the Philippines (yay Deturte :/ ).

    For the record, Thailand has long produced HDDs, Malaysia and Philippines CPUs, and the others have been slowly working up the tech chain.

    It’s VERY possible, so if your knee-jerk gut reaction is that they don’t have the skills, think again.

    • Jumping jack flash

      Yes definitely.

      Philippines has lots of industry in the South. Not sure about the North, plenty of call centres, lol.
      I know Honda manufactured some of their Jazz line somewhere around there originally.

    • It would be a skills and labour shortage issue. China invests heavily in training of manufacturing engineers to keep operations running. When your standard foxconn factory employs 800000 you need a lot of highly skilled engineers to keep operations chugging. This is without mentioning supply chain efficiency. It’s far to much to build up even if you factored in his possible 6 years of office.

  4. Much as I hate Trump – I love his China strategy. Make them feel pain. They are not economic partners, military partners, nor are they political partners – Here comes the pain.

  5. The point is also that it isn’t just Trump. The whole system, republicans/democrats, everyone is anti China now.

    • From the Economist:

      “America is undergoing a deep shift in its thinking about China on right and left alike. There is a new consensus that China has a deliberate strategy to push America back and impose its will abroad, and that there needs to be a strong American response.
      The coalition takes in conventional free-traders in the White House as well as the zero-summists in Team Trump and the national-security hawks in Congress. Pentagon chiefs and the bosses of spy agencies have framed China as the greatest threat to America’s security, requiring a “whole of government” response.
      In civil society, the coalition includes religious conservatives, human-rights advocates, labour unions and old-school protectionists. …”

      What is going on is totally bipartisan.

      • No, Xi Jinping did by announcing that China was going to take over the world at the 19th Party Congress last year.

  6. With stories like this, I ask you, why should America play nice?

    The Big Hack: How China Used a Tiny Chip to Infiltrate U.S. Companies

    The attack by Chinese spies reached almost 30 U.S. companies, including Amazon and Apple, by compromising America’s technology supply chain, according to extensive interviews with government and corporate sources.

    https://www.bloomberg.com/news/features/2018-10-04/the-big-hack-how-china-used-a-tiny-chip-to-infiltrate-america-s-top-companies