What a crazy week it has been on the topic of trade. It has been a roller coaster ride to say the least. We just can’t seem to cross a finish line with China. The talks did dominate much of the headlines.
The whole thing started on Sunday when President Trump tweeted that he was willing to increase tariffs on Chinese goods from 10 to 25%. Also, he would be looking at imposing tariffs on another 325 million dollars’ worth of Chinese goods. This would mean that practically everything coming to the United States from China would be affected.
Reactions were knee-jerk and quick. There was a scramble to discover whether these tweets were political grandstanding, establishing a tough-guy approach, or were there other reasons behind the tweets. Starting Sunday evening, the markets were beginning to react. Corn took a double-digit hit, and soybeans dropped almost 25 cents. The futures trading of the DOW on Monday morning saw losses of over 400 points. There was a lot of fear and speculation. Two things that will eat a market alive.
Monday also saw reactions from the Chinese. China’s Vice Premier Liu We had planned to lead a trade delegation to Washington. The hopes had solidly been that a trade deal was close at hand. Suddenly, after the President’s tweets, the Chinese were looking at canceling their trip. State newspapers were commending the Vice Premier for taking a hard stance to President Trump’s message. By the end of the day on Monday, it seemed the Chinese were still willing to send the delegation, and China’s news stated that this should be seen as a gesture of goodwill on the part of the Chinese. (Yes, this stuff happens over there too. Just remember through all these trade negotiations, there are people on the other side of the world who are being told that we are wrong.)
By Tuesday the flood of negative reaction had started to temper. At least in the markets. We even saw gains in both Corn and Soybeans by midweek. Reports were confirmed that the Chinese still planned to come. However, it seemed the whole chain of events was started because the Chinese were starting to renege on parts of the trade deal. Some parts that we thought were already ironed out.
Of course, Congress wanted to know what was going on. Trade Ambassador Robert Lighthizer was more than happy to fill them in. He stated that his trade team was not willing to accept China’s latest moves, and they were going to stick to their guns. Lighthizer said we can compete with anyone, but we need enforceable rules. The Ambassador restated the President was willing to fight for the American Economy.
Lighthizer seemed to have a more tempered sense of optimism for getting the deal done, but it was optimism all the same.
Iowa Senator Chuck Grassley addressed the situation with China as well. Grassley said, “Enough is enough” regarding China’s trade practices. He says we need to get these talks to a successful conclusion, one that will have been worth the sacrifices made to the American economy.
Late on Wednesday, it was reported that the tariff increase was put into the Federal Register. They were to take effect at 12:01 a.m. on Friday, May 10th. This put a crunch on the negotiations. China said it would retaliate as well. They also reiterated how their presence in Washington was as a sign they were the ones seeking a fair deal, and the U.S. was the side trying to go too far. It really has devolved into a war of words while negotiators keep meeting.
Chinese Vice Premier We met with Treasury Secretary Steven Mnuchin and Trade Ambassador Lighthizer on Thursday, but no agreement was reached. The group did decide to meet again on Friday.
At 12:01 Friday morning, as promised the tariff increase went into effect. The new tariffs especially target consumer electronics, clothing, and toys. President Trump also said he had received a “beautiful letter” from Chinese President Xi Jingping. The letter apparently stated the two sides needed to find an agreement. Trump said China has rebuilt and expanded its economy and expanded by stealing from our “piggy bank”. He says he doesn’t blame the Chinese for doing it, it’s is the fault of many previous administrations.
There is still hope a deal can be reached and agreed to by both President Trump and President Xi at the G-20 summit in Japan this June. It’s been a long and winding road for the last year, but hopefully, the destination is coming into view.