You knew it would be bad when you heard the Chinese press saying that it had won a huge victory over President Trump with its new tariffs. You knew the President wasn't going to lose a war of words.
Honestly, did anyone think that, somehow, Trump would possibly let the other guy grandstand against him? Did anyone think that he would possibly not be furious that the Chinese congratulated themselves for winning the first round of talks?
Now there are two questions to be asked after the new, higher tariffs are demanded by the President. First, where are we going to get $100 billion more in tariffs? We know we have a gigantic trade deficit with China so there are plenty of goods the U.S. can throw duties on. We import more than $500 billion from them. The issue is, though, that you have to put big duties on electronics and machinery, $150 billion and $112 billion, respectively, if you are going to get to $100 billion because after that you have $34 billion in furniture and lighting, $26 billion in toys and games, and $17 billion in plastics. That's not a lot of leeway to go after anything smaller.
Now unlike the Chinese who make a lot of different things, we make planes and truck engines, giant earth movers and cellphones and sell them in China. In that sense we are easy to pick off. This time it would not just be Boeing (BA) and soy. You would have to believe it's Cummins (CMI) , Caterpillar (CAT) and Apple (AAPL) .
Or, second question: is this just total bluffing as in, why not ask for $150 billion in tariffs? Why not $200 billion? Why not $250 billion and cut the imports in half?
Why not just say we will take nothing from the Chinese at all?
It does get a little absurd, which is why we the S&P futures aren't down much more or at least down what we were last night when we hit down 38 ticks after the $100 billion announcement. Maybe he's just negotiating in a ham-handed way and somehow he can now walk it back from $100 billion to the original lower numbers to look like a winner, something he believes will be greeted positively by most non-stock owning Americans.
Can we all agree, though, that one thing has to stop? The surrogates, Steve Mnuchin from Treasury and now Larry Kudlow, chief economic adviser, are being forced to play good cop, of course on Fox, and be made to look like Keystone cops almost immediately after. We now know better a second time. Will a third time close out this absurdity?
So, it's either posturing that people aren't taking seriously other than the Chinese media which is furious and looks shocked and confused or it is a machinery ban. The market says it is posturing just so he can claim to be a winner.
Otherwise it's pretty much the end of commerce with China. Who knows?
Could be both.
Maybe he will study it like he vows to study Amazon (AMZN) . Who knows with this guy?