It really does not seem to have sunk in with Asian investors that the trade war is back on.
Tariffs went up to 25% on US$200 billion in Chinese goods at midday on Friday my time here in Hong Kong. That gave investors plenty of time to factor them in.
And what happened?
Chinese stocks dipped briefly into the red after the lunch break. They then soared on Friday afternoon. The CSI 300 index of the largest companies in Shanghai and Shenzhen closed up 3.6%. That pared their losses for the week to 4.7%.
The Chinese yuan strengthened 0.2% to the U.S. dollar, although it is down 1.1% for the week.
The rapid change in sentiment in Chinese markets late on Friday smacks of state support. China appears to be putting its state coffers to work to support stock values in a bid to take away U.S. President Donald Trump's trump hand.
Investors are accounting for a scenario that one week ago most people would have told you was impossible. Most market participants -- the honest ones, anyway (there are a few) -- will tell you there's no pricing for the exceptionally rapid risk-assessment changes that keep taking place.
Only on Sunday did Trump bring up these tariffs in the first place. It has been a fast five days! The signs here in China have been, first, that the tariffs wouldn't go into place, and second, that Trump is just bluffing. They don't believe he's serious.
This appears to be a manifestation of what's increasingly called the "Trump put." Since Trump keeps score in the trade war game he is playing through the stock market, deficit figures and GDP growth, the "Trump put" insists he will renege on promises or threats when those U.S. figures turn bad.
So stocks are holding up well, despite a marked deterioration in bilateral talks. I'm hearing plenty of talk here on Hong Kong on Friday that it is good trade talks are still going ahead on Friday. But let's face it, they're not going well.
Vice Premier Liu He was shown the door, or chose it, after less than 90 minutes in the office of hawkish U.S. Trade Representative Robert Lighthizer on Thursday. There needs to be a full reset of these trade talks, now in their 11th phase, and surely their 11th hour, to get them anywhere near any tracks, let alone back on them.
Can the U.S. president's flattered receipt of a "beautiful letter" from his Chinese counterpart, Xi Jinping, really make that much difference? The two men were due to talk over the phone before Liu and Lighthizer met.
We do not know yet what they said, or even if that call took place as planned. I'm sure they both played nice, if they did, and flattered each other, as they have tended to do in person.
I'm glad the two are talking. It appears that it was Xi, personally, who stripped out any wording in the 150-page U.S.-China trade-deal draft that would have required China to change its laws. Xi sees that as embarrassing for a sovereign state that is licking century-old wounds about "unfair" trade pacts that it signed.
I understand mainland markets not responding in traditional ways. The news media are not free in China, and its citizens are being told that Xi is winning these trade negotiations.
China's Commerce Ministry issued a statement immediately after the tariffs went into effect on Friday that China "deeply regrets" the U.S. move to install higher tariffs. "We'll have no choice but to take the necessary countermeasures," it stated.
For his part, Trump says he is starting the "paperwork" to impose 25% duties on another US$325 billion in Chinese imports. He says China "broke the deal" on commitments to which it already had agreed.
The top front-page story today on the Global Times, a state newspaper used by the Communist Party to convey its stance, dredged up sentiments again that China is the victim of these latest developments.
If China doesn't make good on countermeasures to "extortionist" U.S. actions, "it will be a total humiliation to the Chinese side," Sang Baichuan, director of a university business institute, said in an interview. China repeatedly has stressed that it would not negotiate at gunpoint, he added.
Of course, the Lighthizer-led U.S. side saw the removal of enforcement clauses as an evisceration of their carefully laid plans to enforce any trade changes to which China agrees. Lighthizer and U.S. Treasury Secretary Steve Mnuchin took that to their boss. Cue Trump's tweets, and the rapid-fire tariffs.
None of this sounds good. It is injecting huge uncertainty into supply chains. I don't know how companies requiring parts, raw materials or sales in either direction price their goods at the moment. Remaining competitive against rivals not paying a 25% duty would be almost impossible.
And consumers ultimately will pay the price. Technically, goods that have already left China en route to the United States won't be covered by these new duties. That's unlike previous tariffs, but only because these were so last-minute.
Those Chinese goods already on the way must arrive by June 1, where they'll still be liable for the original 10% tariffs. An initial US$50 billion in Chinese imports is already paying a 25% import tax.
So we have about a month of grace before prices start going up on the shelves. Inventories may provide another month of buffer. For shipments leaving as of Friday, or arriving after June 1, the cost of 5,700 types of goods will start reflecting these extra costs. The categories include modems, circuit boards, car parts, furniture, lighting, vacuum cleaners and building materials.
Investors looking for reasons to remain positive say the June 1 date provides another window for an agreement to be reached. Xi and Trump better line up another call ...
But investors have stayed positive. Across the border here in Hong Kong, equities advanced 0.8% on Friday. The market is closed on Monday to celebrate Buddha's Birthday, the only exchange in Asia that will have a three-day weekend. So traders didn't seem overly concerned ahead of their holiday.
Stocks in Taiwan (down 0.2%) and Singapore (down 0.1%) did decline, but only slightly. Markets simply have not priced in the tariffs yet.
Talks are due to continue on Friday. The Chinese statement said it "hopes the United States can meet China halfway," resolving the problems "through cooperation and consultation."
We'll know more by the end of the day, when Liu will head on his way. Will he have a smile or a scowl on his face?