Trump brandishes art of the deal flair with new, bigger tariff threat

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Photo: AFP/Nicolas Asfouri

US President Donald Trump continued his attempt to show off his negotiating prowess late Thursday, throwing a bomb into potential talks with China, after Beijing neutralized his starting position with equally steep tariff proposals.

China, in fact, had their US$50 billion in levies lined up to throw at Trump almost immediately after the White House released the US list of products. Beijing’s pledge that they would match Trump’s first round of tariffs took the negotiations straight back to the starting position. A willingness to go tit-for-tat completely nullified Trump’s initial threat.

Yesterday, with a new threat of US$100 billion in tariffs, Trump doubled down on his number one rule of negotiating: “think big.”

“Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers,” Trump said in a statement. “In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs.”

Though China did not have matching tariffs at the ready this time – Trump seemed to catch everyone off guard – they were ready to take a page out of the US president’s negotiating treatise. The second key element that Trump touts in his negotiating style is “protect your downside.” That is exactly what China did in response to Trump’s second round of tariffs, which it should be emphasized have not been formally proposed yet.

China is calling Trump’s bluff, saying they won’t even come to the negotiating table under these circumstances.

“Finance and trade officials from the two sides have not conducted any negotiations on the trade issue,” Chinese Commerce Ministry spokesperson Gao Feng was quoted by the Associated Press as saying. This is, despite Trump economic advisor Larry Kudlow’s insistence Wednesday that talks were ongoing.

“If the US side announces the list of products for $100 billion in tariffs, the Chinese side has fully prepared and will without hesitation counterattack with great strength,” Gao said. “Under these circumstances, the two sides cannot possibly conduct any negotiations about this issue,” he added.

Beijing’s options are limited for matching such a big number of tariffs. They have already proposed tariffs on imports that could hurt at home. One oft-cited avenue for retaliation, dumping US Treasuries, is also likely off the table. As China’s Caixin points out on Friday, “dumping US treasury bonds, would erode China’s ability to stabilize its own currency. As this would hurt China even more than the US, it won’t happen unless all other options are exhausted.”

But, looking at the White House’s existing US$50 billion in proposed tariffs, which appeared crafted to be as painless as possible for the US consumer, China seems to be betting that Trump’s new threat is just more bluster. Members of Trump’s own party are hoping that China is right. Republican Senator Ben Sasse of Nebraska ridiculed the president’s threat in a statement Thursday night.

“Hopefully the president is just blowing off steam again, but if he’s even half-serious, this is nuts,” Sasse said. “The president has no actual plan to win right now. He’s threatening to light American agriculture on fire.”

US stocks fell Friday morning, after closing higher for three-consecutive days, with investors stuck digesting another dose of bellicose trade rhetoric. The president’s statement Thursday gave no timetable for trade officials to furnish a proposal on US$100 billion in additional tariffs.

There are a number of factors to consider:

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