At least for now, instead of getting us closer to the bargaining table with China, we’ve only pushed them further away as they are likely canceling their trip to the US and are ready to retaliate. The Chinese commerce ministry said “China will adopt countermeasures to safeguard its legitimate rights and interests and the global free trade order.” The American Chamber of Commerce in China said “The downward spiral that we have previously warned about now seems certain to materialize…Contrary to views in Washington, China can, and will, dig its heels in.” We’ve threatened to add even more tariffs if China does respond with more of their own and it certainly does seem that we’re approaching spiral stage.
Instead of protecting US IP, we’ve only managed to piss off US business, particularly the tech companies that especially want protections on IP. The president of the Information Technology Industry Council which represents big US technology companies said the tariff decision “is reckless and will create lasting harm to communities across the country.” The US Chamber of Commerce has an entire page on its website on tariffs, //www.uschamber.com/tariffs.
Tom Donohue yesterday said there are “less harmful ways to truly achieve free and fair trade with China.” The CEO of the National Association of Manufacturers touted higher pay for US workers, new plants opening and more jobs in response to the cut in US taxes “but more US tariffs and Chinese retaliation risk undoing that progress and moving our economy in the wrong direction.”
The American Apparel and Footwear Association said last night “During the public review progress, AAFA and many of its members detailed the extreme damage this new tax bill will do to our industry, our nearly 4 million US workers, and to every American family. It seems most of those pleas were ignored. Instead, today’s announcement shows a deep disregard for American businesses, American workers, and American families, who will be negatively impacted by this decision. This is a very dangerous game to play, one that will not end with a winner.”
Let’s add in that this is happening as global monetary policy is tightening. Whoever said ‘expansions don’t die of old age, something usually kills it?’
A late day rally saved Chinese stocks and helped other markets in the region. The reaction is clear that this trade news was little surprise and considering the damage already done to Asian markets, enough for now has been priced in. Here is a chart comparing the S&P 500 and the Chinese H share index over the past 12 months. Asian stock markets remain inexpensive and very attractive for long term buyers.