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Breaking: all reciprocal tariffs halted for 90 days EXCEPT on China. Tariff rates over 100% on Chinese exports.
So it seems like it’s more of a targeted war against China specifically? Likely giving other nations time to choose (with us or against us), and slapping the nations who chose to align with China with huge tariffs in 90 days.
Interesting choice to make as a country then… do we want cheap goods from China but lose access to the American market? Or do we want to be able to sell to Americans?
The next “stick” will be weaponizing the financial system against China-aligned nations, while China dumps treasuries and tries to spark a financial crisis.
https://www.zerohedge.com/markets/china-holds-back-retaliation-opts-strategic-messaging-through-white-paper-trade
Trump seems to have a legitimate hard-on for tariffs going back decades (as some people point out even most of his 2016 announcement speech was about tariffs and thinking free trade is bad) but he also seems to be a scaredy cat who keeps backing down anytime it causes actual trouble. He's delayed stuff like what, 4-5 times already?
At some point the market is just going to stop reacting because they'll internalize the large majority of tariff threats end up fizzling out. High chance he backs down on China some too, or at least that they allow some obvious workaround like China > Vietnam > US or something.
Edit: And it's already starting https://www.foxnews.com/politics/trump-says-hell-take-look-exempting-some-larger-us-companies-hit-especially-hard-tariffs
Man, I don't even know. Because "the stock market crashed and a bunch of retirees are mad because that's their nest egg" is, I think, a significant part of the signal Trump is looking at. But the market is considering the impact of tariffs times the probability that Trump actually sticks with them, so if the market stops believing Trump, the market impact of the tariffs stops looking so large, which makes Trump less likely to change his mind, which increases the chance they stick around... feels like one of those cursed anti-inductiveness/self-defeating-prophecy dynamics.
I am worried about this too, but the strength of the favourable initial market reaction to his climbdown makes me hope he might not try again in 90 days again.
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I believe the technical term is 'negative-feedback loop'.
The term "negative feedback loop" is a technical term for this but a non-specific one. Other related terms are "non-credible threat", "equilibrium selection", and "brinksmanship". I like the term "one of those cursed anti-inductive things", though, because
Here's how I'm modeling the situation:
As far as I can tell, this situation leads to the cycle
I don't have the math chops to figure out what actually happens in this model as market participants get better at predicting Trump's behavior though. My suspicion is "25% chance the disaster actually happens each time we go through the cycle".
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Trump thinks he is a genius but he does also think other people (Musk, some of his golfing pals, some other real estate people, some Wall St people) are also geniuses and I guess some combination of them on the phone spooked him.
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It’s just his usual negotiating tactic
Make some crazy demand then pause it to use the demand as an anchor from which to negotiate. Door in the face technique it’s called iirc
Ok, that's pretty damn funny. I'll have to steal that!
It’s not really stealing, that’s actually what it’s called in psychology.
I see! I'd heard of foot-in-the-door, and thought Magusoflight was riffing off that. I guess psychologists have a sense of humour too.
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125% tariffs on all Chinese imports is "scaredy cat" behavior?
If he caves on China then sure, make fun of him all you want.
It doesn't seem like the market believes he will actually follow through given the rally back, and given he's caved multiple times already on other nations (including this recent one) it's a fair expectation when seeing a consistent pattern.
Or that China is not the only important country from a trade perspective.
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While I would agree that the market does not find the China tariffs very plausible as a long-term policy, we're still well below inauguration asset price levels, so I would interpret the market as mostly saying that a) the 10% tariffs are a major impediment to growth and so are the China tariffs and b) he screwed the business climate up so badly already that there is no fixing it.
Or the market was irrational back then with crazy P/E ratios.
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Well we can do a !RemindMe and if he does cave on China (i.e. returning to basically the pre-tariff status quo, modulo perhaps some minor and ultimately inconsequential concessions on either side) then yes, I will acknowledge that the whole thing was dumb and a waste of time.
Decoupling from China is a legitimate and important strategic goal for the US, and I think there are enough China hawks in both the administration proper and the Republican party in general that there is enough political will to see it through.
It's not some 100% guarantee thing. It's possible he goes through with it, but we also have his whole first term to look at where he also did the same exact thing of threatening tariffs on China only to pull back like what happened with Apple https://www.cnbc.com/2019/12/13/apple-dodges-iphone-tariff-after-trump-confirms-china-trade-agreement.html
He had said over and over again there would be no exemptions only for the exemptions to come. https://www.politico.com/story/2019/07/26/trump-apple-tariff-waivers-1437284 https://9to5mac.com/2019/09/20/trump-apple-mac-pro-tariff-exemption/
Even if he doesn't drop the tariffs themselves on a technical level, history does suggest there will be meaningful levels of exemptions and workarounds. Most of his actions so far have been to bark really loud and then pull back.
Again, if he does pull back, or if he leaves a loophole so big that the tariffs are effectively symbolic, then I will acknowledge that the whole thing was dumb and a waste of time.
Well good news, not even that much later and it's already starting with talk of exempting large companies https://www.foxnews.com/politics/trump-says-hell-take-look-exempting-some-larger-us-companies-hit-especially-hard-tariffs
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What event are we reminding for exactly, though? If the China tariffs remain large and the stock market fully recovers despite this? My claim is pretty much just that financial markets think the tariffs are bad for the economy and that they are not pricing in the consequences of them staying long-term.
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