Here’s why the market is looking past the trade war

The Latest: Sec. Ross: Americans won't feel trade-war sting

China vows to retaliate against Trump's tariffs on $200 billion of Chinese goods

"At the White House, wrongly said that 'China is now paying us billions of dollars in tariffs, '" The Post reported, and "he celebrated the Treasury Department collecting 'tremendous amounts of money, which is great for our country'".

It's a familiar role for them - and one they'd be wise to rethink.

The meetings were part of a larger shift in tactics, whereby Chinese policymakers have sought to reassure foreign businesses that their investments in the country are welcome and safe. Chinese leaders could easily engineer a further slide in the yuan. But backing China into a corner is unlikely to make Beijing surrender.

China's strategy is a tried and true one: Divide and conquer. In July, the Trump administration imposed a 25 percent levy on $34 billion in Chinese goods.

"So we charged 25 percent on $50 billion worth of merchandise tariffs coming in. Consumer products are much of the imports from China that were left".

The outcome, though, is that the administration has effectively, if inadvertently, transformed these businesses into pro-China lobbyists against its own policies.

China remains an important market for American companies despite the challenges.

China has yet to publicly accept an invitation extended last week by U.S. Treasury Secretary Steven Mnuchin to hold a fresh round of talks, which China welcomed at the time.

Indeed, their complaints - usually made anonymously for fear of retaliation - undergirded the US Trade Representative's (USTR) report justifying Trump's tariffs. There really are those around Trump (and elsewhere in Washington) who are encouraging his obsession with the American trade deficit with China for exactly that reason.

In the long run higher prices for Chinese goods in the U.S. might damage its market share there, with negative effects on employment in China, but that's a slow process.

They could start by accepting some responsibility for creating their own mess in China. That means reducing its discrimination against foreign companies, adhering to the spirit as well as the letter of its World Trade Organization obligations and halting the forced transfer of US technology to local Chinese partners.

"It isn't clear what steps China can show it is taking in the short-term to abandon its entire industrial strategy, which is ultimately a long-term process", Megan Greene, chief economist at Manulife Asset Management, wrote Wednesday. "And as long as it was a really small fraction of GDP, it is not a big deal, but we are running [a trade deficit of more than] $500 billion at an annual rate".

Latest News