‘A perfect storm’: Trump, Xi make big bets in trade war that may backfire

For Trump, the bet is that a hard-line stance on China will help him win another four years; the political calculations for Xi are harder to grasp, given the secretive nature of the Communist Party

International News: When Xi Jinping first met Donald Trump back in 2017, the Chinese leader said they had “a thousand reasons to make the China-US relationship a success, and not a single reason to break it.”

Two years on, ties are at their lowest point in decades — and they appear to be worsening by the day. Trump’s threat to raise tariffs on all Chinese goods last week shattered a truce reached with Xi just weeks earlier, unleashing tit-for-tat actions on trade and currency policy that risk accelerating a wider geopolitical fight between the world’s biggest economies.

A big part of the problem is that neither leader believes the other is serious about making a deal: China sees Donal Trump as posturing ahead of the 2020 election, while US officials think Xi is looking to wait him out for a better deal. Either way, the political space for compromise is diminishing as hardliners take center stage, prompting investors to weigh the potential economic fallout.

“We are looking at a situation now that is a bit of a perfect storm,” said Dennis Wilder, former senior director for Asia on the National Security Council who is now at Georgetown University. “Both have a great deal to lose in this high-stakes poker.”

For Trump, the bet is that a hard-line stance on China will help him win another four years in the Oval Office. His administration has proudly trumpeted what it calls the most robust response in decades to a rising China, and most Democratic candidates agree with the need to stay tough on Beijing even if they don’t agree with Trump’s tariffs..

Trump hits China with more tariffs, says Xi moving too slow on trade

Moody’s said the new tariffs would weigh on the global economy at a time when growth is already slowing in the United States, China and the euro zone

International News: US President Donald Trump said he plans to impose a 10 per cent tariff on $300 billion of Chinese imports from September 1 and could raise tariffs further if China’s President Xi Jinping fails to move more quickly to strike a trade deal.

The announcement on Thursday extends Trump’s trade tariffs to nearly all China’s imports into the United States and marks an abrupt end to a temporary truce in a trade war that has disrupted global supply chains and roiled financial markets. “I think President Xi … wants to make a deal, but frankly, he’s not going fast enough,” Trump said.

Trump made the announcement in a series of Twitter posts after his top trade negotiators briefed him on a lack of progress in US-China trade war talks in Shanghai this week. Trump later said if trade negotiations fail to progress he could raise tariffs further – even beyond the 25 per cent levy he has already imposed on $250 billion of imports from China. The news hit US financial markets hard.

Oil prices plummeted 7 per cent, with Brent crude registering the biggest daily percentage drop since February 2016. The benchmark S&P 500, which had been in solidly positive territory on Thursday afternoon, closed down 0.9 per cent. Benchmark US Treasury yields also fell. Retail associations predicted a spike in consumer prices. Target Corp tumbled 4.2 per cent, Macy’s Inc fell 6 per cent and Nordstrom Inc was down 6.2 per cent.