President Donald Trump is considering slashing tariffs on Chinese imports—in some cases by more than half—in a bid to de-escalate tensions with Beijing that have sent global and U.S. markets on a rollercoaster ride since the tit-for-tat tariff war between the world's two largest economies began, according to an exclusive report from the Wall Street Journal on Wednesday.
So what does all of this mean?
How much time do you have to sift through the multitude of implications and possible outcomes?
If Trump does decide to pull the trigger on what would be a relief to some (most of whom I suspect have a bit of knowledge about the longterm effects of extended tit-for-tat tariff wars), while others (many of whom likely believe the incorrect claim that China pays those tariffs, when in reality, it's U.S. importers and ultimately down-line users and consumers who pay tariffs) will perhaps scoff at the report and dismiss it out of hand.
While Trump hasn’t made a final determination, people close to the situation told WSJ the discussions remain fluid and several options are on the table.
Here's more:
One senior White House official said the China tariffs were likely to come down to between roughly 50% and 65%. The administration is also considering a tiered approach similar to the one proposed by the House committee on China late last year: 35% levies for items the U.S. deems not a threat to national security, and at least 100% for items deemed as strategic to America’s interest, some of the people said. The bill proposed phasing in those levies over five years.
Trump said Tuesday he was willing to cut tariffs on Chinese goods, saying the 145% tariffs he imposed on China during his second term would come down. “But it won’t be zero,” he said. The development was welcomed news to investors who had been spooked by the White House’s aggressive moves in recent weeks.
China on Wednesday signaled it was open to trade talks with the U.S., though Beijing warned it wouldn’t negotiate under continued threats from the White House. In China’s policy making circles, Trump’s comments Tuesday were viewed as a sign of him folding, people who consult with Chinese officials said.
So here's the thing — one of many, that is.
As I've frequently noted throughout the tariff escalation between the White House and Beijing, this whole thing isn't just about money to China. It's likely just as much about the ChiComs' fear of worldwide repercussions if the communist giant is seen as kowtowing to the United States — a yoke it has worked for decades to cast off.
China Losing It Over 'Extremely Shameless' Tariff War With Trump: 'Peasants in the US Will Suffer!'
For the above reason alone, I didn't believe — and still don't — that Xi and his pals were ever going to blink. Rather, China must be given a face-saving way out, and I believe wiser heads in the Trump administration know that — perhaps even the president himself.
The Bottom Line
The bottom line, meaning where this trade war — tariff war, call it whatever you choose — with China is headed, is unknowable, despite protestations to the contrary on both sides, and everywhere in the middle, of course.
That said, many, if not most, reputable economists know that extensive trade wars hurt both sides. Does China play fair? Of course not. Will China blink if the tit-for tat continues? I highly doubt it. Would it be a wise decision for President Trump to provide Xi and pals in Beijing a face-saving exit ramp? Without a doubt.
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