Commentary: China knows Trump’s breaking point

Key Points

  • President Trump's trade war has revealed his constraints and his primary target is China.
  • Trump suspended most country-specific tariffs but increased tariffs on Chinese imports to 145%.
  • China has retaliated aggressively, with tariffs on American goods at 84% and other punitive measures.
  • The US stock market has been significantly impacted, with a near 20% drop in the S&P 500, influencing Trump's tariff decisions.
  • There's a risk of a financial crisis if China or other adversaries sell US Treasuries, potentially causing a credit crunch.

Summary

President Trump's approach to trade has been marked by a series of aggressive tariff impositions, aiming to reshape America's trade landscape with a particular focus on China. Despite initially targeting a broad range of countries, Trump eventually suspended most of these tariffs except for those on China, which were dramatically increased to 145%. This move has positioned China as Trump's primary adversary in the trade war, leading to a significant escalation in tensions. China has responded with its own set of retaliatory tariffs, now at 84% on American goods, alongside other measures to punish American businesses. The financial markets have reacted sharply, with a near 20% drop in the S&P 500, signaling investor concerns over the economic implications of these trade policies. This market reaction has influenced Trump's decisions, highlighting his sensitivity to economic downturns. Moreover, there's growing concern about the potential for a financial crisis if China or other adversaries decide to sell off US Treasuries, which could lead to a credit crunch. Despite these risks, Trump's strategy seems to be shifting towards a more focused confrontation with China, potentially setting the stage for a long-term economic decoupling between the US and China.

yahoo
April 11, 2025
Stocks
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