Bloomberg’s economists pretty much echo my earlier comment regarding what’s behind the President’s risky move this morning, and that it will “focus the market’s attention” on trade; specifically on China’s top negotiator’s Washington visit this week.
What Our Economists Say
“Without more information, it’s difficult to know how to interpret Trump’s tweets. It’s possible talks are breaking down, with China offering insufficient concessions, and an increase in tariffs a genuine prospect. More likely, in our view, is that this renewed threat is an attempt to extract a few more minor concessions in the final days of talks. Either way, Trump’s tweet has added uncertainty to the final stage of the negotiation and will focus market attention on Liu He’s DC visit.”
Tom Orlik, chief economist, Bloomberg Economics
It’ll be interesting to see if traders take a wait and see approach come tomorrow morning, or simply sell the news hard.
Frankly, the latter would be the better, as the best outcome for markets would be the complete abandoning of the use of tariffs as a weapon in international negotiations. And, alas, it looks as though it’ll take yet another major selloff to convince the President.
They as well point out the mechanical (how they’re paid), and economic reality of tariffs: emphasis mine…
“Trump also said on Sunday that tariffs paid by China “are partially responsible for our great economic results,” although it is companies that import Chinese goods, not China itself, that pay the bulk of the additional costs.
The conflict has contributed to a slump in global trade, dented business confidence and forced companies to upend their supply chains. The International Monetary Fund cut its global outlook last month to the slowest pace since the financial crisis, warning that an escalation in tariffs could push growth even lower.”
That last paragraph is consistent with the deterioration we’ve seen in our proprietary macro index over the past 16 months.