Today is the day the first round of US tariff changes with regard to China go into effect. China initially said they would act first, and then quite rightly decided to let the other side make the first trade war move. Beijing will now respond, and it goes where it is going to go from there.
The question of who needs who more – a question addressed previously amidst these pixels – will become clearer still as the weeks go by. Trump on Friday sent out a hawkish message to back up the tariff changes, which will impact on Chinese exports to the US. But with him, there is always the chance of fiddling with decisions – to muddy waters? For usually no clear strategic benefit.
But if it is true, as some say, that Mueller is going to drop his package soon, then Trump would be too busy to second-guess his China trade team, in which the hawks appear to be in the ascendant. Meanwhile, the main Shanghai stock index strayed down into the 2600s during trading on Friday, and while a massive forex market effort by the financial instruments reporting to Those in Command pulled the RMB rate off 6.7 during the week, it is clear to everyone that the financial markets are under pressure. Overall, the balance of factors is not favoring Those in Command right now.
The other topic we are watching closely at the moment is Taiwan, from the perspective of the medium-term possibilities for that relationship. Is it possible that the pressure is on to “resolve” the problem during the current administration? And if so, how would that play out? We have no answers, but it’s worth pondering. Have a good weekend.