President Trump’s campaign rhetoric and post-election comments critical of China sparked fears of a renewed trade war on the first day of his second term. But such fears have yet to materialize. Instead, Goldman analysts have described Trump’s initial trade policy on day one as having a “more benign tone.”
In a Thursday night interview with Fox News host Sean Hannity, the president showed his reluctance to escalate the trade war, stating that he would “rather not” impose tariffs on China. He has emphasized this week his willingness to negotiate with Chinese President Xi Jinping and has so far averted a clash between the world’s two largest economies.
“We have one very big power over China, and that’s tariffs, and they don’t want them,” Trump told Hannity in an interview that aired Thursday, adding, “And I’d rather not have to use it. But it’s a tremendous power over China.”
On Tuesday, Trump considered a 10% tariff on goods imported from China starting February 1. The proposed tariff would be in response to years of fentanyl precursor chemicals flowing from Chinese companies into Mexico, where Mexican drug cartels cook them and then smuggle them into the US via the Biden-Harris regime’s previously open southern borders.
In the prior election cycle, Trump floated tariffs on China by as much as 60%, which would’ve sparked a tit-for-tat trade war and crushed US trade with the Chinese economy heavily reliant on exports.
“It’s hard to know exactly what US President Donald Trump was getting at with his latest comments on China tariffs … That said, it’s difficult to see Trump backing down from his tariff threats. And analysis by Bloomberg Economics shows there’s a lot at stake for China, and the world,” Bloomberg Chief Asia Economist Chang Shu wrote in a note.
Fiona Lim, a senior strategist at Malayan Banking Bhd, pointed out that global “markets are likely to reduce bets on tariffs right now.”
US Dollar slides from Trump’s Day One at White House.
“Trump continues to take a softer approach with China,” Lim said.
Goldman Sachs Chief Economist Jan Hatzius, alongside Alec Phillips, David Mericle, and others, told clients on Tuesday that Trump’s first day of trade announcements was “more benign than expected,” adding, “Trump’s comments on China were notably less hawkish than during the presidential campaign or even his more recent comments since the election.”
From China’s perspective, “this is a very positive start,” said Wang Huiyao, president of the Center for China and Globalization, a Beijing-based think tank and adviser to Beijing, as quoted by The Wall Street Journal.
A Chinese Foreign Ministry spokesman said earlier this week that China is ready to work with the Trump administration to improve ties from “a new starting point.”
Carlos Casanova, senior Asia economist at Union Bancaire Privée in Hong Kong, told WSJ that Beijing might be able to navigate the 10% tariff next month by offering incentives such as tax cuts to exporters. He said that a deflationary environment in China has made Chinese goods increasing attractive to US buyers despite additional tariffs, adding, “Ten percent will be quite manageable.”
On Friday, Chinese Foreign Ministry spokeswoman Mao Ning outlined that both countries have “huge common interests.” She said, “The two sides should step up dialogue and consultation.”
Earlier on Thursday, Trump said in a virtual interview at the World Economic Forum that he has “always had a great relationship” with the Chinese leader.
“All we want is fairness. We just want a level playing field,” Trump continued, adding, “But I like President Xi very much. I’ve always liked him.”
Trump’s efforts to keep the Chinese video-sharing app TikTok operating in the US can be viewed as an ‘olive branch’ to Beijing, signaling a willingness to negotiate on trade instead of reigniting a tit-for-tat trade war.
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