Why Beijing is not backing down to Trump on tariffs
In response to why Beijing is not backing down to Donald Trump on tariffs, the answer is that it doesn’t have to.
China’s leaders would say that they are not inclined to cave in to a bully – something its government has repeatedly labelled the Trump administration as – but it also has a capacity to do this way beyond any other country on Earth.
Before the tariff war kicked in, China did have a massive volume of sales to the US but, to put it into context, this only amounted to 2% of its GDP.
That said, the Communist Party would clearly prefer not to be locked in a trade war with the US at a time when it has been struggling to fix its own considerable economic headaches, after years of a real estate crisis, overblown regional debt and persistent youth unemployment.
However, despite this, the government has told its people that it is in a strong position to resist the attacks from the US.
It also knows its own tariffs are clearly going to hurt US exporters as well.
Trump has been bragging to his supporters that it would be easy to force China into submission by simply hitting the country with tariffs, but this has proven to be misleading in the extreme.
Beijing is not going to surrender.
China’s leader Xi Jinping told the visiting Spanish Prime Minister Pedro Sanchez on Friday that his country and the European Union should “jointly resist the unilateral bullying practices” of the Trump administration.
Sanchez, in turn, said that China’s trade tensions with the US should not impede its cooperation with Europe. [Continue reading…]
U.S. consumer sentiment deteriorated sharply in April and 12-month inflation expectations surged to the highest level since 1981 amid unease over escalating trade tensions that have roiled financial markets and raised the risk of a recession.
The University of Michigan Surveys of Consumers said on Friday that the slump in sentiment to the lowest level in nearly three years was “pervasive and unanimous” across age, income, education, geographic region and political party affiliation.
The jump in inflation expectations poses a dilemma for Federal Reserve officials, who have argued they remain anchored. President Donald Trump this week ratcheted up trade tensions, hiking duties on Chinese goods to 125%, even as he delayed reciprocal tariffs on other trade partners for 90 days.
Beijing on Friday retaliated with a 125% tariff of its own. Trump has maintained a 10% blanket duty on almost all U.S. imports as well as a 25% tariff on motor vehicles, steel and aluminum, leaving businesses and consumers bracing for a burst in inflation.
“Consumers have spiraled from anxious to petrified,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
The Consumer Sentiment Index dropped to 50.8 this month, the lowest reading since June 2022, from a final reading of 57.0 in March. Economists polled by Reuters had forecast the index falling to 54.5.
The decline in sentiment was more pronounced among Democrats and Independents. Morale was also down among Republicans. [Continue reading…]