US and China Trade: The Stakes Are Rising

On Sunday, President Trump tweeted an escalation to his trade war with China, warning tariffs would more than double, from 10% to 25%. By Tuesday, stocks were sent tumbling, and companies scrambling. The Dow Jones Industrial Average dropped 472 points Tuesday, it’s worst day in four months. Grain futures hit their lowest mark in more than 40 years. Companies weren’t given much in the way of warning, with tariffs due to increase Friday. They’ll have to decide whether to eat the tariffs themselves or pass the costs on to consumers.

Trump’s escalation comes amid a five-month truce between the world’s two biggest economies, and as the U.S. and China appeared close to a deal. However, Administration officials say China has been backtracking from earlier commitments. In a Washington Post op-ed, former chief strategist Steve Bannon urged the president to “follow his instincts and not soften his stance against the greatest existential threat ever faced by the United States.” Trade advisor Peter Navarro, and others, see no deal as preferable to any deal, and some fear the president will cave, again.