The Wall Street Journal frequently criticized President Obama but they never ridiculed him.
The Wall Street Journal ridiculed President Trump. That's a good thing. Trump deserved it.
Just Another Manic Friday
Trump and Xi see who can take the most trade pain. Everyone loses.
By the Editorial Board
August 23, 2019
The trouble with trade wars, like shooting wars, is that once they start you never know how they’re going to end. The enemy gets a vote, and sometimes events escalate in ugly fashion. Take Friday, which saw China retaliate for Donald Trump ’s recent tariffs, Mr. Trump blow a gasket, markets tank, and Mr. Trump impose even more tariffs.
Friday began with China announcing tariffs of 5% and 10% on the remaining $75 billion of U.S. products that have escaped duties since the tariff war started. This includes luxury autos, chemicals and small jets that the Chinese can’t easily substitute with foreign alternatives. The tariffs are scheduled to take effect on Sept. 1 and Dec. 15 when the next two rounds of Mr. Trump’s tariffs on Chinese products are also scheduled to hit.
Stocks took that news in stride. They then rose modestly after Federal Reserve Chairman Jerome Powell said in his annual Jackson Hole remarks that the central bank would “act as appropriate to sustain the expansion.”
But then Mr. Trump began tweeting like a bull in a china shop. “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” he tweeted, as if Mr. Powell isn’t a patriot. “We don’t need China and, frankly, would be far better off without them. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME.”
Order? Somebody should tell Chairman Trump this isn’t the People’s Republic of America. U.S. businesses have been trying to shift production out of China to avoid tariffs, but supply chains that have been developed over decades can’t be uprooted overnight. And no other country has China’s huge relatively skilled workforce, infrastructure and network of suppliers.
Mr. Trump also teased later actions, and sure enough after markets closed he announced via tweet that tariffs on $250 billion of Chinese imports would rise to 30% from 25% on Oct.1. The 10% tariffs that were set to take effect next month will also go up by 5%. Take that, Xi Jinping.
Peter Navarro, Mr. Trump’s trade-war general, seems to think China has more to lose from a tariff escalation. “The risk here for China, when it does things like this, is simply to galvanize support even more for the President,” Mr. Navarro said Friday on Fox Business. “Seven-five billion dollars worth of tariffs in terms of what the combined $30 trillion economy is not something for the stock market to worry about and we’re cool here.”
Got that, markets? Just chill, baby. But that was before Mr. Trump promised to retaliate yet again, and markets are wondering if we’re heading toward mutual assured economic destruction. Mr. Trump this week also dismissed the risk of a recession, but his continued mauling of Mr. Powell suggests he’s less than confident about the U.S. economy. Perhaps Beijing has taken note and believes its leverage in trade negotiations is increasing.
The IHS Markit index of factory activity in August dropped in the U.S., Japan, Germany and eurozone—the first manufacturing contraction in the U.S. since September 2009. A compound index of economic activity in the U.S. that includes services also fell to its lowest point since February 2016. The risk of a recession grows as trade uncertainty increases. Consumers have been shrugging off the market whiplash and the President’s trade irruptions. But if job and wage growth slows amid falling business investment, consumers may pull back too.
U.S. motor vehicle jobs have declined by 16,000 this year amid a slowdown in domestic sales. Tesla, BMW and Daimler plants in the U.S. that export luxury cars to China will get whacked with tariffs come December. Farmers who have been bearing the tariff brunt will receive another dose of pain in September.
What was that again about trade wars being easy to win?
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