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Journalism of Courage
Trump Tariff News: Thursday (April 24) started on a good note for the US markets. Close on the heels of President Trump saying that he doesn’t intend to fire the Chairman of the Federal Reserve, Jay Powell, the buzz in the market was that the Fed may cut interest rates sooner than expected earlier to support the economy.
If this happens then it would be a neat turn of events and an example of collaboration among the fiscal and monetary policymakers, because until Wednesday evening it appeared that Trump was gearing up to take the unprecedented step of firing the Fed Chair just because Powell was not cutting interest rates.
But the day was not short of controversies.
On Thursday, the question on everyone’s mind was: Is China even negotiating with the US on tariffs?
Ever since President Trump took office, he and his cabinet members have been repeatedly telling the American public as well as the world at large that the US was in “active” negotiations with China. However, a statement by He Yadong, the spokesperson for the Chinese Ministry of Commerce, early on Thursday came as a rude shock for Americans, even as it was more than mildly amusing to observers around the world.
According to Bloomberg, the Chinese spokesperson said: “China and the US are not in talks on tariffs and the US needs to show sincerity if it wants to talk… The US should revoke all unilateral tariffs on China if it wants to solve problems.”
As things stand, the US has imposed tariffs of 145% on China, and the latter has retaliated by imposing tariffs of 125% on the US.
To be sure, while Trump’s tariffs against the US’s traditional trading allies, such as the EU, Japan, Canada and Mexico shocked many observers, tariffs against China were considered far more par for the course. After all, Trump had tariffed China in his first term, and President Biden had decided to retain those tariffs while taking other steps to contain China’s rise.
China’s blunt refutation of US’ repeated claims — that negotiations were underway and that a deal could be reached soon — allowed many observers and investors to finally openly ask the obvious question.
For instance, the 75-year-old widely respected investment strategist Ed Yardeni said the following to Bloomberg radio: “It is a very odd situation where the US seems to be negotiating with itself. It’s a very peculiar part of the deal where you walked into the room, and you’re the only one negotiating”.
When asked about the Chinese spokesperson’s statement that talks of China-US negotiations are, as Trump would call it, fake news, the US President questioned the reporters for getting their facts wrong and reasserted that the Chinese and US had the latest talk on Thursday morning. However, when pressed for details by the media during an interaction in the Oval Office of the White House, Trump refused to name or identify the Chinese (or American) official(s) involved in the negotiations.
The bottom line is that only one of the two assertions can be true. If the US cannot prove with details that China is actually part of the negotiations, it will undermine the US’s credibility and Trump’s leverage even further.
The day ended with positive results for the Trump administration as all the benchmark indices ended the day well in the green even as treasury yields receded and the US dollar gained back some ground against the euro.
However, here is a quirky trend about the markets reportedly spotted by Neil Dutta, Head of Economic Research at Renaissance Macro.
“Since the beginning of March, the S&P 500 has shed a total of 719 points on days Howard Lutnick (Commerce Secretary) and Peter Navarro (senior counsellor for trade) have been the biggest story. By contrast, if (Scott) Bessent (Treasury Secretary) has been the biggest story on the day, the S&P 500 has advanced a total of 52 points,” found Dutta.
“Trump’s recent comments around Powell, his soothing words around China, all tell you that Trump is starting to ‘feel the market’,” Dutta concluded.
