To be or not to be, that’s the question. Will the US trade war with China resume? Or will the parties conclude a peace agreement by November, and the White House will waive the additional 100% tariffs? Both Washington and Beijing are escalating and de-escalating the conflict, which is echoing through the financial markets. Wild EURUSD rides have become the new normal. Investors are rushing from selling everything American to TACO and back.
If the markets have adopted the “Trump always backs down” principle, why not China? Beijing has become seriously emboldened, first by strengthening export controls on rare earth minerals, and then banning local companies from doing business with the American division of the South Korean shipbuilding giant Hanwha Ocean. Further – more. China has stated that it does not intend to buy soybeans from the United States during the trade dispute.
Donald Trump accused China of hostility and threatened to cut off supplies of American vegetable oil. However, in this case, the United States is playing the role of a pug, not an elephant. Their vegetable oil exports to China amounted to $1.2 billion in 2024. Beijing’s purchases of soybeans from the United States amount to $12.6 billion. A holy place is never empty, if the White House imposes tariffs, why not buy goods from other countries? For example, Brazil?
Donald Trump claims that you have to pay for access to a large and beautiful American store. But what if U.S. exports start to fall along with imports? Another one will be added to the troubles of the economy. And is the United States, with its slowing labor market, declining production, and rising prices, able to withstand another trade war? China thinks not. He seems to have found the Achilles’ heel of the owner of the White House – his unwillingness to sink stock indexes.
