In a terse warning form the editorial board of the conservative Wall Street Journal, the editors warned Donald Trump that he is playing with fire after issuing yet another round of tariffs aimed at China as part of his trade war.
On Thursday, via Twitter, the president announced "The U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%" which promptly sent the U.S. stock market plummeting.
Needless to say, the business-oriented editors of the WSJ took notice.
"One problem with President Trump’s China trade strategy of gradually escalating tariffs is that no one knows when or whether they’ll stop," the editorial began. "This is the third round of tariffs on China, and this time the border tax will hit consumer goods such as cellphones, laptops and tablets, clothing and toys. The stock market went in reverse on the news, but that isn’t the biggest economic risk. Bond yields also fell and oil fell nearly 8%, both warnings of slower growth in China and perhaps around the world."
The Journal notes that Trump's latest actions would likely have far-reaching effects on monetary valuations, suggesting that "Mr. Trump no doubt thinks this adds to the pressure on China to capitulate in trade negotiations, but it also carries risk of a larger run on the yuan that would do further harm to the Chinese economy. "
However, economic evidence suggests that in the U.S. "tariffs result in mutual pain."
"Mr. Trump’s Thursday tweets on China were respectful and anticipated further bilateral trade talks," the editorial conceded, before warning, "But the President is embarked on a high-risk coercive showdown with the world’s second largest economy in which neither side wants to bend first. Trade wars aren’t easy, especially for the innocent economic bystanders."
You can read the whole piece here (subscription required).