(Bloomberg) -- In the span of a week, President Donald Trump escalated a trade war with his biggest strategic rival, ended a steel tariff battle with the U.S.’s closest neighbors, and managed to both prolong and inflame yet another squabble among friends for at least six months.
And it’s not even World Trade Week yet.
Here’s a summary of what happened in the past week as Trump’s attempted overhaul of the global trading system reached a fever pitch and roiled financial markets again:
Made in China
On Monday, the U.S. Trade Representative’s office released a list of about $300 billion worth of Chinese goods including children’s clothing, toys, mobile phones and laptops that Trump is threatening to hit with a 25% tariff. If he proceeds, those new taxes, plus 25% duties on $250 billion of Chinese goods already in place, mean American consumers may start feeling the pinch of higher prices.
Then, on Thursday, Trump extended his crackdown to include the Chinese telecom giant Huawei Technologies Co. He issued an executive order that could effectively ban Huawei and Chinese sister firm ZTE Corp. from the U.S. market. He also placed Huawei on a blacklist that means U.S. suppliers will need licenses to sell the company components.
China’s response dashed most hopes that the world’s two biggest economies would patch things up soon. “If the U.S. ignores the will of the Chinese people, then it probably won’t get an effective response from the Chinese side,” according to a commentary carried by state-run Xinhua News Agency and the People’s Daily, the Communist Party’s mouthpiece.
By midweek, Bloomberg News was reporting that Trump was close to delaying a decision by as long as six months to impose tariffs on automobiles and some parts, a move aimed at delaying a simultaneous clash with Europe and Japan. He made the decision official on Friday, but issued a proclamation saying he agreed with his Commerce Department’s conclusion that competition from foreign carmakers and imports from the likes of Toyota and BMW pose a threat to U.S. national security.
Trump’s directive sets a 180-day period of negotiations. The goal? “Domestic conditions of competition must be improved by reducing imports,” the proclamation stated. The stroke of this pen did more than delay tariffs. It escalated tensions by saying that auto imports are a threat to national security and “American-owned” producers. Toyota responded with a rare rebuke, saying Trump’s proclamation “sends a message to Toyota that our investments are not welcomed, and the contributions from each of our employees across America are not valued.” Consumer will pay more and have fewer vehicle choices if import quotas are imposed, the automaker said.
Closer to Home
As if trade watchers hadn’t digested enough, Trump and his counterparts in Mexico and Canada announced on Friday that the U.S. will lift steel and aluminum tariffs on those two nations, boosting efforts to encourage lawmakers to ratify a new North American trade deal.
In a joint statement, Canada said it will lift retaliatory duties on U.S. products as part of the deal. Mexico welcomed Trump’s removal of the duties. Both nations suggested it would open the way for their lawmakers to approve the new trade pact. The metals melee had become an obstacle for lawmakers in all three nations to ratifying the U.S.-Mexico-Canada Agreement, the deal to revamp Nafta that Trump wants to tout as he heads for re-election in 2020.
‘World Trade Week’
At the end of the most consequential week for trade policy in Trump’s presidency, investors looked weary from uncertainty. The MSCI Global Index slumped for a second straight week and the yield on 10-year Treasuries flirted with its low of the year. The Bloomberg Dollar Index, meanwhile, reached his highest level of the year.
Trump may not be finished. On Friday, he foreshadowed the arrival of “World Trade Week,” May 20-26, in a proclamation that contained a not-so-coded message to what’s emerging as the main source of his economic angst: China.
“The United States will no longer tolerate any foreign nations gaining unfair advantages on American industries by stealing or forcing the transfer of our companies’ technology or intellectual property, subsidizing their exporters, illegally dumping products into our markets, and building excessive and unnecessary capacity,” Trump’s proclamation stated.
--With assistance from Jenny Leonard and Shawn Donnan.
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