Trump Prepares to Confront China on Trade

ZH: What If Trump Does Not Back Down, And Why Is "$1 Trillion" Being Floated Around Washington?
President Trump is considering imposing tariffs on Chinese goods in response to China stealing US intellectual property. This is often referred to as Section 301 and President Trump specifically mentioned this action in both his Davos and State of the Union speeches. The rumor around DC is that the US will impose $1 trillion of tariffs, which would shock financial markets. We believe the $1 trillion number is too high. Since the US imports $450bn from China, across the board tariffs would need to be 200 percent. Even for Trump that is too much. But given the magnitude of what is being discussed, China would need to respond.
I don't know why they conclude a penalty would be imposed in one year. If the U.S. calculated that China had damaged U.S. companies by $1 trillion, a 22 percent tariff on all Chinese exports for 10 years would add up to $1 trillion ignoring changes in behavior. A 200 percent tariff in one year would achieve nothing since most trade would cease and then the tariff is gone the next year. It would cause a major short-term disruption and then the economy would revert back to pre-tariff trade patterns.

For negotiations to work, China has to believe Trump is willing to sink the global economy by sending China into a deep depression. Throwing around a figure of $1 trillion should make for serious negotiations.

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