Tariffs again? I thought we already did this. It's like, come on, tariffs are so Q2 / Q3! However to no-one's surprise, President Trump is at it again with throwing his tariff weight around.
Here's what's gone down in the past few days:
- On Thursday, China issued new export restrictions on rare earth elements and minerals, adding five new elements and extra scrutiny for semiconductor users and dozens of pieces of refining technology to its control list. China produces over 90% of the world's processed rare earths and magnets, which are used in products like electric vehicles, aircraft engines, and military radars.
- On Friday, Trump said he will impose an additional 100% tariff on imports from China, as well as impose export controls on “any and all critical software” starting Nov 1st, in retaliation of China's new export restrictions.
- He posted on Truth Social that “China has taken an extraordinarily aggressive position on Trade,” claiming that their move “was obviously a plan devised by them years ago.” He described the new controls as “absolutely unheard of in International Trade, and a moral disgrace in dealing with other Nations.” Feels a little like the pot calling the kettle black, but let's move on…
- President Trump has been planning to meet with President Xi later this month, but said on Friday that “there seems to be no reason” for the meeting to take place under current positions.
- Following the news on Friday, the S&P 500 dropped 2.7%, the Dow Jones Industrial Average 1.8% and the Nasdaq Composite dropped 3.6%.
- It also sparked a massive $18.28B cryptocurrency sell-off late Friday, which is the largest liquidation event in crypto history.
- On Sunday, China defended its new rare earth export controls, which began on Oct 9th, explaining that the measures are “designed to better safeguard world peace and regional stability.”
- China's Commerce Ministry called Trump's plan to impose another 100% tariff on Chinese goods a “classic case of double standards.” The ministry further stated that Trump's actions “have severely harmed China's interests and undermined the atmosphere for bilateral economic and trade talks.”
- On Sunday Trump posted again on Truth Social, “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. The U.S.A. wants to help China, not hurt it!!!”
- Beijing later signaled on Sunday that it's ready to retaliate against any new levies that the Trump administration imposes on Chinese imports. A spokesperson for China's Commerce Ministry said, “Threatening to impose high tariffs at every turn is not the right way to engage with China. China's position on tariff wars has been consistent: we do not want to fight, but we are not afraid to fight.” He later added that Beijing is ready to retaliate with unspecified “corresponding measures” if Trump follows through on his threat.
Does President Trump even have the authority to be doing this? Tariffs should be approved by Congress except during emergencies, but Trump even says himself this is a retaliatory tariff, and has nothing to do with the fentanyl crisis he's been using to rationalize tariffs up until this point under the International Emergency Economic Powers Act (IEEPA). An upcoming Supreme Court case will determine if he actually does have the authority to haphazardly impose tariffs without Congressional approval.
More harmful than the bombshell tariffs themselves is the instability that they bring to U.S. businesses. There's no good argument for imposing surprise tariffs at the drop of a hat. The instability is making it impossible for businesses to plan ahead, forecast inventory or expenses, or in many cases know if they're going to still be in business in a month.
Do you actually believe that tariffs are the answer? At least strategically plan them in advance and give businesses time to prepare. And then stick to a plan! We're living in the Ross / Rachel timeline of tariffs and it's absurd.