Trump caves in and slashes tariffs on China back to 30%.
In his negotiation approach, Trump tends to follow a very volatile yet relatively consistent strategy.
My friend Marko Papic created this interesting infographic that goes through each and every step.
Here is how it’s working this time with China:
1-2. Tell China they are ripping you off, ask them to become a consumer-driven economy, and whip out your big...fentanyl tariffs
3. When the market doubts your resolution, find an excuse to increase tariffs on China to 100%+
4. Forget about it, break bread, make friends: send Bessent to Geneva and tell the world you are making great progress on a ’’beautiful deal’’ with China
We are now at step 4, and markets are forced to unwind many negative carry and crowded trades they accumulated in April: long EUR or JPY, long Gold, curve steepeners are all negative carry and they tend to hurt twice as bad now.
Yet, a friendly reminder: take a look at step 5.
Do you think Trump has caved 100%, or will he go back at slashing tariffs on countries with which he can’t strike a deal over the next few weeks?
