, 8 tweets, 3 min read Read on Twitter
A big question right now is how does China respond to Trump's decision to raise U.S. tariffs on roughly half of China's trade with US to 25%.

The boring but I suspect correct answer:

In the same sectors that China targeted last fall. They are its best targets.

(1/x)
After the truce last December, China's national team did resume modest soy imports --

But with a strong harvest in Brazil and Argentina coming to the market, it can (and almost certainly will) take those purchases back to zero.
U.S. oil and gas exports to China haven't really picked up, but I would be surprised if they don't go to close to zero as is possible ...

(won't matter much to the oil and gas sector in the US; oil in particular is fungible, and global prices are decent right now)
US auto exports to China (mostly US made BMW and Mercedes SUVs) have been running at their pre-tariff pace this year. Lots of scope to push those down ...

especially as China wants the Germans to make China their global SUV production hub (especially for e-vehicles)
Other sectors? A bit harder to find sectors where China has alternative sources of supply/ doesn't rely on US components for its own exports. Maybe China will find some, but doubt they will be as attractive as squeezing ag/ oil and autos.

(5/x)
Currency? could drift to weak side of its recent range v the basket, but if China lets it go further it risks triggering tariffs on the remaining half of its exports ... would likely be a sign China has given up.

(6/x)
Same for US companies operating in China (GM = most obvious). Certainly could be squeezed a but (and won't do as well as the Europeans), but if China really goes after the Chinese operations of US firms, it risks undermining the coalition in favor of an eventual deal

(7/x)
My gut at this stage ...

But who knows what China has gamed out.

No doubt though they have a plan, but don't think the end game happens just yet.

(8/8)
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