Trump dismisses fears of long-lasting trade war; China sees severe global impact

- U.S. President Donald Trump dismissed fears of a protracted trade war with China yesterday despite a warning from Beijing that labeling it a currency manipulator would have severe consequences for the global financial order.

Trump, who announced last week he would slap a 10% tariff on a further $300 billion in Chinese imports starting on Sept. 1, tweeted that “massive amounts of money from China and other parts of the world” were pouring into the U.S. economy.

He also pledged to stand with American farmers in the face of Chinese retaliation. China has halted U.S. agricultural purchases and raised the possibility of additional tariffs on U.S. farm products. U.S. farmers, a key political constituency for Trump, have been among the hardest hit in the trade war. Shipments of soybeans, the most valuable U.S. farm export, to top buyer China sank to a 16-year low in 2018.

While Trump played down the prospect that the trade dispute could be drawn out, St. Louis Federal Reserve Bank President James Bullard said the U.S. central bank may be stuck with a volatile global trade environment for years. “I think of trade regime uncertainty as simply being high in the current environment,” Bullard said at a National Economists Club luncheon. “I do not expect this uncertainty to dissipate in the quarters and years ahead.”

The U.S. Treasury Department said on Monday it had determined for the first time since 1994 that Beijing was manipulating its currency.

It acted after China decided to let the yuan fall below the key seven-perdollar level for the first time in more than a decade, rattling financial markets and dimming hopes for an end to a trade war that has dragged into a second year.

U.S. stocks strengthened on Tuesday afternoon, with the S&P ending up 1.3% a day after dropping 3%. The Nasdaq surged 1.4%.