Trump’s Trade Offensive Threatens China Truce

(Bloomberg) -- U.S. President Donald Trump's threat to ramp up tariffs on Chinese goods is either classic brinkmanship or an indication that hostilities are set to resume.

Either way, the stakes for a trade deal are high. Global markets have been roiled by Trump's twitter outburst yesterday when he threatened to increase tariffs on $200 billion of Chinese imports this Friday to 25 percent from 10 percent. He also floated the possibility of extending a new 25 percent duty on another $325 billion of imports not already covered.

Chinese officials appear to have been caught off guard by the offensive. The U.S. had been targeting May 10 to announce a deal that Trump and Chinese President Xi Jinping would sign later at an official summit, people familiar with the negotiations said last week.

While a Ministry of Foreign Affairs spokesman said today a delegation from Beijing is still preparing to travel to Washington for talks this week, he stopped short of any detail on when or who might make the trip.

Yet a media blackout in China on Trump's warning left investors baffled. And there is the additional danger, says Chua Hak Bin, a senior economist at Maybank Kim Eng Research Pte. in Singapore, that Beijing won't want to negotiate “with a gun pointing at their heads.”

Global Headlines

Gunboat diplomacy | The U.S. is dispatching an aircraft carrier strike group and bomber force to the Middle East in what National Security Advisor John Bolton described as an “unmistakable message” to Iran that any attack on American interests or those of its allies would be met with “unrelenting force.” Tensions have been rising since Trump imposed economic sanctions last year after he unilaterally withdrew from the 2015 nuclear deal with Tehran.

Wanted: a winner | Joe Biden enjoys a key advantage over the other 20-plus candidates seeking the Democratic Party nomination for the 2020 election: a perception that he can beat Trump. As Sahil Kapur reports from Iowa, which holds the first nominating contest, many Democrats see Biden as the top choice, including women who worry the U.S. isn't ready to elect a female president and others who believe the more liberal contenders can't win.

Customs offer | U.K. Prime Minister Theresa May's officials are drafting a new law in preparation for a Brexit deal with the opposition Labour Party. Clauses being written into the Withdrawal Agreement Bill would provide for a customs union-style arrangement guaranteeing no checks on goods crossing the U.K.-EU border, Tim Ross and Robert Hutton report. It may not be enough to gain Labour leader Jeremy Corbyn's support.

Truce called | Israel and Gaza Strip militants reached a truce after the most intense round of fighting since their 2014 war. The violence had threatened to undo months of Egyptian-brokered efforts to achieve a long-term cessation of hostilities. While there was no official word, Gaza's Sama News website cited unidentified diplomatic officials as saying the cease-fire was reached after Israel threatened to unleash “massive” firepower and resumed its assassinations of leading Hamas figures.

Missile training | One of Latin America's most dangerous rebel forces, Colombia's Marxist ELN group, has received instruction in using Russian-made anti-aircraft missiles by Venezuelan soldiers, according to Colombian officials. As Matthew Bristow reports, the allegation comes as Venezuelan President Nicolas Maduro is mobilizing everything he can to cling to power in the face of sanctions and calls by the U.S. and its allies for a military rebellion.

What to Watch

Russian Foreign Minister Sergei Lavrov meets U.S. Secretary of State Michael Pompeo in Finland today, where they may discuss Venezuela, Syria and Ukraine.
NATO Secretary-General Jens Stoltenberg holds talks today with Turkish President Recep Tayyip Erdogan in Ankara amid continued tensions within the military alliance over Turkey's plan to buy a Russian air-defense system.
The live-fire military exercise Kim Jong Un oversaw on Saturday potentially included North Korea's first ballistic missile launch since 2017, challenging Trump's bottom line in nuclear talks.

And finally…Brunei declared a moratorium on punishing gay sex and adultery with death by stoning after criticism from human rights groups and prominent celebrities such as George Clooney. Sultan Hassanal Bolkiah announced the suspension in a televised address yesterday, state-owned newspaper Borneo Bulletin reported. The tiny Southeast Asian nation put into effect laws in April to penalize homosexuality and extramarital affairs, sparking calls to boycott hotels owned by the oil-rich monarchy.

To contact the editor responsible for this story: Karl Maier at kmaier2@bloomberg.net, Anthony Halpin