May 13, 2019

The stock market is looking at a 500-point drop this morning over China retaliating against Trump's tariffs. CNBC reports:

Stocks fell sharply on Monday, giving back the gains from a strong turnaround in the previous session, after China decided to raise tariffs on some U.S. goods as the ongoing trade war between the world’s largest economies intensifies.

The Dow Jones Industrial Average traded down 611 points, while a 3.4% drop in the tech sector pushed the S&P 500 down by 3.4%. The Nasdaq Compositedropped 3.2%.

China will hike tariffs on $60 billion worth of U.S. imports, starting on June 1. The goods targeted include a broad range of agricultural products. This comes after President Donald Trump raised tariffs on Chinese imports last week. China said in a statement that the U.S.′ decision jeopardized the interests of both countries and does not meet the “general expectations of the international community,” according to a Google translation.

Stephanie Ruhle points out two very important points about this morning's Chinese Trade War Explosion:

One, Chinese ruler Xi Jinping doesn't have to worry about re-election, ever.

Two, China knows our system of government very well and can punish Trump and his Republican party in specific ways.


HALLIE JACKSON: Stephanie, talk through why the markets are having the reaction. Not just the China retalatory tariffs but threats of more down the road.

STEPHANIE RUHLE: When the president says there's no reason for the US consumer to pay the tariffs, yes, there absolutely is. That's the way tariffs work. To Kirsten's point, the president loves a strong economy, he's dependent on that. Do you know who knows that? Xi Jinping, sitting in China not on Twitter. He is sitting in China where he is going to be in power for the rest of his life and is going to quietly extract revenge on President Trump. That's what the market knows. Last week the market was a bit of a roller coaster with many investors hoping it was a game of chicken that would results in a deal on Friday. Who has ultimate power and leverage? China does. China can suddenly say we're going to sit this one out. We're going to auction US Treasuries this week. And if China doesn't play, that's a massive negative for us. China could say, let's go after Chuck Grassley's state or Mitch McConnell's in those areas. That could hurt the president. The base of his re-election tour is about the strong economy, the market knows that and China knows that. The market now realizes that President Trump has lost his leverage and China has it. That's what has the market so worried.

JACKSON: Who is hurting the most, Steph?

RUHLE: Last week we saw a report out of the World Bank. It's blue-collar workers and it's farmers. For the president to say, US companies don't have to pay these tariffs, they can start manufacturing here. Great. Does the president actually think there is an empty factory sitting somewhere in the Rust Belt with workers just waiting to turn the lights back on? That could take years. If he were honest about it and say this will hurt in the short-term, but long-term I want to bring jobs back, many people on both sides of the aisle have applauded the spirit of what the president wants to do in taking on China. What he is actually doing? I spoke to a former bank CEO last Thursday night who said this is strategically stupid.

Obviously, this strategically stupid trade war is Trump's doing, and it's also obvious he does not care who he hurts as long as he appears "tough" on China. We'll wait to see how tough Mitch McConnell can or can't be with the Monster President his party created.

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