China, Japan, Korea Sense Trump Trade War Weakness

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To be sure, Beijing is reportedly considering suspending its 125% tariff on some US imports to limit economic fallout . Bloomberg reported today (April 25) that Beijing may remove additional levies on US-made medical equipment and some industrial chemicals like ethane, as well as waive tariffs on plane leases.

But the last month has shown what it looks like when an unstoppable force like Trump meets an immovable object like Xi's China. But Trump just demonstrated that his pain threshold for tariffs is Wall Street-dependent.

It was headlines about the many trillions of dollars in stock losses, JPMorgan CEO Jamie Dimon being unhappy and Goldman Sachs talking recession that had the self-proclaimed“Tariff Man” changing his tune.

The only thing falling faster than the US dollar is Trump's economic approval rating at home. A new Reuters/Ipsos poll puts it at 37% while roughly 75% of American adults worry recession is imminent.

Confidence is likely to fall even more precipitously as American households see their retirement account statements and feel tariffs boosting prices across the board. Market volatility also forced Trump to throttle back on plans to fire Powell, at least for now.

If you're happy“just because Trump said he isn't going to fire Powell in an era in which the independence of central banks is going to be called into question by the demands of realpolitik, or because he said something nice about China and tariffs for the nth time as the world starts to divide along geopolitical lines, well clearly you enjoy fairy tales,” says Michael Every, global strategist at Rabobank.

At a business forum this week, veteran investment strategist Jim Paulsen said that“almost every corporate CEO is revising down their outlook. The commentary warnings of the corporate sector have escalated.”

Some titans of finance think many peers are being too dramatic about what damage Trump 2.0 might do in the long run. As C S Venkatakrishnan, CEO of Barclays, tells Bloomberg:“It's 100 years of dollar strength, so much so that important commodities - gold, oil - are denominated in dollars. I think undoing that will take a long, long time.”

Yet Wedbush's Ives speaks for many when he says Trump's tariffs, and the chaos surrounding their implementation,“will go down as the worst US policy mistake” since the Smoot-Hawley Tariff Act of 1930, which amplified the Great Depression.

China's Commerce Ministry has been making a similar point, calling the US tariff moves“a mistake on top of a mistake.”

Then, after the US president vowed to ratchet up tariffs again this week, Beijing once again vowed to hold the line.

It has since clashed with Trump by insisting no trade talks are underway, which the US leader has insisted are happening behind the scenes without naming who was involved.

At a forum in Washington sponsored by Semafor this week, Citadel CEO and founder Ken Griffin warned that a Trump reversal might be too little, too late. Before the tariffs,“no brand compared” to US Treasurys, the dollar or the creditworthiness of the biggest economy. That's now been“eroded” in short order.

“We put that brand at risk,” the billionaire hedge fund manager said.“It can be a lifetime to repair the damage that has been done.”

The financial dust cloud Trump leaves behind could play into Asia's hands as trade negotiations are expected to heat up in coming weeks amid a 90-day pause on the imposition of his reciprocal tariffs on all global nations.

China now knows, for example, that the bond market can rattle Trump. The recent surge in yields clearly unnerved Trump's inner circle.

And it put on display the extent to which the US is just as vulnerable as it's perceived to be strong. Beijing holds some US$760 billion of US Treasuries .

Chinese state media regularly discusses the idea of selling, or scaling back purchases, as a retaliation tool some market watchers believe Beijing quietly did soon after Trump's reciprocal tariff announcement.

It's all making Trump desperate to change the narrative with a big trade deal win. The first opportunity on that front is Japan.

Of course, Team Trump is trying to put on a brave face. Asked on Wednesday whether Trump had unilaterally offered to de-escalate trade tensions with China, Treasury head Bessent claimed“not at all.”

“As I've said many times, I don't think either side believes that the current tariff levels are sustainable, so I would not be surprised if they went down in a mutual way,” Bessent said.

One possible takeaway from Bessent's comments is that they“underscored that the United States is not aiming to decouple from China,” says Thomas Lee, head of research at Fundstrat Global Advisors.

Lee points to Trump's press secretary claiming there are“ongoing trade discussions with 34 countries and referencing President Trump's optimistic outlook regarding a potential deal with China.”

Yet the lack of progress with Japan could be a warning sign for the White House.

Last week, Navarro tried to suggest a bilateral Japan deal was imminent. It was his Exhibit A for the argument that Trump's“90 deals in 90 days” pledge remains operational.