So President Trump announced on social media that a deal with China is "done," pending final approval between himself and President Xi. He added, rather cryptically, that "We are getting a total of 55% tariffs, China is getting 10%." Which is... an interesting way to frame international trade negotiations.
The market, as usual, is trying to decipher exactly what this means. Is this good news? Bad news? News at all? Let's unpack this a bit.
First, what exactly does "55% tariffs" mean? Is that an average across all Chinese imports? Specific sectors? Is this a reduction from current levels or an increase? And China "getting 10%" tariffs suggests some kind of reciprocal arrangement, but that's significantly lower than what they currently impose on many American goods. The lack of detail is telling.
This reminds me of what I call the "announcement without substance" phenomenon that's become increasingly common in both corporate and political spheres. The basic model works like this: Make a headline-grabbing claim that moves markets or shifts narratives, leave out crucial details that would allow for proper analysis, and let the resulting ambiguity work in your favor while others scramble to fill in the blanks.
Look, trade negotiations with China have always been complex. They involve hundreds of product categories, intellectual property concerns, market access issues, and geopolitical considerations that go far beyond simple tariff percentages. Reducing this complexity to two percentages without context is either a dramatic oversimplification or a deliberate obfuscation.
Remember when markets would swing wildly based on Trump's trade tweets during his first term? We're seeing the same dynamic at play. The S&P futures ticked up slightly on this news, but without substance, it's essentially just noise trading.
The thing is, serious trade negotiations typically involve detailed documents spanning hundreds of pages, crafted by teams of specialized negotiators and lawyers. They don't typically conclude with a social media post declaring victory in vague percentage terms. This announcement has the hallmarks of premature declaration - something we've seen repeatedly in U.S.-China trade relations.
I'm reminded of the "Phase One" deal from 2020, which was celebrated as a breakthrough but ultimately fell short of its promised purchasing targets by nearly 40%. Markets initially cheered, but the reality proved more complicated.
What's particularly interesting here is the framing of tariffs as something "we get" versus something China "gets," as though higher tariffs are inherently beneficial to the imposing country. Most economists would argue the opposite - that tariffs are essentially taxes paid by domestic consumers and businesses. But the narrative of tariffs as "winning" has proved remarkably durable in political discourse.
Anyway, if there is a substantive deal in the works, we should expect to see more details emerge in the coming days. The devil, as always in trade policy, will be in the details - which sectors are covered, what non-tariff barriers might be addressed, implementation timelines, and enforcement mechanisms.
Until then, I'd suggest treating this announcement with healthy skepticism. The market seems to be doing just that, with relatively muted reactions so far. After years of trade tensions and false starts, Wall Street has developed a certain immunity to vague pronouncements without substantive follow-through.
I guess we'll see if this deal is actually "done" or just another chapter in the ongoing U.S.-China trade saga. Color me cautiously pessimistic until we see something more concrete than percentages without context.
