(A)Political - April 12th

Good morning everyone,

A lot of money went up and down in the markets this week, and that’s not too dissimilar or disconnected from the current event chaos on Capitol Hill. Let’s jump in!

What started out as a week of tariff scares for all countries has quickly morphed into a 90 day detente for all other countries with one exception. The world’s 2nd largest economy is now facing serious heat. Residing Fellow Jose Garcia gives a current global economic breakdown following the US tariff aftermath. Speaker of the House Mike Johnson and other Republican House leaders have successfully passed a bill that requires proof of citizenship to vote. It will now go through a Senate vote before a potential Presidential signature.

• Liberation Day Fades For Every Country Not Named China

• Economic Analysis of World Economy Following Tariffs

• House Republicans Pass Bill That Requires Proof Of Citizenship To Vote

Get your merch here before it runs out!
You can get it at our shop here.

Liberation Day Fades For Every Country Not Named China

_{By: Atlas}

In a serious shift in his "Liberation Day" trade strategy, President Donald Trump has paused his sweeping tariff protocol for all countries with one exception, China. Unprecedented duties are now triggering a retaliatory response from Beijing that has sent shock through the global economy.

The 90-Day Reprieve and China Exception

After initially implementing baseline 10% tariffs on virtually all imports on April 2, Trump announced a surprising 90-day pause for almost all countries just one week later. The White House confirmed that all nations except China would benefit from this temporary relief, citing widespread willingness to negotiate new trade terms.

"If you want your tariff rate to be zero, then you build your product right here in America, because there is no tariff if you build your plant, your product in America," Trump declared during his announcement. The pause appeared designed to address market panic, with Trump acknowledging that people were "getting a little bit yippy, a little bit afraid."

However, China was explicitly excluded from this relief. Instead, the administration confirmed that tariffs on Chinese goods had escalated to a staggering 145% total—a 125% reciprocal tariff on top of an existing 20% levy imposed earlier over fentanyl trafficking concerns.

"I've been talking about it for thirty-five years, how our country is being ripped off," Trump said. "China is doing the best job of it, frankly. And it's just not going to happen."

China's Defiant Response

Beijing's reaction was swift and forceful. After initially implementing 84% retaliatory duties, China increased its tariffs on all U.S. imports to 125% on April 12. However, in a significant shift of strategy, Chinese officials also announced they would no longer engage in the escalating tariff war.

"Given that American goods are no longer marketable in China under the current tariff rates, if the US further raises tariffs on Chinese exports, China will disregard such measures," China's Ministry of Finance stated. "China will ignore it."

The Ministry of Commerce dismissed the U.S. approach as "a joke in the history of the world economy," arguing that Washington's repeated use of "excessively high tariffs has become little more than a numbers game—economically meaningless and revealing its use of tariffs as a tool for bullying and coercion."

In a rare public comment on the trade war, Chinese President Xi Jinping warned during a meeting with Spanish Prime Minister Pedro Sánchez that "one that goes against the world risks being isolated themselves." Xi added that "no matter how the external environment changes, China will stay confident, remain calm, and focus on managing its own affairs."

Beyond tariffs, China has tightened export controls on rare earth minerals and added several American companies to its "Unreliable Entity List." According to leaks from two prominent Chinese bloggers, Beijing has also considered targeting U.S. agricultural products, poultry imports, Hollywood films, and even suspending cooperation on fentanyl-related issues.

Market Turbulence and Economic Impact

The tariff battle has triggered severe market volatility. U.S. stocks experienced multiple days of steep losses, with the S&P 500 losing 11% in a two-day period at one point. The Nasdaq 100 plunged into bear market territory with a 20% drop from its February peak. Asian markets were similarly affected, with Taiwan's market suffering its largest one-day percentage fall on record.

Goldman Sachs raised the probability of a U.S. recession to 45%, while analysts at JPMorgan cautioned that emerging markets like Brazil and India, which maintain high average tariff rates on imports, could be particularly vulnerable to reciprocal measures if trade tensions continue to escalate.

Treasury Secretary Scott Bessent has attempted to downplay concerns, arguing that China's escalation is a "loser" decision for the regime. "They have the most imbalanced economy in the history of the modern world," Bessent told Fox Business Network. "So, they can raise their tariffs. But so what?"

Diplomatic Positioning

Both Washington and Beijing appear engaged in a complex diplomatic dance, with each claiming openness to negotiations while projecting strength.

White House Press Secretary Karoline Leavitt said Trump is "optimistic" about reaching a deal with China. "The president has made it very clear he's open to a deal with China," she stated, adding that "the president would be gracious if China intends to make a deal with the United States."

Meanwhile, Trump has maintained that China "wants to make a deal" but doesn't "know how quite to go about it." When asked whether Trump is waiting for China's President Xi to make the first move, Leavitt declined to comment on communications that "are happening or may be happening."

Experts suggest both leaders are concerned about appearing weak domestically. "While there's substantial risk of a global economic meltdown caused by both leaders' fear of looking weak at home, the odds are greater for a short-term 'big, beautiful deal' and medium-term acceleration of deglobalization," a former Commerce Department official told The Hill.

Current political sentiment via Polymarket has political futures priced at a 70% likelihood that Trump’s tariffs on China will be reduced before June.

Bipartisan Response at Home

The tariff strategy has drawn mixed reactions on Capitol Hill, including concerns from some Republicans. Senator Ron Johnson (R-Wisconsin) admitted, "I don't know what the endgame is here yet," while other GOP senators urged patience.

Meanwhile, Representatives Pat Fallon (R-Texas) and Ro Khanna (D-California) have introduced bipartisan legislation called the Securing America's Federal Equipment (SAFE) Supply Chains Act to eliminate Chinese technology from U.S. government systems. Fallon praised Trump's "bold leadership" in "breaking its dependency on Communist China," arguing that his bill "dovetails with this endeavor."

Strategic Objectives and Path Forward

Trump has framed his tariff strategy as a once-in-a-generation opportunity to reset America's economic foundation. "It's the only chance our country will have to reset the table, because no other president would be willing to do what I'm doing," he said. "I don't mind going through it because I see a beautiful picture at the end."

The president has emphasized that tariffs would bring manufacturing back to the United States, reduce trade deficits, and ultimately lower prices for American consumers. However, economists and business leaders have warned about potential inflationary effects and supply chain disruptions.

Cornell University economist Wendong Zhang predicted the standoff "will likely persist for some time" due to "many sticking points" in the "deteriorating" relationship between the two global powers. These include not only trade issues but also tensions over Chinese ownership of U.S. agricultural land, the status of Taiwan, and TikTok's future in America.

As the trade war continues, most analysts believe Trump is ultimately seeking a "phase-two" trade deal with China, building on the initial agreement signed during his first term in 2020. However, with both sides digging in their heels in the short term, the economic standoff appears likely to continue despite the diplomatic posturing.

"At best, it's signaling a willingness to probe the contours of decoupling. At worst, it's just economic suicide," said Georgetown University professor Marc Busch. "I don't know that either side can really do this much longer... None of this is good for either side, and I sure hope both sides blink."

Subscribe to (A)Political to read the rest.