From Business Insider:
The trade war is here, so it’s time to take a look at the Chinese economy to know what we’re dealing with here.
On Monday, China retaliated against the Trump administration’s tariffs on steel and aluminum by slapping tariffs on 128 imports from the United States.
Now, the US already had a bunch of duties on Chinese steel and other commodities going back to the Obama administration, so the new tariffs are likely more a preemptive move to set the negotiating table before the Trump administration announces more meaningful action against China for stealing American intellectual property. Those measures should be announced in the coming weeks.
So, regardless of why exactly China did what it did, we’ve got a tit for tat exchange of protectionist moves going. That means the trade war is on.
This is coming at a time when, on the surface, the Chinese economy is looking pretty stable. For the first time in a few years, the country’s stock market or currency didn’t start the year with a violent puke or unnerving slide. Economists and politicos at the World Economic Forum in Davos didn’t spend time tearing their hair out wondering if the country’s massive debt bubble (which is still growing) was going to burst.
Thanks to all that, Chinese officials have been successfully selling the narrative that everything is under control — that the central government’s plan to slowly deflate the bubble through supply side reforms is working.
You should know that that’s utter nonsense. China’s economy is in a weaker position than its leaders would have you think. Of course, that doesn’t mean they can’t rally their people against the West — they’ve been preparing for that for a while.