I think China is looking very weak here. The whole 'we won't put tarrifs on first even though July 6 starts before the USA, because we will never fire the first shot' messaging they put out the other day says it all to me.
~20% drop in China markets, bear territory
-Still significant tariffs on lots of products
-Foreign Investment restrictions
-IP theft rampant overseas
-They need to maintain power
-President Xi needs to cement himself as a divine leader after changing the constitution, if they have a major economic crisis, good luck with that
-They are doing a huge geopolitical play and technological planning play 10-20 years in the making so that they can be the next super power
US on the other hand
-Shows they can shake the hand of NK or inflame the peninsula with a tweet
-Shows they can befriend Russia and put some heat between them and China
-Reduced taxes which will provide stimulation to the economy if a trade war erupts
-Hosts trillions of China's money in their bonds
I think the US is fast forwarding the show down that China wanted to have in 10-20 years when technology and their geopolitical influence grew.
They need to make a decision, will they join in the world in a low tariff environment that allows foreign investment or will they continue with the Communist dream.
I don't think Trump will back down. He's surrounded by intelligence agencies who are likely using Trumps personality weaknesses to get what they want. I think they want the show down now, because they know it'll be harder in 10-20 years.
I could write more but I'm sure you get my drift.
So what does this mean. We may actually go to a full blown trade war because this isn't just ego, I think this is serious.
If China was half smart they would signal to the world they aren't trying to be the next super power because the current system is prosperous enough for us all. Reduce some tariffs, allow foreign investment and make some pledges on the IP theft side.
If they don't, they may face an existential crisis - well the Communist Party might. Higher risks for them imo.
(20min delay)