ExclusiveThe US Is in a Trade War With China: Financial Expert | Business Matters (April 9)

In today's business matters, the Trump administration raised tariffs on low-dollar shipments from China after previously closing the so-called de minimis exemption. It allowed Chinese retailers like Timu and Xi'an to ship goods to the U.S. duty-free. The administration announced yesterday a tariff increase on small parcels from China that'll now be 90 percent of their value, or $75, with the future hike to $150. That's up from the previous plan of 30 percent, or $25. The order applies to packages valued at under $800 and takes effect on May 2nd. The strength of the U.S. dollar fell to a six-month low on Wednesday after President Trump's punishing new tariffs came into effect. An index that measures the dollar against certain other major currencies was down nearly 0.9 percent Wednesday morning. That's even lower than the level it dropped to last week. According to one economist, a weaker dollar is not usually how markets respond to U.S. tariffs. Higher U.S. tariffs would normally boost the dollar by lowering American demand for foreign goods. The expert says the dollar's weakness may reflect a clear and present danger to the U.S. economy. It could also be that the way tariffs are being implemented, but the announced tariff pauses, could change the picture further. Walmart has pulled its financial guidance for the year due to uncertainty about the impact of tariffs on China, Vietnam, and other key sources of goods. In a news release, the company says it wants to maintain flexibility as tariffs are implemented. Walmart scrapped its operating income guidance for the year, but said sales would grow by up to 4 percent. Fasten your seatbelts. Delta Airlines is seeing turbulence for the economy on its flight path. CEO Ed Bastian warned that revenue this quarter could fall and that growth has largely stalled. The airline says its weakened outlook is due to broad economic uncertainty around global trade. It's anticipating both business and casual travelers pulling back plans due to the uncertainty. As a result, Delta is no longer standing behind its previous guidance that expected record profits this year. The airline is also ditching plans to offer more seats to passengers later this year. In an interview, Bastian said everyone is going into defensive posture, and if that continues, we'll probably end up in a recession. Small businesses could see the largest blows in the trade turmoil, though many are relieved after today's announcement. Billionaire hedge fund investor Bill Ackman warned on X before the pause that many small businesses will go bankrupt. Ackman said several startups that he's invested in are concerned about meeting their margins. One small business who makes goods from China told the New York Post it may be forced to shutter within months. Ackman said he supports tariffs to create stronger trade relationships but called for a 90-day pause like the one President Trump issued today. Ackman also acknowledged that for some industries, there is no reshoring solution in the short or long term. The global trade situation has sparked an unusual sell-off of U.S. Treasuries. And that sell-off is going around the world. During market turmoil, global investors typically turn to the bond market and the perceived safety of U.S. debt. The U.S. has trillions of dollars in debt financed by treasuries. A move away from treasuries could be a sign that investors are losing confidence in the U.S. A strategist for LPL Financial notes the likely cause being funds that rely on borrowed money to buy treasury bonds or instead selling them to meet margin calls or to pare back on borrowing at a time of heightened market volatility. U.S. Treasuries' Scott Besant is downplaying the sell-off. He said this is a normal deleveraging going on in the bond market. American Airlines is testing a program that would streamline baggage checks for international travelers connecting to domestic flights. It would allow passengers to bypass baggage screening after they go through customs on a layover. The bags would still be screened but instead of travelers having to collect their luggage and recheck it, bags would automatically be transferred to connecting flights. The pilot program, called International Remote Baggage Screening, was done in partnership with U.S. Customs and Border Control. It's currently being tried out on flights from Sydney, Australia to Los Angeles. In February, the airline announced a separate trial program to ease connections for travelers going through London's Heathrow Airport. It allows passengers flying from Dallas Fort Worth Airport to bypass a second security screening in London when flying to other international destinations. As if deep fake videos weren't already enough to worry about, now there are fake job applicants using AI-generated videos to get through remote interviews. When hired, these fake people can do incredible damage to a company, like planting malware and demanding ransoms. NTT Sean Marshall has more for us. Yeah, is it better now? Yes. Yes, it's much better. Thank you for joining again. Imagine hiring an AI-generated fake person who appears to be the perfect fit for a role at your company. Being tricked through a video conference call sounds like something out of a science fiction movie, but this is exactly what information security company Pindrop has been finding. They offer services to detect AI fraud. Pindrop describes a recent example, a job application for a senior back-end engineer. The candidate they call Ivan X appeared well qualified on paper, but the company says there were several red flags during the video interview. His facial expressions seemed slightly out of sync with his words, a telltale sign of deep fake video manipulation. His voice occasionally dropped out or did not align perfectly with his lip movements. And when the interviewer asked an unexpected technical question, the candidate paused unnaturally, as if processing the response before playback. Pindrop's AI fraud detection technology confirmed that they were face-to-face with a deep fake candidate. These deep fake personas will go to great lengths to apply at companies, which includes making fake LinkedIn profiles, AI-generated resumes and cover letters, and fabricated work history and references. Once inside a company, deep fake employees can hold internal systems hostage, locking critical files and demanding ransom payments. They can also commit payroll fraud and steal intellectual property. But Pindrop says that wasn't the last of Ivan X. The fake applicant resurfaced again eight days later after they flagged the original as fraudulent, but they let the interview go ahead anyway. The startup used a new video authentication program it created to confirm he was a deep fake fraud. Ivan claimed to be located in Western Ukraine. His IP address indicated he was actually thousands of miles to the east, possibly in a Russian military facility near the North Korean border. Deep fake people are no longer science fiction. The CEO of a company that goes after crypto criminals told CNBC that hundreds of North Korean spies regularly apply for sensitive positions at her firm. Research company Gartner predicts that by 2028, one in four candidate profiles worldwide will be fake. Sean Marshall, NTD News. Some Americans may potentially need to cut seafood, coffee, fruit and more from their diets once reciprocal tariffs come into effect after the announced tariff pause. Here's more. From fresh to packaged foods and household goods, every section of the supermarket has imported items. With the sweeping new reciprocal tariffs, experts say groceries will quickly become more expensive. Yale University estimates food prices will rise close to 3% overall. The food consumed by Americans is part of a complicated global supply chain. Much of the produce grown abroad can't be replicated in the U.S. because of climate and crop conditions. Right now, the U.S. imports about 17% of all its food and beverages, but that varies dramatically by category. Based on the data from the Department of Agriculture, the U.S. imports about 80% of its seafood and coffee and about 60% of its fresh fruit. Mexico and Canada have been left off the latest list of tariffs, softening the blow of price increases. They're the two largest agricultural suppliers to the U.S. In fact, most food and agricultural products from the countries are exempt from tariffs under the existing U.S. MCA free trade agreement. The world's two largest economies are in a rapidly escalating trade war. The U.S. and China are exchanging retaliatory tariffs. Investors are bracing for the long haul as the tit-for-tat trade moves continue. Here's more. Amped up retaliation from both of the world's superpower economies. In response to the sweeping new U.S. reciprocal tariffs on all trading partners, China has unveiled retaliatory tariffs of 84% on imports of U.S. goods, further intensifying trade tensions. President Trump on Wednesday announced a pause in the tariff hikes on most countries, but increased the tariff on China to 125%. It's the latest in a series of escalations between the two largest global economies. This comes as China's export sector has become a bright spot in its sluggish economy, which has been grappling with weak consumer spending and a prolonged property slump. The back and forth of tariffs has led to swings in stock markets around the world. Chinese stocks saw a morning sell-off in the hours before the U.S. tariffs took place, but then returned small gains. It appears Beijing has stepped in to prop up the market. It eased its grip on currency, loosened investment rules, and turned to state-backed funds to buy stocks and exchange-traded funds. Stocks surged today after President Trump's announcement of the pause in reciprocal tariffs on most countries, but not China. The new U.S. tariffs have brought many countries to the negotiation table, but China has responded with retaliation, bringing even more retaliation from the U.S. I talked with Joseph Trevisani, senior analyst at FX Street, about where this could be going. So good morning, Joseph. Are we in a trade war, do you feel, with China? Well, good morning, Don. Yes, it's only a very brief war at the moment, but it certainly has all indications of one. The thing about China is their retaliation is partially, at least, because they see themselves as a global power, and they are not going to be bullied by the United States. Whether or not China has participated fairly, shall we say, in the world trade system is a different question. But certainly the approach that the administration has taken to China was bound to bring on this retaliation from China. One might even speculate that that was the intention of the Trump administration. But if we do go down this path with China specifically, is it a path to decoupling of the U.S. and Chinese economies? Well, there is, and many things have started to move in that direction already since the pandemic back in 2020. So yes, there have been moves along that way. But for many of products, it's going to take a long time to move out. Others have not. Apple still does a lot of their production in China, although they've started to move. Nike's another one that does a lot of its production, I believe, in Vietnam and China. So yes, it will. And I think that's the direction the world is going. And this is something that has to concern China. In the immediate run, though, you cannot simply close a factory in China and open it up in another country the next day. You can't go and buy a factory at Walmart and start it up. OK, I'm wondering how far China can go down this path, because yesterday it was saying it's going to fight to the end. Given China's current economic slowdown and deflation concerns, how much room do they have to retaliate? That's another good question. I'm not sure, because the Chinese economic statistics, the Chinese system is not particularly open or transparent. You can't really exactly tell what's going on. One thing that I think is true is the Chinese consumer sector over the past 20, 25 years has not developed to the degree that it can certainly stand in for the United States consumer. So the Chinese are going to have a large problem with their exports. Where are they going to go? They're not going to go to the EU. They're not going to go to South America. Really, the place they go is here. So yes, China, I think, is going to be belligerent. China is going to respond in kind. As I said earlier, part of that, at least, is China's own perception of itself as a world power, and not someone to be bullied. You could even say that there's some residue from the 19th and 20th centuries in China's economic and political relations with the West. So there are issues here that are beyond the simple trade war—not the simple, but the trade war rhetoric—that will make China, I think, be more aggressive and has so far. Does that mean we won't come to an agreement eventually? No, I don't think so. Okay, let's say both countries don't back down. So China imposes retaliatory tariffs. The U.S. puts more tariffs in response to the retaliatory tariffs. In that situation, do you feel China has the capability—does it have the capability—to out-tariff the U.S. in this kind of trade war? I think for a good amount of time it does. And I think, you know, there's going to have to be an issue, since the stakes are high and the terms of this conflict are now set. The U.S. started it. The Trump administration started it. They put on tariffs. When China responded, they escalated tariffs again. I'm assuming China will do that. So that position is now set. Can China wait this out for six or eight months? Yes, I think they probably can. Can the United States? Yes. Beyond that, it's hard to tell. It is in the best interest of both countries to settle this, of course, but the Trump administration does not want to settle it for anything like the status quo ante, what went before. China likes the situation that existed up until the tariffs started. So they are going to be more reluctant to change, but I think they also have less leeway, even though they will certainly wait it out as long as they can. All right, Joseph, good to talk to you this morning. Thanks for coming on. Thank you for having me. Hunting games today in the markets. Uber unveiled its ninth annual lost and found index. The most unique lost items list include a mannequin head with human hair, a Viking drinking horn, a Ghostbusters ghost trap, a chainsaw, breast milk, a turtle, a zempig and ten live lobsters. The top three most common items left behind in an Uber in twenty twenty four were phones, wallets and keys in that order for phones. A total of one point seven million iPhones and Androids were left behind. The top food items include one hundred seventy five burger sliders. The top luxury items included a gold Rolex and Air Jordans worth eighteen hundred dollars. And the top three most forgetful cities in order were New York, Miami and Chicago. Big escalations between the U.S. and China involving tariffs, this could make some common products more expensive. What's more, it could stunt these countries economic growth. Kevin, paint us a picture here of the tariff rates between the U.S. and China. And why is President Trump imposing these steep duties? Well, these are huge tariffs in this hit for that escalation. That's one hundred and twenty five percent tariffs that President Trump has levied on Chinese goods. In response, China has put eighty four percent tariffs on American goods. Now, that's according to the White House. But there's a little bit of a discrepancy in terms of how much China is putting on American goods in terms of tariffs. That's one hundred and six percent that the Peterson Institute for International Economics puts it at, given that there was already some tariffs in place, given that prior trade war or what was called one in the first Trump administration. But either way, that is very, very high rates of tariffs on the goods going between these two countries. Right. And the reason for that is partly because, as Secretary Treasury Secretary Scott Besson says, it's unfortunate that the Chinese actually doesn't want to come and negotiate because they are the worst offenders in the international trading system. So to answer your question, why President Trump is putting these on there? Well, China has predatory economic practices. It has a huge trade deficit with the United States and it is a source of the deadly fentanyl that's coming into this country. So that's part of the reason. But that twenty one hundred and twenty five percent, that increase, that's partly because China retaliated. Trump says that China has a lack of respect for the world markets. Now, as we drill down further into this, we understand that there is definitely a trade deficit between the United States and China, and it's on China's behalf because the United States imports over four hundred billion dollars worth of products from China last year, whereas China is only exporting only the United States, only exporting about one hundred and fifty billion. So there's a three hundred billion dollar trade deficit between these two countries. Again, one of the main reasons why these tariffs are being levied against China at the hands of President Trump in this, according to the Office of the U.S. Trade Representative. Right. And to give you an idea of just which countries are feeling the pressure from these tariffs the most. And again, this is with this new scale that we're talking about, where Trump has reduced the tariffs down to 10 percent in the other countries and bumped up those tariffs to one hundred twenty five percent on China. That's what you're seeing right here. So as you go further to the right, you're looking at higher percentage of the share of the imports to the United States. This is 20 percent. And back out here, this is about zero percent. Right. So you see all these other countries, you know, UK, India, they're all over there. Right. They don't contribute that much to the total imports coming to this country. But China, that's 15 percent right here. And that's that one hundred and twenty five percent tariffs that you're seeing. So ultimately, what you see here is since China is such a big dot compared to these other countries and this is the EU right here, China is being singled out. And part of the reason is because other countries have come to negotiate with the United States following President Trump's imposition of tariffs on these countries. Right. And as you see, the import tariffs by the U.S. and China over time has had, you know, a huge, rapid spike recently. And that's when Trump got in office. But again, this is the Biden administration, which kept those trade those tariffs that were on since the first Trump administration. They ramped up. But then that's a rapid rise. And it's even off the charts here now. One hundred and twenty five percent with that new breaking news. So now the Chinese tariffs on American products has matched almost exactly with that. So they've gone tip for tat on this. And to give you an example. So, I mean, this is one hundred and twenty five percent tariffs that we're at right now with the United States imposing on China, the United States and the rest of the world. That's very low. I mean, that's almost about three percent. It jumped up a little bit here to 15 percent or that might be 10 percent. We have to see exactly what Trump does. But the the Chinese tariffs on the rest of the world, again, that's only about six percent. So it's much less. It's these two countries going at it back and forth. Right. And now you might ask, what is the cost of an iPhone going to cost? You know, how is that going to change? Well, the ones made in China, those high end models, the 16 pro max, 256 gigabytes. Well, that was twelve hundred dollars. That's expensive. But now that's going to go up almost 60 percent to eighteen hundred dollars and seventeen hundred seventy four eighteen eighteen hundred seventy four dollars. So very, very expensive. A comparison of that would be a model made in India. That's the 16 pro hundred twenty five hundred twenty eight gigs. That's going from a thousand to twelve hundred. So, I mean, that's maybe a 10, 20 percent increase. Nowhere near as much as the one coming from China for obvious reasons. Right. And you might ask, well, can the Chinese economy take this hit? I mean, one hundred twenty five percent tariffs from a big trading partner in the United States. That's a big effect. I mean, you see the Chinese GDP has been growing steadily. They estimate they could probably pull off about a five percent increase in their growth like they have been in recent years. They kind of hit a plateau. Here's the United States GDP projection to show you the comparison. But a lot of these these analysts show that China's projected GDP, which China says it's about five percent. But these other ones like Citi and the taxes, they're putting it at about four point seven percent. That was before this big tit for tat escalatory trade off with these tariffs happened. Morgan Stanley's put in about four and a half percent Goldman Sachs. But that revised number has shot down about point five percent down to four point two percent here. Citi and the taxes. Goldman Sachs has not revised their number, but The Wall Street Journal reports that Goldman Sachs says that these big tariffs on China from the United States could cost the whole Chinese economy two and a half points on their their growth for this year. That's just one person, President Trump, with a pen being able to affect the entire Chinese economy. So can they take the hit? Yes, they have other things that they may do. They may lower interest rates and so on. But that's still going to be a very hefty blow to their economy considering their ambitions on growth. Back to you. All right, Kevin, thank you for that. Markets soared today after U.S. President Donald Trump declared a 90 day tariff pause for many countries effective immediately bring some relief to investors who were worried about the global economic impact of trade policies. So the Dow advanced over twenty nine hundred points. This is its biggest advance since March 2020. S&P 500 had its best day since 2008. Nasdaq had its best day since 2001. So after Trump's reversal, Goldman Sachs said it's rescinding its recession forecast on the U.S. economy. Now, the upcoming earnings season will offer more insights into the health of corporate America as investors fear a hit to economic growth from the tariffs. And U.S. banks, including J.P. Morgan, will report first quarter results. And that's coming out on Friday.