A significant amount of unearned optimism was shared across markets ahead of this week's trade talks between Chinese and American officials, but that optimism became pessimism once again this morning because Trump did what Trump always does.
Of all the weeks this could have been done, the Trump regime chose this week to add more Chinese companies to the Commerce Department's blacklist, meaning American companies cannot sell goods to those Chinese companies.
Chinese state media reported this morning that China's trade delegation may leave the country earlier than they originally planned to.
A report from the South China Morning Post said China had tamped down expectations ahead of the talks scheduled for Thursday with Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, saying the Chinese delegation could leave earlier than planned because “there’s not too much optimism.”
The mood soured this week after the U.S. Commerce Department widened its trade blacklist to include 20 Chinese public security bureaus and eight companies including video surveillance firm Hikvision, as well as leaders in facial recognition technology SenseTime Group Ltd and Megvii Technology Ltd. [...]
U.S. officials said the action was tied to China’s treatment of Muslim minorities and human rights violations, provoking a sharp reaction from Beijing.
The Trump White House could almost be forgiven if it were actually true that the decision to blacklist more Chinese firms was exclusively linked to China's treatment of Muslims, but I don't buy that for a second.
I don't believe it's a coincidence that the White House imposed more sanctions on the same week that trade talks were set to resume. I don't believe they remained quiet on China's treatment of Muslims for years only to coincidentally impose sanctions this week. The Trump regime also originally claimed that sanctions on Chinese-owned telecommunications giant Huawei were not connected to the trade war, but that also wasn't true. Trump explicitly linked sanctions on Huawei to trade talks after originally denying that they were connected.
All of this is part of Trump's strategy to beat China into submission -- his strategy of "maximum pressure" -- but they're not going to submit. China's ruling party is not afraid of Trump or the American economy which is being driven into recession by Trump.
If past is prologue, and if Trump repeats what he has already done several times leading up to this, he may respond to a collapse in trade talks by escalating his trade war again.