The U.S. approach to the China trade crisis has become a tale of two messages, leaving the world confused and markets volatile. On one hand, there is President Trump’s hardline threat of crippling 100% tariffs; on the other, his softening tweet assuring everyone that “it will all be fine!” This stark contradiction has become a central feature of the unfolding drama.
The first message, delivered on Friday, was one of uncompromising aggression. By threatening the massive tariffs in response to China’s “hostile” rare-earth policy, the president signaled a willingness to engage in an all-out economic war. The market took this message literally, resulting in a catastrophic $2 trillion selloff.
The second message, delivered over the weekend via Truth Social, was one of reassurance and even friendship. Trump called President Xi “highly respected” and stated that the “U.S.A. wants to help China, not hurt it!!!” This tone was completely at odds with the punitive policy he had just announced, creating a classic case of rhetorical whiplash.
This dual-messaging strategy, whether intentional or not, has fueled immense uncertainty. Is the hardline threat the real policy, with the soft tweet intended as a calming gesture? Or is the tweet the true sentiment, with the threat merely a negotiating bluff? No one outside the White House can be sure.
This has put both China and global investors in an impossible position. China has to respond to the credible threat, not the friendly tweet, leading it to promise retaliation. Investors, meanwhile, are caught between fear and faint hope, a state of limbo that has manifested as extreme market volatility. The tale of two messages has thus created one big state of confusion.