Article: https://www.bloomberg.com/news/articles/2019-05-09/china-is-armed-with-powerful-market-weapons-in-duel-with-trump No negotiated settlement has been made between the Trump administration and China so, as of Friday, tariff on select Chinese goods has gone from 10% to 25%. China could simply react dollar-for-dollar, increase-for-increase, however that would damage China more directly. Analyst find that the likely reaction will be one or a combination of the following options: devalue the yuan, dump U.S treasuries, or withdraw from soybean purchases. President Trump has criticized China in the past for alleged "currency manipulation". Part of the negotiations process is a proposed "yuan stability act" to combat any devaluations that could negatively impact the United States edge in trade even more. Dumping US treasuries could lead to a price plummet - thereby making yields higher and devaluing debt to other countries. Finally, China is the largest buyer of US soybeans. There is already a 25% tariff on US soybeans which led to a 10% fall in their futures contracts. Many mid-western farmers and communities that rely upon this cash crop could be devastated by a ban or higher tariff on the commodity. This could directly impact trump because of many of the states and communities that rely upon the crop are part of President Trumps voting base. It is very unlikely China will not respond, even if it is just a tariff. China's response will likely be symbolic of Robert Putnam's two level game theory. Whatever action they take will likely aim at President Trump's popularity or voting base. The domestic impacts could be enough to force bargaining between China and the United States.
