Can Trump tolerate a trade war that would roil the stock market? | investingLive

The WSJ is out with a report saying that China believes Trump won’t tolerate a drop in the stock market in order to fight the trade war.

China’s leader, Xi Jinping, is betting that the U.S. economy can’t absorb a prolonged trade conflict with the world’s second-largest economy, according to people close to Beijing’s decision-making. China is holding a firm line because of its conviction, the people said, that an escalating trade war will tank markets, as it did in April after Trump announced his Liberation Day tariffs, prompting Beijing to hit back.

This is an odd leak from China and by leaking it to the WSJ it shows that they’re sending a message.

The report says the prospect of a market meltdown will force Trump to negotiate. I’d say that most people in markets agree, especially after the weekend TACO.

According to the people close to Beijing’s decision-making process, Xi’s hard-line strategy is based on the belief that Trump will ultimately fold and offer concessions rather than deploy Washington’s own significant leverage. This confidence was fueled, the people said, by a U.S.-China trade truce struck in May.

The report is from the WSJ’s Lingling Wei, who is well-connected in China.