Evening Report | Trump willing to negotiate but not with China

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USDA’s April WASDE Report out Thursday... Usage updates in USDA’s World Agricultural Supply and Demand Estimates (WASDE) Report on Thursday will reflect March 1 stocks and trade policies that are currently in effect. Typically, the April report is rather uneventful, though how the agency will handle usage forecasts in the face of the trade/tariffs turmoil adds some uncertainty. The following pre-report estimates are from Reuters; Bloomberg for cotton.

Trump willing to negotiate but not with China... President Donald Trump spent the final hours before his tariffs were set for full implementation lining up negotiations with key U.S. allies, but he insisted on pushing forward with sweeping 104% tariffs on many Chinese goods. Trump and top administration officials on Tuesday signaled the US was open to dealmaking that could reduce or eliminate higher tariffs on dozens of nations as Asian and European leaders announced plans for talks with the White House.

Trump said he would negotiate with nations on issues beyond trade and tariffs, making for a “beautiful and efficient process,” and the White House said nearly 70 countries had reached out in the past week seeking to strike a deal.

Still, Trump is pushing ahead with higher duties on roughly 60 trading partners that he dubbed the “worst offenders” are set to take effect after midnight ET. The White House said Trump is proceeding with tariffs that would amount to 104% on many Chinese goods. That package includes previous levies applied because of the fentanyl crisis, his reciprocal tariffs, as well as an additional retaliation Trump announced after Beijing said it would tax U.S. exports to China.

Trump said in a social media post he was waiting for a call from Chinese officials and accused them of mishandling the situation. “China also wants to make a deal, badly, but they don’t know how to get it started. We are waiting for their call. It will happen!” the president said.

Beijing signals policy shift with weakest yuan fixing since 2023, stirring global currency markets... The People’s Bank of China (PBOC) set the yuan’s daily reference rate at 7.2038 per U.S. dollar, breaching the symbolic 7.20 level for the first time since September 2023. Analysts interpret this as a soft devaluation intended to mitigate the impact of U.S. tariffs on Chinese exports. The move is seen as a calibrated policy shift — designed to boost export competitiveness without triggering market instability. Beijing is expected to avoid a sharp devaluation, fearing capital flight and damage to investor confidence.

The move comes against the backdrop of escalating U.S./China trade tensions, with tit-for-tat tariffs reemerging under President Trump’s administration. China’s strategy appears aimed at offsetting trade losses while avoiding direct confrontation.

China’s offshore yuan fell as much as 0.5% to 7.3848 per dollar in New York trading on Tuesday, setting an all-time low in the spot currency.

Of note: A weaker yuan makes Chinese goods more affordable abroad, helping exporters absorb tariff shocks. Past devaluations triggered capital outflows into assets like Bitcoin or stablecoins — a risk authorities remain wary of.

Bessent flags Japan as top trade priority in wake of new tariffs... Treasury Secretary Scott Bessent has confirmed that Japan will take priority in the administration’s upcoming trade negotiations, underscoring its strategic importance as both a military ally and major economic partner. In an interview with Fox Business, Bessent praised Japan’s swift diplomatic outreach following President Trump’s announcement of sweeping new tariffs — highlighting Tokyo’s proactive stance in securing talks. The tariffs include a 10% baseline levy on all imports, with reciprocal hikes targeting specific countries. Japan, in particular, faces a 24% tariff on select goods and a 25% tariff on automobile imports, sparking concern from Japanese officials and global markets.

Why it matters:

• Military alliance: Japan hosts over 50,000 U.S. troops, playing a pivotal role in regional security, particularly in countering China’s growing influence.
• Economic ties: Japan is among the largest foreign investors in the U.S., with deep links in manufacturing and tech.
• Potential impact: Analysts estimate the tariffs could shave up to 0.8% off Japan’s GDP, particularly harming its export-heavy auto sector.

Japanese Prime Minister Shigeru Ishiba has voiced his concerns, urging a shift toward investment-driven cooperation rather than economic confrontation. With both nations anchoring the Indo-Pacific strategy, the stakes are high for maintaining alliance cohesion while rebalancing trade terms.

Bessent, alongside U.S. Trade Representative Jamieson Greer, will spearhead the talks, with President Trump expected to be actively involved. Negotiations will cover a broad range of issues: tariffs, non-tariff barriers, currency policies and government subsidies.

Of note: Ishiba and Trump spoke on the phone Monday and agreed to appoint Cabinet-level officials to handle the bilateral talks, which are usually led by the Office of the U.S. Trade Representative. That the Treasury secretary will represent the American side could be an indication that Washington seeks to address what it sees as the yen’s weakness against the dollar. During the phone call, Ishiba expressed “strong concern” that the 24% tariff announced Wednesday by Trump will reduce the ability of Japanese companies to invest in the U.S., urging the president to reconsider it. Ishiba told Trump that their countries should consider a “comprehensive approach to cooperation that benefits both sides, including by expanding investments, instead of unilateral tariffs.”

Trump White House: ‘Team Tariff’ vs. ‘Team Deal’... Trump administration officials remain split regarding tariffs.

• Team Tariff: Senior advisor Peter Navarro and Commerce Secretary Howard Lutnick back permanent tariffs.
• Team Deal: Treasury Secretary Scott Bessent and Department of Government Efficiency czar Elon Musk are pushing for negotiations.

Musk struck a more optimistic tone, saying over the weekend he was “hopeful” about a future “zero-tariff situation” and a potential free-trade zone between Europe and North America.

Summers warns U.S. likely headed to recession... Former Treasury Secretary Lawrence Summers warned that the US is now likely headed toward a recession, with potentially 2 million Americans put out of work, thanks to tariff increases. There will be “very important choices in the weeks ahead” with regard to tariff plans by President Trump that exceed even those of 1930 that “made the depression great,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. It would be wise to be “backing off the policies that have been announced,” he said.

“We’re very likely, in the context of a recession, to see markets reach levels significantly below their current level,” Summers said. “I’d be surprised if the bottom is yet in with respect to this phase and markets,” he also said.

For the first time, the U.S. is facing a recession caused by its own policy actions, he indicated. “There is nothing in the outside world that is causing this challenge. It is induced by the words and deeds of President Trump and his administration,” he said. “I don’t know that there really is a historical precedent for what’s being done now.”

It will be “enormously costly for the United States and for the world economy” if Washington cranks up tariff rates back to pre-World War II levels, Summers said. “The losses to markets, if all of this were sure to be implemented, would be many trillion dollars. And the stock market only measures a very small fraction of the losses to the economy from policies of this kind.”