Lingling Wei and Gavin Bade at WSJ:
In its trade standoff with Washington, Beijing thinks it has found America’s Achilles’ heel: President Trump’s fixation on the stock market.
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 so-called Liberation Day tariffs, prompting Beijing to hit back.
China expects that the prospect of another market meltdown ultimately will force Trump to negotiate at an expected summit with Xi late this month, the people said. Beijing continued playing hardball this week, escalating the trade fight Monday by sanctioning the U.S. units of South Korean shipping company Hanwha Ocean. The move whipsawed U.S. markets on Tuesday, triggering a sharp early selloff as hopes for easing tensions faded, before major indexes partially rebounded and steadied in the afternoon.
Last week, Beijing imposed sweeping restrictions on the export of rare-earth minerals, which are vital to consumer electronics and the tech industry. Trump then threatened additional 100% tariffs on China starting Nov. 1. Both sides have vacillated between tough talk and de-escalation in recent days, but the rhetoric took a harder turn on Tuesday. China’s commerce ministry accused the U.S. of “double standards” regarding tariff threats and it vowed that China would “fight to the end” in the trade dispute.