President Donald Trump insisted on Wednesday that the United States was “in a very good position” because its economy is strong | Zach Gibson/Getty Images trade Trump doubles down on China trade strategy

President Donald Trump defended his confrontational stance in trade negotiations with China, insisting the eventual gains from an elusive agreement with the world’s second-largest economy will offset any short-term pain and stock market losses.

“I think the market reaction is anticipated,” Trump told reporters on Wednesday before departing on a trip to two American cities scarred in recent days by gun violence. “I would have maybe anticipated even more, but ultimately it's going to go much higher than it ever would have gone because China was like an anchor on us, China was killing us with [an] unfair trade deal.”


Trump’s decision last week to impose a 10 percent tariff on another $300 billion worth of Chinese goods beginning Sept. 1 has whipsawed stocks in recent days. Major indexes fell 3 percent on Monday, the biggest drop for 2019.

They regained some lost ground on Tuesday but were lower again on Wednesday, driven by concerns of a protracted trade war. Investors flocked to safer alternatives, sending rates on 10-year Treasury bonds in a free fall as they fell 6 percent on Wednesday.

Trump also took to Twitter to hammer the Federal Reserve again for not doing more to cut interest rates.

“Our problem is not China - We are stronger than ever, money is pouring into the U.S. while China is losing companies by the thousands to other countries, and their currency is under siege,” Trump wrote over a series of tweets. “Our problem is a Federal Reserve that is too proud to admit their mistake of acting too fast and tightening too much.”

The United States and China have been negotiating on and off since the early months of the Trump administration with no agreement in sight. In the process, Trump has already imposed a 25 percent duty on $250 billion of Chinese goods.

On Monday evening, U.S. Treasury Secretary Steven Mnuchin, apparently acting on orders from Trump, took the rare step of declaring China a currency manipulator.

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By itself, the move carries no immediate penalties, but shows Trump’s frustration with the stalled trade talks and Beijing’s recent announcement that it has ordered its state-owned enterprises to halt purchases of U.S. farm goods.

Beijing’s action came just weeks after Trump celebrated in Japan that negotiations were back on track and China would be making major agricultural purchases as a goodwill gesture as talks continued.

Because the president is popular in farm country, many farm organizations have been reluctant to criticize Trump’s decision to slap tariffs on virtually all imports from China, even though American agriculture has been one of the biggest pawns in the trade war.

However, the impending disappearance of what once was a top market for U.S. farm exports elicited strong criticism from the American Farm Bureau Federation this week.

“China’s announcement that it will not buy any agricultural products from the United States is a body blow to thousands of farmers and ranchers who are already struggling to get by,” said Zippy Duvall, the group’s president.

“Farm Bureau economists tell us exports to China were down by $1.3 billion during the first half of the year. Now, we stand to lose all of what was a $9.1 billion market in 2018, which was down sharply from the $19.5 billion U.S. farmers exported to China in 2017,” Duvall added.

Rep. Cindy Axne (D-Iowa), a first-term congresswoman who defeated an incumbent Republican in last year’s “blue wave” election, said China’s decision to halt ag purchases would be “devastating” for her state’s farmers and add to the financial challenges they are already facing because of dropping commodity prices and flooding.

Trump, however, insisted on Wednesday that the United States was “in a very good position” because its economy is strong and the pain he has inflicted on China is worse than the pain Beijing has inflicted on the United States. He also asserted that China “very much wants a deal,” despite his administration’s inability to reach an agreement as of yet.

That's an argument White House economic adviser Larry Kudlow made Tuesday in an interview on CNBC, while stressing the administration's willingness to continue talks with China in early September.

If China wants to want until after the 2020 election in the hope of negotiating with a new president, "that's up to them," Kudlow said. "But I think they will continue to do great damage to their economy. The American economy is very strong. Theirs is not."

Still, economists say the trade war is taking a toll on the United States. U.S. economic growth slowed to 2.1 percent in the second quarter, from 3.1 percent in the first.

Analysts have also warned of the United States sliding into recession next year if Trump decides to hit China with a 25 percent duty, instead of 10 percent, on the remaining $300 billion of its exports to the United States.

Trump’s no-holds-barred approach to China has fans among some members of Congress who feel it is the only way to force the country to change its policies. Senate Finance Chairman Chuck Grassley, for one, emphasized Wednesday that amid what he sees as an otherwise successful trade agenda, China is “the only 900-pound panda that we have to conquer.”

Grassley, a free trader who has at times sparred with the White House over its tariff actions, said he was optimistic, noting that the two sides were still communicating and still plan to meet next month. He pushed back against questions regarding whether he felt tensions might last for several months or a year.

“As long as they’re talking, there’s a chance of having an agreement,” the Iowa Republican told reporters on a press call. “I think the president specifically set the tariffs to take place September the 1st instead of immediately as one way of signaling that we want to continue those talks.”

Chinese negotiators are due back in Washington in early September for another round of trade talks. Despite the dim prospects of reaching an agreement, those talks “are likely to happen as planned,” Wei Jianguo, a former vice-minister of commerce responsible for foreign trade, told the South China Morning Post.

“It is possible that the meeting could ease the tensions a bit on some aspects,” Wei said, but declined to elaborate further.

Megan Cassella contributed to this report.