Let’s quickly recap everything that’s happened over the past week on trade in the interest of providing context.

On Friday, China stepped in to arrest the slide in the yuan, which has depreciated markedly of late, a devaluation which the central bank has countenanced (and implicitly encouraged) because the yuan is one of the most powerful weapons China has at its disposal when it comes to shielding the domestic economy from the effects of the trade war. Goldman, JPMorgan, Deutsche Bank and others have all done the math on this and the bottom line is that recent yuan depreciation has fully offset the effects of the first two rounds of 301-related U.S. tariffs on the Chinese economy.

Of course China is concerned about capital flight and past a certain point, currency weakness has the potential to catalyze a rerun of what unfolded in 2015. Beijing put in place a number of measures to prevent capital flight since the devaluation three years ago, so in essence, policymakers in China knew they had some room to let the currency fall before they would be forced to intervene in the interest of preserving financial stability. As it turns out, the “red line” (as it were) level on the yuan for intervention was roughly 6.90, and on Friday, the PBoC reinstated rules on forwards designed to guard against speculation in the currency.

At the same time, China announced that they will slap differentiated tariffs on some $60 billion in U.S. goods “as soon as” the Trump administration implements its own measures – and by that, Beijing means as soon as Trump imposes duties on an additional $200 billion in Chinese imports. The proposed tariff rate on those additional goods was 10% up until this week when reports suggested that the President has instructed the USTR to consider raising that rate to 25%. Those reports hit on Tuesday evening and were confirmed the next day.

Through it all, Trump has been at pains to explain away a number of negative side effects of his burgeoning trade war. On the corporate front, General Motors, Harley-Davidson and Whirlpool all explicitly cited the tariffs on the way to explaining either earnings misses, guidance cuts or in some cases both last month and on Monday, Caterpillar said it will likely be forced to raise prices to compensate for as much as $200 million in tariff-related costs. Tyson Foods this week slashed guidance citing “changing global trade policies [at home] and abroad and the uncertainty of any resolution.”

Meanwhile, America’s farmers have been waylaid by China’s retaliatory tariffs. So acute is the pain that the Trump administration last month dusted off Depression-era measures to subsidize American agriculture, much to the chagrin of lawmakers and, in many cases, farmers themselves, who aren’t particularly proud of being put on welfare (but they’ll still gladly pay Trump $45 for a green hat).

On Friday, Larry Kudlow (who insists the President is “a free trader at heart”), made the talk show rounds to perpetuate the idea that the U.S. is “winning” and that China is “weak”.

Well, in a lengthy (by Twitter standards) Saturday diatribe, Trump picked up where Kudlow left off, with a riff on his now infamous “tariffs are the greatest” line from last month.

“Tariffs are working far better than anyone ever anticipated”, Trump tweeted, before lampooning the Shanghai Composite, which fell into a bear market earlier this year. “China market has dropped 27% in last 4 months, and they are talking to us”, the President said.

He’s correct about the selloff in Chinese equities of course. The U.S./China equity ratio is near its lowest in a dozen years.

That said, Trump conveniently forgets to mention how the yuan’s declines have negated the impact of his tariffs. And don’t you tell me he isn’t aware. He clearly is and he said as much on July 20 as part of his overt efforts to pressure the Fed into pausing their hiking cycle. What Trump will mention, however, is steel. “Tariffs have had a tremendous positive impact on our Steel Industry and Plants are opening all over the U.S.,” he claimed.

And the President went further – because that’s what he does. Here’s the rest of his Saturday trade rant:

Big dollars are flowing into our Treasury. Other countries use Tariffs against, but when we use them, foolish people scream! Tariffs will make our country much richer than it is today. Only fools would disagree. We are using them to negotiate fair trade deals and, if countries are still unwilling to negotiate, they will pay us vast sums of money in the form of Tariffs. We win either way. China, which is for the first time doing poorly against us, is spending a fortune on ads and P.R. trying to convince and scare our politicians to fight me on Tariffs- because they are really hurting their economy. Likewise other countries. We are Winning, but must be strong!

Almost none of that is true. For one thing, it is not at all clear what he means by “big dollars are flowing into our Treasury” but whatever he means, it’s absurd. If he means the U.S. is issuing a lot of debt to finance his tax cuts and his fiscal stimulus, well then he’s bragging about putting America in more debt. In the same vein, his tax cuts mean less revenue for the government, not more – that’s what tax cuts are.

Additionally, the idea that “only fools” disagree with the notion that tariffs will make the U.S. richer seems to again underscore the fact that he doesn’t understand how trade (or really, economics in general) works. This isn’t a zero-sum game, and “only fools” think it is. Economists have tried to explain this to him on too many occasions to count and he either isn’t capable of grasping it, or else just doesn’t care.

Further, “they” will not “pay us vast sums of money”. What “they” will do is simply cut the U.S. out by striking plurilateral deals with one another to the detriment of U.S. industries and other folks (like, say, farmers) who will lose access to foreign markets either because other countries have reciprocated with their own tariffs thereby driving up prices for U.S.-produced goods overseas (which will invariably lead to loss of market share for U.S. producers) or else because “they” simply source what they need from trade partners who aren’t beholden to the agenda of a simpleton.

Finally, China’s “PR” campaign is just the same Politburo propaganda that has always existed and that is part and parcel of the Party’s efforts to keep domestic order. Beijing doesn’t really have to sell U.S. politicians on why Trump’s policies are flawed precisely because protectionism is objectively bad.

Ultimately, this suggests Trump is almost sure to move ahead with the proposed tariffs on $200 billion in Chinese goods after he finishes implementing the first round of 301 duties (the U.S. will slap levies on another $16 billion in Chinese imports in the coming days and weeks to complete the first tranche). It also appears he’s going to be inclined to go ahead with the idea of raising the rate on the second tranche to 25%, a move which, you’re reminded, will likely push up the price of consumer goods for working American families whose inflation adjusted wages are growing at a negative rate (see: “Here’s Why You Should Be Concerned About The Latest Escalation In The U.S.-China Trade War“).

And with that, Trump will see you in Ohio…

Heading to Ohio!

— Donald J. Trump (@realDonaldTrump) August 4, 2018