China may be less likely to deal on trade after new tough talk from President Donald Trump, and the GOP is getting worried the party will suffer in the farm belt, according to political analyst Greg Valliere.
Valliere, who is Horizon Investments' chief global analyst, said a GOP source told him the risk of soybean tariffs by China will hurt Republican candidates in the farm belt and even beyond. "There goes Iowa," he quoted the source as saying.
Trump on Thursday night said he may slap tariffs on another $100 billion of Chinese goods, after China matched an earlier $50 billion round of Trump tariffs with $50 billion of its own.
China's tariffs target goods and agricultural products, causing particular concern for soybean farmers. The tariffs threaten to hit farm states that were strong supporters of Trump in the presidential election, as Republicans prepare for November midterm elections.
"The 'headline risk' president has stunned Washington — and it takes a lot to stun Washington these days," Valliere wrote in a note. "We still think a trade war can be avoided, but our confidence has been shaken; Donald Trump is itching for a fight and the Chinese will not tolerate public bullying from him."
Valliere said Chinese officials have privately said that trade concessions are necessary, especially on intellectual property and tariffs on U.S. cars, but Trump may have made China less likely to deal.