US-China global trade war - it’s only the beginning!

Workers at a steel plant in Zouping, eastern China. A trade war with the US will benefit no one, Beijing has warned. Photograph: -/AFP/Getty Images
China promises 'necessary response' to US tariffs as trade war fears grow
Foreign minister Wang Yi warns that the only outcome from Trump’s protectionist measures will be ‘harmful’The prospect of a trade war between China and the United States has increased after Beijing’s foreign minister said it would make a “necessary response” in the event of Donald Trump introducing punitive tariffs on steel and aluminium imports. The US president was expected to approve the 25% levy on steel and 10% on aluminium imports this week, possibly as early as Thursday. He says they are needed to counter overseas operators, especially from China, who are undercutting US companies and destroying American jobs … for more, go to 

US-China global trade war - it’s only the beginning!

KUALA LUMPUR (March 2018): Buckle up! Prepare for a bruising global economic trade war between the war-waging US and China.

The Donald Trump-led US drew first blood by imposing tariffs on imported steel. Now, even retailers in the US have started cutting ties and links with China’s businesses.

And, China has started preparing to retaliate with various economic controls over US produce, goods and services.

When the world’s No.1 and No.2 economies fight, the rest of the world will also be affected. Just steer clear and not be sandwiched between the two.

And, what about the Russian factor?

The fact remains China’s grip on the world economy is, arguably, much more wider and varied than the US.

Watch the CNBC video and digest the following two news reports on the seriousness of the US-China trade war that is just unfolding:

" (What would a U.S.-China trade war look like? - CNBC's Phil Han explains what a potential U.S.-China trade war could look like.)

If a trade war with China escalates, David Dollar, a Brookings Institution fellow and former U.S. Treasury envoy to Beijing, said the American farm sector could be hit hardest. | Getty Images

How a Trump trade war with China could whack the U.S.

03/21/2018 05:03 AM

President Donald Trump’s plan to slap as much as $60 billion in tariffs on imported Chinese goods could eventually trigger a trade war that slams American farmers, according to a leading expert on the U.S.-China relationship.

David Dollar, a Brookings Institution fellow and former U.S. Treasury envoy to Beijing, said in the latest POLITICO Money podcast that Trump misunderstands the nature of the U.S. trade relationship with China — and that a trade war could badly damage the American economy.

“I think the argument that we are losing out to China — that they are cheating everywhere — I think that’s overblown,” he said. “The administration focuses a lot on the imbalance in the relationship, and that’s not really a very useful metric. The trade balance is largely a macroeconomic variable. In the case of the U.S., we don’t save enough, so as a result we run a trade deficit.”

If a trade war with China escalates, Dollar said, the American farm sector could be hit hardest.

“What you would find in a serious trade war is much reduced demand, including for U.S. agricultural products,” he said. “Farm prices would fall and maybe even collapse. You could definitely see the economy going into recession if the trade war were serious enough.”

Morning Money

Celeste Drake, trade and globalization policy specialist at the AFL-CIO, argues on the podcast that fears of a trade war are overblown and that tariffs are a useful weapon against China.

“We think that trade enforcement is always a good idea,” she said. “If you are going to have rules to try to establish a level playing field on trade, then they are not rules at all if you don’t enforce them.”


US retailer Best Buy cuts ties with China's Huawei

Thursday, 22 Mar 2018
12:59 PM MYT

LAS VEGAS/HONG KONG: Best Buy Co Inc , the largest U.S. consumer electronics retailer, will cut ties with China's Huawei Technologies Co Ltd, a person familiar with the matter said, amid heightened scrutiny on Chinese tech firms in the United States.

Best Buy will stop selling Huawei's devices over the next few weeks, according to the person with knowledge of the matter, a setback for the Chinese telecommunications giant as it looks to expand in the U.S. market.

The move, after similar actions from U.S. carriers including AT&T Inc, comes as U.S. scrutiny of Chinese tech firms grows amid simmering tensions over U.S.-China trade and concerns of security.

A Best Buy spokesman told Reuters the firm could not comment on specific contracts with vendors. "We make decisions to change what we sell for a variety of reasons," he said.

Huawei said in emailed comments on Thursday that it valued its relationship with Best Buy but could not discuss details of its partnership with the U.S. firm.

"Huawei currently sells its products through a range of leading consumer electronics retailers in the U.S.," the firm said, adding its products met the "highest security, privacy and engineering standards in the industry".

Earlier this year, AT&T was forced to scrap a plan to offer Huawei handsets after some members of Congress lobbied against the idea with federal regulators, sources told Reuters. Verizon Communications Inc also ended its plans to sell Huawei phones last year, according to media reports.

Last month two Republican Senators introduced legislation that would block the U.S. government from buying or leasing telecommunications equipment from Huawei or Chinese peer ZTE Corp, citing concern the firms would use their access to spy on U.S. officials.

The tougher climate in the United States has forced Huawei to sell its flagship smartphone Mate 10 Pro - its challenger to the iPhone - in the United States only through open channels.

U.S tech and electronics website first reported the termination of the agreement on Wednesday. - Reuters/The Star Online

China raises a key market interest rate, following Fed's move

Thursday, 22 Mar 2018
4:26 PM MYT

The People's Bank of China (PBOC) said it had increased the rate on 7-day reverse repurchase agreements by 5 basis points (bps) to 2.55 percent.
SHANGHAI: China gingerly raised a key short-term interest rate on Thursday following the U.S. Federal Reserve Bank's move overnight, in a symbolic reminder that Beijing is keeping an eye on global market trends even as it cracks down on financial risks at home.

The People's Bank of China (PBOC) said it had increased the rate on 7-day reverse repurchase agreements by 5 basis points (bps) to 2.55 percent. Reverse repos are one of its most commonly used tools to control liquidity in the financial system.

The Fed raised U.S. interest rates by 25 bps, or a quarter of a percentage point, on Wednesday and forecast at least two more hikes for 2018.

The PBOC's move had been widely expected and was its first major policy decision under new Governor Yi Gang, who was appointed by parliament on Monday as part of a sweeping reshuffle of China's cabinet under ever-stronger President Xi Jinping.

"I think it's just a symbolic rate hike again to avoid the China-U.S. rate spread from widening too much," said Ken Cheung, senior FX strategist at Mizuho Bank in Hong Kong.

"A 5 bps hike is enough because yuan depreciation is not a big concern. And the PBOC is refraining from lifting rates aggressively amid the regulation reform and benign inflation pressure."

The news prompted Chinese 10-year treasury futures for June delivery to rise as much as 0.3 percent to 93.475. By 0700 GMT the most traded contract had eased to around 93.375, up about 0.2 percent.

The PBOC also injected 10 billion yuan ($1.58 billion) into the financial system on Thursday.


Many market watchers had expected the PBOC to follow a Fed hike with a 5-10 bps increase in the borrowing cost for Chinese interbank loans.

That would keep the U.S.-China rate differential from getting too wide -- which would risk a resurgence in capital outflows from China.

But analysts said the move was also a signal to banks and other financial institutions that the government is pressing ahead this year with its campaign to reduce risks in the financial system.

Capital Economics said in a note that it believed the rate hike was an effort by the PBOC to show it would follow the Fed to minimise outflows and prevent a yield gap blow-out.

But the consultancy added that the PBOC may revert to looser monetary conditions in coming quarters if economic activity cools more than expected.

The PBOC had similarly inched up some rates after the Fed hiked its policy rate last March and December.

It began nudging up short-term market rates and those of its other liquidity tools in early 2017 as authorities' clampdown on riskier financing practices kicked into higher gear, but it has moved cautiously to avoid a hit to the economy.

In a statement, the PBOC said the rate increase was a normal response to the Fed's move that would help shape interest rate expectations and guide "reasonable" growth in credit.

The PBOC also raised rates on its standing lending facility (SLF) short-term loans by 5 bps, three sources with direct knowledge of the matter said.


With global markets expecting more monetary tightening in the United States, economists think China will raise market rates again, although there is no clear consensus on how high they may go.

Nie Wen, an economist at Hwabao Trust in Shanghai, expected the PBOC to raise market rates by a total of 25 bps this year, but possibly as much as 50 bps if consumer inflation in China rises above 3 percent.

Economists at ANZ expect the 7-day reverse repo rate to rise another 30 bps this year as the PBOC continues with a tightening bias.

However, much of the official focus this year is expected to be on a continued tightening of the regulatory screws, with a flurry of measures already announced in the last few months.


Some market watchers also expect the PBOC to start moving benchmark rates again, but said the move would be asymmetric, with only the deposit rate rising to haul negative real deposit rates above the water line.

The PBOC has not changed its benchmark one-year lending and deposit rates since October 2015, with the central bank preferring to guide borrowing costs via liquidity operations and interbank market rates.

"On the one hand, the PBOC needs to push up the interest rate in the domestic financial market, so as to curb domestic financial speculation and prevent capital outflow," said Chaoping Zhu, global market strategist at J.P. Morgan Asset Management.

"On the other, given the probability of a correction in asset prices and the potential for economic slowdown, it is not an optimal choice to adjust up the benchmark deposit and lending rates. Therefore, increasing the 7-day reverse repo rate provides the PBOC with the flexibility to control market liquidity and financing costs."

Analysts polled by Reuters expect China's GDP growth to slow to 6.5 percent this year from 6.9 percent in 2017, pressured by higher borrowing costs and cooling investment in the property market. That would be in line with the government's 2018 target. - Reuters/The Star Online
Image Credit: Official White House photo
Is This The Start of a US-China Trade War?
After the Trump administration levies tariffs on Chinese solar panels, China investigates U.S. sorghum imports.
By Shannon Tiezzi
February 06, 2018
Ever since the election of U.S. President Donald Trump, the threat of an uptick in U.S.-China trade tensions have seemed unavoidable. Trump, after all, based his campaign on a promise to return economic prosperity to the U.S. Rust Belt, where manufacturing jobs have dried up, or, in Trumpian parlance, been “stolen” by China. A year into Trump’s presidency, however, we hadn’t seen much action on that front, with Trump instead taking a cordial stance in talks with Chinese President Xi Jinping. That changed on January 22, when the Trump administration announced that it would levy tariffs on imported solar panels and washing machines, arguing that “increased foreign imports of washers and solar cells and modules are a substantial cause of serious injury to domestic manufacturers.” While the tariffs apply to products imported from around the world, the press release from the Office of the U.S. Trade Representative singled out China’s trade practices as a major concern. In response, China’s Ministry of Commerce (MOFCOM) called the move “an abuse of trade remedy measures.” … for more, go to