|Delegates listening to President Xi Jinping of China during the closing session of the National People’s Congress in Beijing on Tuesday. CreditKevin Frayer/Getty Images|
Trump’s Trade Threats Put China’s Leader on the Spot
By STEVEN LEE MYERSMARCH 22, 2018
BEIJING — For the better part of two decades, China’s leaders have made the most of the global trade rules set by the United States and others, seizing on opportunities to bolster their nation’s economic rise while finessing American complaints that they were not always playing fair. Now, for the first time, China faces an American president who is embracing protectionist measures, and that has presented its leader, Xi Jinping, with an extraordinary challenge: Even as he has elevated his status as the country’s “helmsman,” with a new mandate to rule indefinitely, the United States is moving to treat China more seriously as a strategic rival and to recast an economic relationship that has long bound the two countries. The punitive actions unveiled by President Trump on Thursday — tariffs on $60 billion worth of Chinese goods, as well as new restrictions on Chinese investment in the United States — put Mr. Xi on the spot, forcing him to consider retaliatory action. On Friday, China said it was proposing additional tariffs on 128 American products valued at $3 billion even as it called on Washington to resolve the dispute through negotiations to “avoid damage to the broader picture of Chinese-U.S. cooperation.” The trade tensions could send a shudder through the global economy and complicate Mr. Xi’s efforts to sustain China’s rapid growth in the face of rising debt and an aging population … for more, go to https://www.nytimes.com/2018/03/22/world/asia/donald-trump-tariffs-china.html
You better believe it! Desperado US and Trump are more than prepared to rock the global economy
KUALA LUMPUR (March 2018): With the war-waging US getting desperate to take stock of its national debt of between US$20 trillion and RM222 trillion (Read this for context: https://ilovemalaysiachinasilkroad.blogspot.my/2018/01/is-us-debt-us20-trillion-or-us222.html), it will be a folly for anyone or nation to not take President Donald Trump’s protectionist tariff policy seriously.
Unable to compete in the global economy, it has become clear that Trump is casting aside free and fair trade to protect American and US interests.
This is only the beginning (Read this for context: https://ilovemalaysiachinasilkroad.blogspot.my/2018/03/us-china-global-trade-war-its-only.html) as more and more protectionist measures are launched against China and the rest of the world.
Trump is not bluffing with his trade-war-like threats, and neither is China going to take it lightly without any equally devastating retaliatory response that is likely to affect the global economy.
For one, US ally Australia, is already feeling the heat with its exports to China.
As long as Trump continues widening its trade protectionist gauntlet, the global economy is likely to implode - to the detriment of everyone, and with the Americans, from farmers to businesses, feeling the long end of the stick more than others.
So, to the rest of the world, be prepared for a long and bumpy global economic ride that could be more bruising than ever.
Digest the following and then form your own opinion the possible long-term seriousness of the US-China trade war - between the No.1 and No.2 world economies:
"Donald Trump sets $77 billion China tariff plan, sending Wall Street tumbling
UPDATED ABOUT 4 HOURS AGO
Mr Trump says he views China as a friend. (Photo: AP/Evan Vucci)
US President Donald Trump has signed a presidential memorandum that could impose tariffs on up to $US60 billion ($77 billion) of imports from China, sending shivers through Wall Street and prompting a vow from Beijing to "fight to the end".
· Mr Trump will target the Chinese imports only after a consultation period
· The United States runs a $486 billion goods trade deficit with China
· Alleged intellectual property law breaches by China will also be pursued through the WTO
Under the terms of the memorandum, Mr Trump will target the Chinese imports only after a consultation period, a measure that will give industry lobbyists and legislators a chance to water down a proposed target list which runs to 1,300 products.
China has increased tariffs on US pork, aluminium pipe and other goods in response to Mr Trump's higher import duties on steel and aluminium.
The Commerce Ministry said last year China bought about $US3 billion worth of the goods affected by the raised tariffs.
China's Washington embassy said it did not want a trade war, but would not recoil from one and would "fight to the end … with all necessary measures".
It said it was "strongly disappointed" and it "firmly opposes" Mr Trump's tariff plans.
By giving China space to respond to Mr Trump's actions, it was thought there would be less risk of immediate dramatic retaliation from Beijing.
And Mr Trump had struck an emollient tone, saying "I view them as a friend".
"We have spoken to China and we are in the middle of negotiations," Mr Trump said.
He said the loss of American jobs due to unfair trade was one of the main reasons he had been elected in 2016.
The United States runs a $486 billion goods trade deficit with China.
Washington will also pursue alleged breaches of intellectual property law by China through the World Trade Organisation, a body that has repeatedly drawn the ire of the administration but which could provide a resolution that avoids a trade war.
Following Mr Trump's announcement, Wall Street plunged.
US markets suffered their worst day since the February 8 sell-off, with the Dow Jones index tumbling by 724 points, or 2.9 per cent, to 23,960.
The S&P 500 and Nasdaq also fell heavily — down by 2.5 and 2.4 per cent respectively — while European stock markets also suffered massive losses.
Talk of a global trade war emerged earlier this month when Mr Trump announced hefty tariffs on steel and aluminium imports, aimed at hitting Chinese overproduction, but which could also affect key allies like members of the European Union.
US Trade Representative Robert Lightizer said China would likely hit back with measures on US agricultural exports, particularly soybeans, and said if that happened, Washington would impose "counter-measures," although he said that "nobody wins from a trade war," a stance that appeared to put him at odds with Mr Trump who had termed trade wars "good and easy to win".
Global stocks had sold off on Thursday (local time) on the expectation of tough action from Mr Trump, with US markets down as much as 2 per cent, but recovered somewhat after the announcement.
Following Mr Trump's announcement, the US Trade Representative's office will present a list of products that could be targeted, primarily from the high-tech sector.
There will then be a 60-day consultation period before definitive action will be put into force.
White House officials told a briefing ahead of the trade announcement that the administration was eyeing tariffs on $64 billion in Chinese goods.
They said the figure was based on a calculation of the impact on the profits of US companies that had been forced to hand over their intellectual property as the price of doing business in China.
There was no explanation of the difference between the numbers provided by White House officials in the briefing and Mr Trump's $77 billion.
"Many of these areas are those where China has sought to acquire advantage through the unfair acquisition and forced technology transfer from US companies … establishing its own competitive advantage in an unfair manner," Everett Eissenstat, deputy director of the National Economic Council, told reporters.
In addition, Mr Trump will also direct the US Treasury to propose measures that could restrict Chinese investments in the United States, Mr Eissenstat said.
The tariffs and investment restrictions will be imposed under the US Trade Representative's "Section 301" investigation into alleged misappropriation of US intellectual property by China.
Mr Eissenstat said the investigation clearly demonstrates unfair practices by China, which forces US investors to turn over key technologies to Chinese firms.
Avoiding a trade war
Since taking office, Trump has taken a hard line on trade, abandoning a 14-nation Pacific trade pact and threatening to pull out of the North American Free Trade Agreement with Canada and Mexico.
He has also attacked Germany, saying it hides behind tariffs to win an export advantage for its car industry.
The administration has been forced to walk back some of its steel and aluminium measures, granting exemptions to Canada and Mexico and entering talks with the European Union and others to discuss potential exemptions.
Intellectual property theft, not metal, is the real trade war in US sights and it's a much bigger worry
ANALYSIS BY BUSINESS REPORTER STEPHEN LETTSUPDATED SAT 10 MAR 2018, 4:32 PM AEDT
Likely US action targeting Chinese electrical goods over alleged intellectual property theft would have major implications for global trade.
REUTERS: ALY SONG, FILE
In the world of global trade the $US2 billion worth of steel the US imports from China is small beer. The $US130 billion worth of electrical goods shipped in from China is not.
· White House is expected to launch action against China over allegations of intellectual property theft worth trillions
· The immediate target is likely to be $130bn worth of Chinese electrical goods exported to the US each year
· Retaliation from China would likely target agricultural exports, which could hit Australian farmers.
Nor is the estimated $US600 billion the US is said to be missing out on through its bright ideas being appropriated illegally offshore.
Having issued battle orders for a steel and aluminium trade fight in front of some hard-hatted metal workers assembled at the White House, President Donald Trump is now likely to move onto the real battle front — allegations of Chinese intellectual property (IP) theft.
The metal tariff started with a few tweets fired off across (largely) Chinese bows.
Now the tweets are fulminating at another trade issue — Chinese knock-offs of everything from high-tech electrical components to low-tech Converse sneakers.
America's big weapon
Donald J. Trump✔@realDonaldTrump
The U.S. is acting swiftly on Intellectual Property theft. We cannot allow this to happen as it has for many years!
11:38 PM - Mar 7, 2018
· 40.1K people are talking about this
Twitter Ads info and privacy
The Trump White House may soon have its "casus belli" to justify a much bigger assault on Chinese trade, and with it a much more likely platform to spark a much bigger conflagration in global trade as the largest and second largest economies on the planet face off.
Back in August last year Mr Trump ordered US Trade Representative Robert Lighthizer to investigate China's alleged theft of US intellectual property.
The results of that investigation are expected shortly, along with recommendations for action.
Mr Trump and his recently departed, anti-protectionist economics advisor Gary Cohn made no secret what the result would be, telling anyone who would listen that China forces US businesses to transfer intellectual property as a cost — a tariff if you like — of doing business there.
The other thing that is not a secret is the weapon it has in its trade arsenal to deal with such matters.
REUTERS: CARLOS BARRI
The so-called Section 301 law is the mother of all trade weapons built in the Cold War and vastly more protectionist era of the 1970s.
It gives the president the authority to unleash unilateral measures on a trading partner, if it is deemed to be harming US business interests.
It is a cluster bomb of measures including outright trade sanctions, import quotas, tariffs, blocked take-over provisions and anything else that could be dreamed up to damage the target's economy.
It also allows the US to sidestep many of the niceties of World Trade Organisation rulings on such things.
China's trade surplus grows, so does the US deficit
Certainly trade figures released this week by both the US and China will do little to change Mr Trump's view on China and trade.
EMBED:China & US trade balances
SOURCE: THOMSON REUTERS DATASTREAM, ABC NEWS
The US trade deficit widened by $56.6 billion in January.
China went the other way. Its long running surplus grew by 42 per cent to a three-year high of $US34 billion in February — Chinese statisticians are a bit quicker than everyone else to draw their conclusions.
Of that surplus around two-thirds, or $US21 billion, was provided by the US.
Overall, China's trade surplus with the US continues to grow. Against Europe, China still runs a significant surplus, but it is relatively steady, while it remains pretty well "in balance" with the rest of the world.
In the 12 months since Mr Trump moved into the White House, the US trade deficit with the rest of the world has blown out by an eye-watering $US556 billion.
EMBED:China external trade balance vs trading key partners
IP theft worth trillions
While tallying up the impact of IP theft is difficult, the New York Times recently had a stab at it, suggesting $US600 billion a year was about the cost to the US, with China responsible for the vast majority of it.Donald J. Trump✔@realDonaldTrump
China has been asked to develop a plan for the year of a One Billion Dollar reduction in their massive Trade Deficit with the United States. Our relationship with China has been a very good one, and we look forward to seeing what ideas they come back with. We must act soon!
11:10 PM - Mar 7, 2018
· 29.8K people are talking about this
Twitter Ads info and privacy
At that rate over the years — in fact in just two years — the tally becomes trillions. The US will allege it has been going on for decades.
While China has deemed Mr Lighthizer's investigation "reckless", it nonetheless uncovered about 1,600 instances of IP theft involved in goods exported to the US during a joint China/US customs actions last year.
The joint task force fingered online giant Alibaba flogging about $200 million of phoney Converse sneakers in the US, while another 36 suspects were arrested for peddling dodgy Rolex watches, Gucci clothes and Louis Vuitton bags.
At the time, which was just before Mr Trump's visit to China last year, China's customs office issued a statement saying it would "actively promote increased cooperation with customs administrations of all countries and regions to jointly fight and comprehensively manage" IP rights.
That concession is unlikely to buy much time if, as expected, Mr Lighthizer's report is damning.
Retaliation would be rapid
Recent reports out of the US suggest Section 301 will be initially dropped on the $US130 billion worth of electrical goods China ships to the US each year.
While taxing what are effectively steel off-cuts from the smoky, old Chinese industrial complex could probably be ignored in Beijing, not so an attack on China's vision for a high-tech, high-margin, low-polluting future.
It would inevitably provoke retaliation, with US farmers likely to be the immediate collateral damage.
Soon you would have not only excess steel and aluminium washing around the world's trade routes looking a shore to wash up on, you can add all manner of grains and agricultural produce as well.
Pretty soon prices tumble and everyone piles in throwing up more trade barriers.
Once those sorts of huge distortions are put into the $850 billion worth of goods traded between China and the US each year, who knows what the outcome would be on everyone else.
One of the few certainties in such a situation is Australia, with its small domestic market, its heavy reliance on being a price-taker in commodity exports and no leverage in such battles, would get absolutely hammered."
|CreditDrew Angerer/Getty Images|
POSTED SAT 10 MAR 2018, 6:05 AM AEDT”
What’s Next for Stocks After the China Tariffs: DealBook Briefing
MARCH 22, 2018
We’ve been here before
An unorthodox action by President Trump unsettles investors, but after a freakout, their optimism returns and the stock market moves higher. But will investors shrug off President Trump’s tariffs on China? The stock market plunged Thursday after Mr. Trump announced the measures against China. Since mid-February, when the Trump administration laid out its case for steel and aluminum tariffs, the S.&P. 500 is down 3.2 percent. The Dow Jones industrial average is off nearly 5 percent. Until now, investors might have thought they could take Mr. Trump’s trade pronouncements in stride. After all, many countries have won a reprieve from the steel and aluminum tariffs. And as Edward Alden of the Council on Foreign Relations wrote Thursday of the anti-China measures, “The administration is delaying the action to solicit comments from affected U.S. companies, and it is quite possible the final tariffs will fall short of the threats.” … for more, go to https://www.nytimes.com/2018/03/22/business/dealbook/mark-zuckerberg-facebook.html