Posts Tagged ‘trade war’

Trump sets ‘terrible precedent’ by crossing red line on Huawei case

December 13, 2018

The President’s remark is “extremely disturbing” — Crossing the red line of the rule of law.

China will see the arrest as “a plot to gain leverage in the [trade] negotiations, a plot to embarrass China, a plot to go after Huawei — any number of plots, pick your plot.”


President Donald Trump’s suggestion that he might use an arrested Chinese tech executive as a bargaining chip in trade talks with Beijing drew rebukes for setting a “terrible precedent” crossing the red line that separates American politics from the rule of law.


The remark triggered pushback from law enforcement officials, criticism from lawmakers and concern from legal and business analysts who said it’s not only a weak bargaining move that might create more friction with allies, but it represents a “poisonous” precedent that could eventually undermine the safety of Americans overseas.

Image result for Donald Trump, Pictures

“The US, like Canada, we’re both rule of law countries based on a constitution, legal principles, rule of law,” said William Reinsch, the Scholl chair for international business at the Center for Strategic and International Studies. “Our history is that things like this proceed through the criminal justice system and justice is blind. Trump is basically saying he might interfere with this process, which is a terrible precedent.”


In an interview with Reuters Tuesday, Trump said he would intervene in the case against Meng Wanzhou if it proved beneficial in securing a trade deal that has splintered relations between the two countries in recent months.
The CFO of Chinese tech giant Huawei was arrested December 1 in Vancouver for violating US sanctions on Iran — the same night Trump was dining with Chinese President Xi Jinping during the G20 summit in Argentina.

‘I would certainly intervene’


“Whatever’s good for this country, I would do,” Trump told Reuters. “If I think it’s good for what will be certainly the largest trade deal ever made — which is a very important thing — what’s good for national security, I would certainly intervene if I thought it was necessary.”

The Huawei Case Just Got (More) Political

Huawei’s Meng Wanzhou on her way home after bail hearing (Screenshot)
While Trump’s assertion to Reuters violates a basic American tenet, Reinsch notes that, “on the other hand, this is exactly the kind of thing China understands … because China isn’t a rule of law country and that’s what they would do.”
There are also the unintended consequences to worry about, said Michael Zeldin, a CNN legal analyst and former global leader of the anti-money laundering/terrorist financing and economic and trade sanctions practice at Deloitte Touche Tohmatsu in Washington.
“The danger is the unintended consequence of an American citizen abroad being arrested and held hostage to the arresting state’s economic, trade desires,” Zeldin told CNN. “But now we’ve set the appropriateness of Americans abroad being held hostage to trade deals. There’s too much danger in that,” Zeldin added. “If I was counseling the President I would say those two things should not be coupled.”
Image result for Michael Zeldin photos
Michael Zeldin
If Trump were able to follow through on his impulse, it could also create more friction with Canada, Reinsch said. “It seems to me to be an odd thing to say at this point in the process,” he said. “She’s not in US jurisdiction. She’s in Canadian jurisdiction. Intervening in the process means he would talk to [Canadian Prime Minister Justin] Trudeau, who has said more than once the normal judicial process will go ahead. It just creates another point of friction with Canada.”
Canada’s Foreign Affairs Minister Chrystia Freeland told reporters Wednesday that she has spoken with Secretary of State Mike Pompeo about Meng’s case. When asked about Trump’s comments, Freeland said Canada is not responsible for the behavior of other countries. “Canada will very faithfully follow the rule of law,” she said.

‘Let them grovel’


While Reinsch is adamant that Trump’s suggestion is not “the way we should be behaving,” he said that if Trump went ahead, it would be “a tactical mistake.”
“If you’re going to do it, the way to do it is make the Chinese come to us,” Reinsch said. “Let them grovel for a bit and then respond. You don’t give them what they want up front. What do we get if he does that? Nothing.”
At a Senate Judiciary Committee hearing Wednesday, top national security, counterintelligence and cybersecurity officials testifying on Chinese espionage threats also pushed back on Trump’s comments.
“What I do, what we do at the Justice Department, is law enforcement. We don’t do trade,” Assistant Attorney General John Demers, the department’s top national security official, said at when asked about the remarks.
“We follow the facts and we vindicate violations of US law. That’s what we’re doing when we bring those cases, and I think it’s very important for other countries to understand that we are not a tool of trade when we bring the cases,” he added.
Sen. Richard Blumenthal, the Connecticut Democrat who had asked the officials for their take on the President’s comments, said he felt “the danger of the President’s statement is that it makes it look like law enforcement is a tool of either trade or political or diplomatic ends of this country.”

‘Not in this one’


“That may be true in other countries,” Blumenthal said, “but not in this one.” The President’s remark was “extremely disturbing to me,” he said.
Image result for Richard Blumenthal, photos
Richard Blumenthal
“It seems to me,” the senator added, “that the President does a disservice to the work as well as the image of our nation in terms of law enforcement.”
Demers told the committee that if Meng is extradited from Canada, as the US has requested, “our criminal case will continue,” he said. He declined to comment further on the case.
Bill Priestap, the FBI assistant director in charge of the counterintelligence division, simply said the FBI would simply follow the motto “do your job.”
“From the FBI’s end, we’re going to continue to do our job,” he said.
Meng was arrested earlier this month at an airport in Vancouver, Canada, at the request of the US government, authorities have said.
The Chinese executive is accused of helping Huawei get around US sanctions on Iran by telling financial institutions such as HSBC that a Huawei subsidiary, Skycom, was a separate and unaffiliated company.
On Tuesday, Meng stepped out of detention after 10 days behind bars when a judge in Canada approved her release on $10 million Canadian bail ($7.5 million US).
Officials in China, where the judicial system is subordinate to the Communist Party, will have a hard time believing Meng’s arrest was due to the wheels of justice turning at their own pace, Reinsch said.
“They’ll believe it has nothing do with a judge in” New York who issued the warrant for her arrest in August, he said.
Instead, said Reinsch, a former president of the National Foreign Trade Council with long experience on US-China ties, the Chinese will see the arrest as “a plot to gain leverage in the [trade] negotiations, a plot to embarrass China, a plot to go after Huawei — any number of plots, pick your plot.”
That highlights another problem with Trump’s remarks, Reinsch said. “It will be seen as validation of what they already think, that we’re not a rule of law country,” he said. “That’s what makes it so poisonous, that they’ll think we’re just like them and we’re not.”
CORRECTION: The spelling of Meng Wanzhou’s name has been corrected.




Huawei arrest perceived as a “political kidnapping” in China

December 13, 2018


South China Morning Post

  • Foreign business executives face greater risks as US decides to target individuals in corporate misconduct cases
  • Donald Trump says he may intervene in the case, feeding into a popular belief in China that Meng’s arrest was a ‘political kidnapping’ for trade war leverage
  • US Deputy Attorney General Rod Rosenstein said in a speech on November 29 that under the revised Foreign Corrupt Practices Act, “pursuing individuals responsible for wrongdoing will be a top priority in every corporate investigation”
Image result for Huawei, logo, pictures
PUBLISHED : Thursday, 13 December, 2018, 5:01am
UPDATED : Thursday, 13 December, 2018, 1:15pm

The Huawei Case Just Got (More) Political

The Huawei Case Just Got (More) Political
The arrest of a former Canadian diplomat in China and unexpected comments from President Trump raise a fresh question about the case of Huawei’s Meng Wanzhou, who has now been released on bail: How political is it? Photo: Associated Press

The arrest of Huawei Chief Financial Officer Sabrina Meng Wanzhou is an early indication of the risks now facing foreign business executives, as American law enforcers start targeting individuals at companies that breach sanctions.

The controversy is increasingly being perceived as a “political kidnapping” in China, after US President Donald Trump suggested that he would intervene in the case as a means of gaining leverage in the trade war. For foreign corporate executives that facilitate trade with blacklisted countries, it may be a sign of things to come.

Against a backdrop of growing rivalry between Beijing and Washington, the case has infuriated the Chinese government and frayed China’s ties with Canada. It came as a result of a shift in focus by the US Department of Justice, which is centring corporate investigations on individual executives working at companies that break US laws.

Meng was arrested on fraud charges in Canada on December 1 upon the request of a district New York court, in relation to Huawei’s alleged violation of US sanctions on Iran. She has been granted US$7.5 million bail.

US Deputy Attorney General Rod Rosenstein said in a speech on November 29 that under the revised Foreign Corrupt Practices Act, “pursuing individuals responsible for wrongdoing will be a top priority in every corporate investigation”.

“The most effective deterrent to corporate criminal misconduct is identifying and punishing the people who committed the crimes. So we revised our policy to make clear that … a corporate resolution should not protect individuals from criminal liability,” read the transcript of Rosenstein’s speech.

Rosenstein said that the US Department of Justice has charged more than 30 individuals and convicted 19 in the past year, after a review of policy concerning individual accountability in corporate cases.

Previously, the US targeted the companies that breached sanctions, doling out mammoth fines to a series of international banks. However, the US targeting foreign nationals in its “long arm” law enforcement could bring fresh risks, analysts said.

Jeffrey Sachs, a professor at Columbia University and the author of A New Foreign Policy: Beyond American Exceptionalism, wrote in an opinion piece for Project Syndicate on Tuesday that, while executives should be held accountable for corporate misconduct, “to start this practice with a leading Chinese business-person, rather than the dozens of culpable US CEOs and CFOs, is a stunning provocation to the Chinese government, business community, and public”.

Sachs wrote that many banks, including US banks such as JP Morgan Chase, have violated US sanctions on Iran, but none of the CEOs or CFOs were put behind bars.

“One can say, without exaggeration, that this [arrest of Meng] is part of an economic war on China, and a reckless one at that”, he wrote.

Trump said in an exclusive interview with Reuters on Tuesday that he is open to using the case to help close a trade deal with Beijing, or for leverage in other American national security interests.

“If I think it’s good for the country, if I think it’s good for what will be certainly the largest trade deal ever made – which is a very important thing – what’s good for national security – I would certainly intervene if I thought it was necessary,” Trump told Reuters in the Oval Office.

Trump added that Chinese President Xi Jinping had not called him about the case, but said the White House had been in touch with both the Justice Department and Chinese officials over the arrest of Meng, a daughter of Huawei founder Ren Zhengfei.

This courtroom sketch shows Meng (right) in court in Vancouver. Image: Jane Wolsak via AFP

Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation, a state-owned think tank affiliated with the Ministry of Commerce, said that Trump’s comments could be read as an “indirect confession” of kidnapping Meng.

“Isn’t this a self confession that he [Trump] had directed the kidnapping and now is blackmailing a ransom [from China]?” Mei wrote in a brief note.

Meng’s arrest in Canada has infuriated Beijing. She was apprehended while changing planes en route to Mexico from Hong Kong, after an arrest warrant was issued by the US for the alleged sanctions violations.

The Chinese foreign ministry has summoned the Canadian and US ambassadors to lodge a “strong protest” against the arrest and has demanded that Canada release Meng or face “grave consequences”.

China’s state media and researchers have widely depicted the case as a conspiracy by Washington to undermine the development of Huawei’s 5G technology, and to broadly thwart China’s rise.

“Washington should not attempt to use its domestic laws as strategic support for its commercial and diplomatic competition around the world. There is no doubt that the US actions are political, as the thin veneer of justice cannot conceal the political motives,” Chinese state-backed tabloid Global Times argued in an editorial on Tuesday.

US Attorney for the Eastern District of New York Richard P. Donoghue (centre) is trying to get Meng extradited from Canada to America. Photo: Getty Images via AFP

When Meng was released on bail on Tuesday, she was ordered to wear a GPS ankle bracelet, submit to the 24-hour supervision of a private security firm, and surrender her Hong Kong and Chinese passports.

She will live in a Vancouver home she owns with her husband. Meng has been told to return to court on February 6 to set a date for her extradition hearing.

The US is seeking her extradition on fraud charges related to alleged breaches of US and EU sanctions on Iran. Huawei has denied the charges.

“Huawei complies with all applicable laws and regulations in the countries and regions where we operate, including export control and sanction laws of the UN, US, and EU,” the company said in a statement after Meng was released.

See also:

Canadian Michael Spavor Questioned in China Following Detention of Ex-Diplomat

China to Replace Made in China 2025, Increase Access for Foreign Companies

December 13, 2018

China plans to replace an industrial policy savaged by the Trump administration as protectionist with a new program promising greater access for foreign companies, according to people briefed on the matter, in a move to resolve trade tensions with the U.S.

By  Lingling Wei in Beijing and  Bob Davis in Washington
The Wall Street Journal
Updated Dec. 12, 2018 7:21 p.m. ET

The Tech Arms Race Driving the U.S.-China Trade Dispute

The Tech Arms Race Driving the U.S.-China Trade Dispute
“Made in China 2025” is Beijing’s industrial plan to dominate high-tech industries including robotics, aerospace and computer chips. The Trump administration argues China is using the plan to give its tech companies unfair advantage over foreign rivals. But what is it exactly?

China’s top planning agency and senior policy advisers are drafting the replacement for Made in China 2025—President Xi Jinping’s blueprint to make the country a leader in high-tech industries, from robotics to information to clean-energy cars. The revised plan would play down China’s bid to dominate manufacturing and be more open to participation by foreign companies, these people said.

Current plans, these people said, call for rolling out the new policy early next year, a time when the U.S. and China are expected to be accelerating negotiations for a deal to end their bruising trade battle.

Odds that the new plan will go far enough in addressing U.S. complaints are long. President Xi and others in the Chinese leadership are used to exercising a strong hand in the economy. Many bureaucracies and state-owned enterprises benefit from the unfettered access to resources that come with big government initiatives and so don’t want to be hampered by the greater competition of a level playing field.

The revision is also likely to be treated with skepticism in the U.S. Officials in the Trump administration have called Made in China 2025 a threat to fair competition, saying it encourages state subsidies for domestic companies and forces technology transfer from foreign partners. Some U.S. officials are likely to see the changes as more cosmetic than real.

An expanded version of this report appears on

China Prepares Policy to Increase Access for Foreign Companies

Forget China Worries: This Will Trigger the Next Massive Stock Market Rally

December 8, 2018

I’ve got good news and bad news.

First, the good news: even though stocks popped after the US and China hit pause on the trade war, there are still plenty of deals to be had. I’ll give you 3 smart buys—with an average dividend of 7% and serious upside—in a moment.

Now the bad news: time is short. If you want to grab the biggest gains on offer here, you need to move soon.

Trade Ceasefire Opens Buy Window …

The way I see it, the trade-war ceasefire is likely the beginning of a deal coming down the pipe in the next three months. That means the market’s biggest anxiety is over—and we’re nicely set up for more upside!

I write on high yield assets that deliver a reliable income stream.

You’re probably wondering why I’m so confident.

Image result for richard drew, U.S. Stock exchange photos

New York Stock Exchange FILE photo by Richard Drew, AP

For one, the fear that the US and China, two of the largest trading partners on earth, would fail to reach some kind of deal has always been irrational.

Second, the recent market stumble has been way out of step with sky-high earnings growth we’ve seen (S&P 500 profits rose 25.9% in the third quarter, even stronger than the record-high growth in the first half of the year), and breakneck sales growth (revenues jumped 9.3% in Q3, again above expectations).

But the best thing about the market now is something we hear nothing about: tardy fund managers.

… And the Race Back in Is On!

Here’s what I mean: market hysteria resulted in a steady selloff of assets among equity funds, and that didn’t stop, even as the data got better. For instance, Thanksgiving week saw fund managers dump stocks all around, resulting in $8.5 billion in cash flowing out of equity funds for the week.

All told, it was the worst Thanksgiving week for fund outflows since 2011.

This is a clear case of late selling on the trade-war noise. Now that a deal looks like it’s in the offing, fund managers will slowly buy back in.

And you know what that means: rising stock prices.

If fund managers are likely to pile into stocks in the next few weeks, wouldn’t it make sense to buy in now, before they do?

The answer is yes—and here are 3 closed-end funds (CEFs) that should be near the top of your list.

3 Comeback Kids Paying Up to 9.6%

If you want to play this oversold market for capital gains and market-busting income, the options are plenty. In a November 19 article—“An ‘Instant’ 3-Fund Portfolio for 9.8% Dividends and 40% Upside”—I mentioned the Boulder Growth and Income Fund as a buy because of its attractive, value-driven portfolio and the fact that it trades at a huge discount to the value of that portfolio.

BIF is only getting started, so it remains an attractive option, as its market price trades at a 16.8% discount to net asset value (NAV, or the value of its underlying portfolio), and its 3.5% income stream is growing.

Another option: the Gabelli Utilities Fund, which has been one of the strongest performers in its class. The market, however, has punished it with a big selloff. But that’s changing, and GUT is starting to attract more buyers!

You don’t have much time to get into this fund before the market closes the gap, which is why you should consider jumping in now for a 9.6% dividend yield and capital gains that will likely come hard and fast in the coming weeks.

Finally, our third fund: the Nuveen S&P 500 Dynamic Overwrite Fund, which uses a covered-call strategy to boost its yield to 6.9% while giving you exposure to the broad index.

Recent volatility has made the fund a decent performer, but the market doesn’t care, which is why SPXX’s price return is negative and its NAV return is positive, resulting in a 2% premium to NAV, far lower than the 15% premium it had back in May or the 5% average premium it’s had over the last couple years.

With the market’s slowness to respond to fundamentals, these are 3 funds you could buy with confidence now, both for their income and their upside potential—but hurry before the fund managers catch on!

Disclosure: none

I have worked as an equity analyst for a decade, focusing on fundamental analysis of businesses and portfolio allocation strategies. My reports are widely read by analysts and portfolio managers at some of the largest hedge funds and investment banks in the world, with trill…


Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report “Indestructible Income: 5 Bargain Funds with Safe 8.5% Dividends.”

Huawei Arrests Shows U.S., Canada Mean Business — Trump’s Confronting China Wins Over Skeptical CEOs

December 8, 2018

Some American executives now see administration’s blunt approach as best shot to resolve intellectual-property grievances

Donald Trump and Xi Jinping at a dinner meeting on Dec. 1 Photographer: Pablo Martinez Monsivais/AP



When President Trump first threatened to levy major tariffs on China, business leaders worried the administration was using the wrong weapon on the right target.

It wasn’t the flood of washing machines coming in and the trickle of Fords going out that raised the ire of America’s CEOs. They wanted something done about counterfeiting, allegations that the Chinese were stealing U.S. intellectual property and investment rules Beijing leans upon that force technology transfers.

Getting China to play by the rules has proven tough over past decades. International bodies—such as the Word Trade Organization—have insufficient power. Export controls and indictments are tools to address theft, but they work only in specific situations and can require cooperation from U.S. companies that may be reluctant to rock the boat.

It’s becoming clear Mr. Trump’s prolonged tit-for-tat trade fight may represent American business’s best shot at addressing those long-standing grievances.

“Calling the abuser an abuser to their face is the first step,” Basheer Junjua, chief executive of San Francisco software development firm Calculi, told me this past week at The Wall Street Journal’s CEO Council in Washington.

U.S.-China tensions have rattled markets. The Dow industrials started the past week strong after positive news on the trade front but plunged as doubts about a favorable outcome re-emerged. The arrest of a senior executive of networking-gear maker Huawei Technologies Co. on Wednesday intensified negotiations on trade.

The dozens of CEOs gathered for the Journal’s meeting in the capital, however, suggest business leaders have shifted their view of Mr. Trump’s confrontational approach. They now say they are encouraged that the administration recognizes complex problems demand sophisticated solutions.

National Security Adviser John Bolton outlined how negotiations could take a turn over a 90-day cease-fire China and the U.S. agreed to this past week. Speaking to the CEO Council, he proposed a rule that says there will be no imports into the U.S. of products or services based on the theft of American innovation.

“That’s not a tariff question,” he said. “That’s a way of defending intellectual property from the United States.”

Mr. Bolton insisted the administration can’t ensure fair trade without getting China to agree to a broad set of reforms.

“Let’s take a show of hands,” Mr. Bolton said to the assembled CEOs. “How many of you believe in free trade?” Several hands went up. “How many of you believe that free trade means allowing the Chinese to kick us around, steal your intellectual property and not respond to it?”

No hands went up.

When critics accuse the administration of not pursuing a free-trade policy by goading the Chinese, he concluded, “I say if there’s going to be free trade, they’re going to have to live by it.”

, the president of the U.S. Chamber of Commerce’s China Center, said the White House has a supportive audience in the business community when it comes to confronting China. When Mr. Trump came to office, there was “a frustration that had been building over a number of years.”

Many companies across many sectors have rushed to China, seeking a new market for goods and a lower cost for manufacturing. As they did, it became increasingly clear what price they had to pay to enter the most populous nation in the world.

“The allure of a billion-plus-people market is an allure for every company,” Mr. Janjua, the Calculi CEO, said. “However, they made the rules say ‘if you want to come work with us you have to put all the technology on the table.’ ”

The trade-off is costly. Earlier this year, the White House published research estimating an annual cost of between $250 billion and $600 billion to the U.S. economy from China’s counterfeit goods, pirated software and theft of trade secrets. By comparison, the National Science Foundation estimates the U.S. spends an average of $445 billion in annual research and development.

Several experts say past administrations attempted to address alleged abuses but lacked resolve. For instance, many companies and regulators figured China would eventually act like the rest of the countries in the WTO.

“People were making a bet which direction China would take, and it looked like China would follow global rules,” said James Andrew Lewis, a vice president at the Center for Strategic and International Studies, a bipartisan research organization in Washington. When it comes to trade, Mr. Lewis says China’s strategy to win at any cost often overshadows the desire to be seen as a good citizen of the world.

“Calling the abuser an abuser to their face is the first step.”

—Basheer Junjua, chief executive of software development firm Calculi, on the need to confront China on intellectual-property grievances

Abigail Grace, a researcher at the Center for New American Security, a bipartisan think tank in Washington, said the Obama administration was initially reluctant to call China out on specific allegations of theft or counterfeiting. That’s because it was trying to get Beijing to cooperate on various multilateral agreements.

“If one pushed China too hard on individual issues, it would jeopardize those broader goals,” Ms. Grace said.

President Obama took a harder line with China during his second term when it became clear Chinese President Xi Jinping wasn’t going to open the Chinese market up as much as initially hoped, she said. Getting the support of American business was tough, Ms. Grace said, because “companies were hesitant to admit this type of rampant IP theft was taking place because of how shareholders might respond.”

Mr. Lewis, a former foreign service officer in the State and Commerce departments, said reforms could be messy, particularly because of the interconnectedness of supply chains or joint ventures.

For example, his organization is preparing to publish a report on whether the next generation of cellular networks, known as 5G, is viable without China’s help.

He said companies like China’s Huawei or ZTE Corp. “can’t make products without U.S. technology.”

Can Western firms could pull off 5G without Chinese partners? “The answer is yes, but it is going to cost a lot more.”

Write to John D. Stoll at

Appeared in the December 8, 2018, print edition as ‘Trump’s China Tack Wins Fans.’

U.S. Companies Feel the Pinch as Tariff Costs Start to Mount

December 7, 2018

American companies that import products are paying record amounts in customs duties as more tariffs imposed by the Trump administration take effect.

Tariff collections topped $5 billion in October, according to data from the Treasury Department and from Census Bureau data analyzed and released by Tariffs Hurt the Heartland, a lobbying coalition of manufacturing, farming and technology groups.

President Trump campaigned on an aggressive trade agenda, and from early this year has imposed or considered tariffs on thousands of products from dishwashers to semiconductors. U.S. revenue from tariffs has begun to build rapidly only in the last few months, as more of the levies have taken effect.

The amount of tariffs being paid by U.S. importers has doubled since May, including an increase of more than 30% from August to October, according to the data. The sum has risen through the year as steel and aluminum tariffs were applied to imports from a growing group of countries, then surged in October, which was the first full month in which U.S. tariffs were in place on a full $250 billion of imports from China.

Trade, Tech and Tweets: Stock Markets May Get Even Bumpier in 2019
U.S. stock markets have gyrated this week with seemingly positive news on trade followed by President Trump tweeting he is still a “Tariff Man.” U.S.-China tensions, plus worries about economic growth and the tech sector, spell more volatility ahead for investors. Photo Composite: Crystal Tai

China and the U.S. struck a trade truce Dec. 1, agreeing not to add or increase tariffs for now. But the tariff rates in place in October will remain in effect, meaning collections are likely to remain high in November and December.

President Trump has touted the surge in revenue his tariffs have brought in thus far. “We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN,” he said in a tweet on Tuesday.

Tariffs are assessed to the U.S. importer of record, meaning U.S. companies that import items from China and the rest of the world directly are the initial parties responsible for paying. The Census Bureau data are based off customs filings, while the Treasury data are based off actual payments.

While some importers will bear the cost of the tariffs themselves, others may be able to persuade their foreign suppliers to cut prices enough to offset the cost and others may pass the higher costs on to their customers.

“We are now seeing the raw data behind the stories of tariff pain that are coming in from every corner of the country,” said Charles Boustany, a former Republican congressman who is the spokesman for Tariffs Hurt the Heartland. “American businesses, farmers, manufacturers and consumers are suffering under the weight of the current tariffs and are reeling from the continued uncertainty over whether they will be increased even further.”

Russell Tiejema, the chief financial officer of Masonite International Corp., a Tampa, Fla. manufacturer of doors, said at an investors’ conference this week that U.S. tariffs would hit about 10% of the $900 million worth of material his company acquires to build its products.

“About half of that, we would be the importer of record, which means that we would be the party liable for tariff remittance,” said Mr. Tiejema. “The other half we acquire from other suppliers who then acquire it upstream from China, but they stand as the importer of record. In both cases, we need to negotiate, wherever possible, price concessions.”

Many U.S. companies are also facing retaliatory tariffs from China—and from Canada, Mexico, the European Union and other countries hit by U.S. tariffs this year on steel and aluminum. Data from the research group the Trade Partnership, which works with Tariffs Hurt the Heartland to assess the impact of tariffs, estimate that more than $1 billion in tariffs were paid on U.S. exports in October, based on the volume of trade of affected goods.

John T.C. Lee, the president of Andover, Mass. MKS Instruments, which makes precision measuring instruments, said at a Nasdaq Investors Conference this week that his company was facing both U.S. tariffs and retaliatory tariffs from other countries. MKS faces $3 million in tariffs on its imports over a year, and $7 million in tariffs on its exports, he said.

“That is most likely going to be borne by the customers,” he said, noting that many had no other options for getting those products, a situation that gives his company more leverage to raise prices.

Even after the recent increase in revenue from tariffs, they account for a small share of government income. Tariffs were the primary source of federal revenue before World War I, but that share has dwindled with the introduction of the income tax and the liberalization of trade. In October, more than 2% of federal receipts came from tariffs, the most in at least two decades.

Write to Josh Zumbrun at

China, U.S. Trade Complicated by South China Sea, Taiwan Other Factors

December 6, 2018

Image result for Kim Jong Un, Xi Jinping, photos, dalien

  • The ongoing trade dispute between Washington and Beijing is as much about the South China Sea and Taiwan as it is about China’s technological practices, according to the University of Arizona’s Jeffrey Kucik.
  • A lasting resolution to the trade war could require multiple compromises on these areas, he argued.
  • Others warn that foreign policy matters could be affected as a result of President Donald Trump’s trade policies.


Chinese President Xi Jinping and members of Chinese delegation attend a working dinner with U.S. President Donald Trump after the G20 leaders summit in Buenos Aires, Argentina December 1, 2018. 

Kevin Lemarque | Reuters
Chinese President Xi Jinping and members of Chinese delegation attend a working dinner with U.S. President Donald Trump after the G20 leaders summit in Buenos Aires, Argentina December 1, 2018.

Trade frictions between the world’s two largest economies go well beyond the parameters of imports and exports.

Washington has been attempting to negotiate with Beijing about issues like forced tech transfers and intellectual property theft, but there’s a growing sense among international analysts that talks may also be touching on other deep-rooted issues in their relationship, particularly on the national security and military front.

The ongoing spat is a reflection of great power rivalries, political scientist Joseph Nye wrote in a Project Syndicate editorial last month: “It is much more than a typical trade dispute like, say, America’s recent clash with Canada over access to that country’s dairy market.”

Many economists have pointed out that the current dispute is more of a tech war than a tariff war as U.S. President Donald Trump’sadministration targets China’s technology sector practices. Beijing’s militarization of the South China Sea and the sovereignty of Taiwan could also be influencing negotiations.

More than just trade

“Clearly, there’s some recognition that there’s more at stake than trade,” said Jeffrey Kucik, assistant professor of political science at the University of Arizona. “There are now so many issues at play, it’s not clear how to alleviate tensions.”

One of the issues, he argued, is U.S. interference in the South China Sea and Taiwan — which Beijing considers internal matters.

Trump claims victory after trade truce with China’s Xi Jinping  

Washington’s arm sales to Taipei this year have angered Chinese officials who oppose countries pursuing relations with the East Asian island. According to the One China Policy, Taiwan and mainland China are considered part of the same territory. Xi’s administration has also been angered by U.S. naval patrols in the South China Sea. The country claims nearly all of the international waterway despite competing claims from neighboring Asian countries.

The fact that China’s statement on this past weekend’s temporary tariff ceasefire highlighted Trump’s promise to respect the One China Policy — something not mentioned in the White House’s version — reveals the importance Beijing attaches to its national interests, Kucik said.

A lasting resolution to the trade war will require multiple compromises on such matters, the professor continued. For Xi’s administration, “trade takes a back seat to territory,” according to Kucik.

Former PBOC governor on tech, bitcoin and the US-China relationship

Former PBOC governor on tech, bitcoin and the US-China relationship  

Others, however, disagree with that argument.

It is certainly clear that the White House views Beijing as a strategic competitor beyond the realms of trade, said Patrick Lozada, director of Albright Stonebridge Group’s China practices. But those matters don’t have any bearing on the trade spat, he warned: “The current dynamic of tit for tat trade actions is not related to other non-trade issues.”

Hong Kong economist Lawrence Lau from the Chinese University of Hong Kong echoed that view, arguing that the South China Sea and Taiwan weren’t factors in the trade war.

Trade influencing foreign policy

Some experts warned that foreign policy matters will be affected as a result of Trump’s hard-line trade policies.

Because of the president’s “counterproductive approach” to resolving the bilateral trade deficit, the South China Sea and Taiwan issues could grow more problematic, said Jeffrey Kingston, director of Asian studies at Tokyo-based Temple University.

Trump has ensured that Xi will now also be less helpful on North Korea thanks to the U.S. leader’s “usual grandstanding and misleading representations” of trade negotiations, Kingston warned.

When it comes to the trade spat, “there are many outstanding issues to deal with and one would hope they are not segregated or asserted as issues that must be resolved before anything else gets addressed,” the academic continued.

The trade turmoil has already spilled into military relations as the two superpowers scale down high-level security engagements. The bilateral defense alliance could now remain at a deadlock until progress is made on the trade front.

Stocks tank as ‘Tariff Man’ sows confusion over U.S.-China trade — Trump’s Tweet causes trouble

December 5, 2018

He is the Tariff Man. They are the stock bears. This is a market dive. Goo goo g’joob.

President Trump’s renewed threats of more tariff pain in the absence of a deal with Beijing — as top administration officials walked back expectations for a breakthrough — helped send stocks plummeting Tuesday.

The Dow Jones industrial average recorded its fourth-worst day of the year on a percentage basis, shedding 3.1 percent.The broader S&P 500 dropped 3.2 percent, falling below its 200-day moving average, a critical threshold for traders.

By Tory Newmyer
The Washington Post

The tech-focused Nasdaq fell 3.8 percent. The declines all but wiped out gains since last Wednesday, when Federal Reserve Chairman Jay Powell suggested the central bank could moderate the pace of its interest rate hikes. That mini-rally had gained steam as the Trump administration looked to be declaring a cease-fire in the trade war with China.

Traders work on the floor at the New York Stock Exchange on Tuesday. (Reuters/Brendan McDermid)

Investment managers said the Trump team’s erraticism in the wake of the G-20 summit over the weekend sapped confidence that a trade peace is at hand. And the confusion started at the top, with Trump starting his Tuesday by reversing his claim from the weekend that he had secured “an incredible deal” in Buenos Aires. Instead, Trump said in a series of tweets, the weeks ahead will reveal “whether or not a REAL deal with China is actually possible.”

Trump doubled down on the threat hours after the market close on Tuesday:

Donald J. Trump

We are either going to have a REAL DEAL with China, or no deal at all – at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal – either now or into the future….

7:20 PM – Dec 4, 2018
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Donald J. Trump

…..China does not want Tariffs!

7:21 PM – Dec 4, 2018
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That came even as Chinese officials broke their post-G-20 silence to declare they accept the Trump administration’s 90-day clock for a negotiation and are confident the two sides can reach agreement. The announcement helped contain losses by Asian and European stocks following the bloodletting on Wall Street, and U.S. futures pointed to a slight recovery.

A host of other developments contributed to spooking investors, as Bloomberg noted: The gap between 2- and 10-year Treasurys narrowed to their smallest point in over a decade, setting off alarms a recession could be lurking; British Prime Minister Theresa May’s Brexit plan suffered fresh defeats; and home builder Toll Brothers renewed concerns about a weakening housing market.

But market watchers agreed trade jitters were the primary culprit tanking stocks. “The fact of the matter is this market is going to be volatile until there’s clarity and certainty on tariffs,” Meridian Equity Partners senior managing partner Jonathan Corpina tells me.

While investors should know better by now than to credit a single Trump-driven headline or presidential tweet as the final word on a complex, evolving policy matter, Corpina said algorithmic trading sets off a chain reaction. “The computer systems read the headlines, they trigger program trading and then you get a snowball effect,” he said. “The market turns one way, and then retail and institutional investors jump on. So the swings are much more magnified than they should be.”

In the bigger picture, the shrinking gap between short- and long-term interest rates on Treasury bonds may prove more consequential. An inverted yield curve means short-term debt is yielding a greater return than longer-term debt, because investors are flocking to longer-term bonds as a hedge against what they perceive to be deteriorating economic conditions.

Treasury Secretary Steven Mnuchin speaks to reporters at the White House on Monday. (Andrew Harrer/Bloomberg)

The phenomenon has accurately predicted each of the nine recessions since 1955. And Trump’s trade turbulence could be contributing to a repeat of it now, says Nicholas Colas, co-founder of DataTrek Research. “The two are related,” he says. “If you have more uncertainty because of trade and tariffs, there’s a greater risk for recession.”

Colas noted the link is direct: Corporate managers deciding on whether to make major investments next year may be compelled to hold off if they believe the trade war could turn uglier. “We’re in the middle of budget season, so this comes at an inopportune time.”

The Trump team hasn’t helped provide clarity since the president’s dinner with Xi.

Top White Hosue economic adviser Larry Kudlow on Tuesday dramatically rolled back Trump’s Sunday night claim that China would remove tariffs on U.S. auto imports — in fact, Kudlow said, such a move would be a good sign. “Likewise, [Treasury Secretary Steven] Mnuchin returned from Buenos Aires on Monday and said China had committed to purchasing $1.2 trillion in U.S. goods and services — an amount roughly equal to nine years’ worth of China’s current purchases of American-made products,” my colleagues Damian Paletta, David Lynch and Josh Dawsey report. “Mnuchin on Tuesday conceded that the figure covered multiple years.”

Said one top White House adviser, “Nobody knows what the deal is.”

“What’s frustrating from my perspective as someone who manages other peoples’ money is how much is really being put on a president who doesn’t have a good sense of what he says and how the markets react to it. The market’s not trading on fundamentals. It’s trading on tweets and fears that the trade war goes wild,” says Scot Lance, managing director at San Mateo, California-based Titus Wealth Management. “That’s damaging not just short-term but long-term to U.S. and global GDP.”


John Bolton: US may ban imports from China that rely on stolen intellectual property

December 4, 2018

National security adviser John Bolton suggested Tuesday that the White House could seek to bar any imports from China that employ stolen intellectual property from American businesses.

“It’s an idea that should be considered. We may have some authority in that area already, we may need some legislation,” he told attendees at a Wall Street Journal conference.

His announcement came just days after President Trump and Chinese President Xi Jinping reached a 90-day trade truce. The agreement will delay both the imposition of tariffs on an additional $267 billion in Chinese products, and the escalation of existing tariffs on $200 billion in goods from the country.

As part of the deal, China will also purchase a substantial amount of agricultural, energy, and industrial products from the U.S., the White House said in a statement. But there is confusion over other aspects of the deal, particularly whether China will remove the additional 25 percent tariff on U.S. auto imports imposed earlier this year as the trade skirmish between the two countries heated up.

While Trump announced the action on Sunday, China has yet to confirm and White House officials haven’t outlined whether the tariffs will go to zero or to 15 percent, in-line with what China levies on other countries.

When asked on Tuesday, Bolton side-stepped answering directly.

“We don’t see the American future being a third world county supplying natural resources and agriculture products to China. We need to see some major changes to their behavior,” he said. “We have to look at other things we might do.”

Now for the hard part – making good on China’s trade war truce promises

December 3, 2018

Image result for china, u.s., flags, pictures

The 90-day ceasefire gives Beijing time to tackle some of Washington’s biggest concerns but it all rests on just how far China will go


South China Morning Post

PUBLISHED : Sunday, 02 December, 2018, 9:33pm
UPDATED : Monday, 03 December, 2018, 11:11am

Beijing and Washington may have reached a ceasefire in further tariffs but China is facing a greater challenge to deliver on its promises to change its economic policy, observers said.

Analysts on both sides of the Pacific said the 90-day truce in the trade war between the world’s two biggest economies would buy Beijing time to address some of Washington’s greatest concerns, including intellectual property protections and market access. But much would depend on how far China was willing to go, they said.

After what both sides said was as a “highly successful meeting” between the leaders of the two countries in Buenos Aires on Saturday, US President Donald Trump agreed to hold off on plans to increase in tariffs on US$200 billion worth of Chinese imports from the 10 per cent now to 25 per cent on January 1.

In return, China agreed to “immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cybertheft, services and agriculture”, according to the White House.

But the US could still go ahead with the 25 per cent tariff increase if both sides failed to reach an agreement within the 90 days, it said.

One of the key questions was just “how far China is willing to go and how hard of a line the Trump administration is going to hold”, said Nicholas Consonery, director of research firm Rhodium Group.

“We’ve got a window now to see how serious the Chinese government is about moving forward with structural economic reform,” Consonery said. “And recent history doesn’t lead us to a very optimistic place.”

Wu Xinbo, director of Fudan University’s Centre for American Studies, said he expected China would try to address US concerns by offering more concrete measures to reform its economy and open up its market. But a breakthrough in the 90 days depended on how determined China was in these areas, Wu said.

“The upcoming negotiations will be critical as we need to solve both short-term issues but also formulate a framework that would solve the long-term, structural issues,” he said.

Meanwhile in China there was no mention of the 90-day deadline, with state media focusing instead on Beijing’s “strong” stand in the trade talks.

A commentary posted on the social media account of state news agency Xinhua said Beijing had “stood firm in protecting its core interests” and struck back in a “strong and powerful manner”.

“We can see that the Chinese side has not lost its rational thinking because of bullying, nor did it panic in the face of the unprecedented trade war,” the commentary said.

Wang Yong, director of the Centre for International Political Economy at Peking University, said China would still need to be ready to deal with an increasingly hawkish Trump administration.

“China will still need to prepare for the worst scenario of a ‘decoupling’ of the Chinese and American economies, in particular in the hi-tech sector,” Wang said.

China would need to seize the moment to push for market reform, while at the same time redouble its efforts to develop home-grown technology through innovation, as well as diversify its trade partners, he said.

“It is possible that China will make adjustments on its industrial policies including expanding market access and intellectual property protection, but a fundamental change to its economic structure will be difficult to achieve,” Wang said. “The US will need to adjust its expectations in the next round of talks.”

William Zarit, chairman of the American Chamber of Commerce in China, said the most challenging area to resolve would be China’s discriminatory economic policies based on state support and protection of the domestic market.

“[These] need to be addressed in order to level the playing field and have a sustainable commercial relationship based on fairness and reciprocal treatment.”

Additional reporting by Robert Delaney