Posts Tagged ‘trade’

China has the ultimate weapon in trade war with US

September 20, 2018

Commerce Secretary Wilbur Ross said something the other day that was either right on the mark or profoundly stupid.

Only time will tell which it is.

Ross said that China was “out of bullets” in the trade war that the Trump administration escalated this week by placing another $200 billion in tariffs — basically taxes — on Chinese goods entering the US.

What Ross meant was that, since China sends more of its goods to the US than we send to China, a tit-for-tat trade battle would ultimately be won by the US. We can tax more of their goods than they can of ours.

Put in Ross’ words, we can fire more tariff bullets at them than they can at us.

By John Crudele
The New York Post

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President Trump’s strategy isn’t a secret: Squeeze China until it is willing to negotiate a fairer deal that will reduce the $375 billion trade deficit that the US had with China last year and play fairer when it comes to intellectual property.

Bravo! How can you argue with the intent of that if you are an American?

If the US can alter the trade imbalance with China (and the other countries Trump is fighting with), it will mean more jobs for Americans, more business for our companies and another star on the report card of the Trump White House that already is acing — for the time being, at least — economics even if it is failing in the area of conduct.

But there’s a bigger issue here that I would be careless in ignoring.

If Ross is right on the bullets issue of the trade war, does that mean China will have to resort to using its financial missiles to combat what Trump is doing?

And by that I mean the $1.171 trillion in US securities that Beijing owned as of July.

What if the Chinese decided to sharply reduce their holdings in US debt? What if Beijing decided to launch a few financial missiles by either selling down their holdings of US Treasuries — or simply not buying any more? A little missile that could still do a lot of damage would be China simply threatening publicly to sell US debt, something that has been hinted at before.

That would certainly get Wall Street’s attention.

First, let me say that there is a school of thought that believes this will never happen. Why? Because by just threatening to sell US securities in a large amount — or by actually doing so — the Chinese would cause the value of US bonds to fall and interest rates to climb here and throughout the world.

And the Chinese, who hold so much of that US debt, would take heavy losses. Plus, the higher interest rates would make it harder for the Chinese to finance their own country’s deficit.

In other words, the optimists in this trade war say that the Chinese may have financial missiles — but that they can’t launch them at the US.

So what happens if today the Chinese decide to become irrational because they are out of bullets? What if they start selling loads of US government bonds?

If that happens, Washington will have to either a) severely cut back its spending so that we don’t need the money the Chinese are giving us through bond purchases or (b) find other buyers of our debt.

Since Washington never cuts spending, the second choice is probably the best option. But where can other customers be found?

Japan is the second-biggest buyer of US debt, but Tokyo owns only a little more than $1 trillion worth. And Japan’s economy isn’t in great shape, so it can’t afford to send more capital abroad.

The next-biggest US government-bond holder, if you can believe it, is Ireland with only $300 billion worth. OPEC nations are small-time investors in our bonds: Saudi Arabia has $167 billion, United Arab Emirates $60 billion and Kuwait $43 billion. So oil money from abroad isn’t going to do the trick.

And if the US is going to lure other countries to invest in our debt, the bonds will have to be made more attractive. That’s another way of saying that interest rates will have to rise.

You’ve already heard that the Federal Reserve is raising interest rates, but what might be needed to entice additional buyers is a course of a different color — a rate increase on top of the Fed-fueled increase.

But that will translate into higher costs for anyone who is borrowing money — from Uncle Sam, already running a nearly $1-trillion-a-year deficit, all the way down to your Aunt Tilly looking to buy a house.

To be sure, there’s another option — but it would be controversial.

The Fed could begin another quantitative easing program, which in the past has easily created new money to buy bonds. The intention when QE was done in the late aughts was to make interest rates extraordinarily low.

The next QE might be launched to make up for the lack of interest in US government bonds. QE, in this case, would be the same as Washington printing money so that it can again act as a shill buyer at Treasury bond auctions.

It would be a fraud and it would raise big questions about the health of the US currency and put our country in a poor light.

People laughed when Trump is alleged to have said that the solution to America’s financial problems is printing more money. If the Fed has to QE our way out of bond-market trouble, it’ll be as hilarious — and frightening — as what Trump is said to have proposed.

Which brings us back to my original question: Are the Chinese really out of bullets or is there just a lull in the fighting before the big guns come out?

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China is running out of US goods to tax — Preparing new ways to hurt America

September 20, 2018

Debate starts to focus on alternative ways to hurt America, ranging from targeting specific imports with higher tariffs to making the exports the US wants the most more expensive

South China Morning Post

PUBLISHED : Thursday, 20 September, 2018, 12:01pm
UPDATED : Thursday, 20 September, 2018, 12:51pm
 Donald Trump has continued to escalate the trade dispute. Photo: AFP

Fresh ideas about how to fight the trade war with the US have begun to fly in China after Beijing was unable to respond in full to the latest escalation in the dispute because it is rapidly running out of room to use tariffs as a weapon.

US President Donald Trump announced on Monday that he would impose 10 per cent tariffs on US$200 billion Chinese imports on September 24, with the tariff rate rising to 25 per cent on January 1 next year if China does not make concessions.

Combined with the previous US$50 billion tariffs on Chinese imports, about half of all Chinese exports will be effected by the measures. Trump has further threatened to target to all Chinese imports unless China agrees to settle the dispute.

The Chinese response to Trump’s latest move was on a far smaller scale – tariffs of between 5 per cent and 10 per cent on US$60 billion of American goods and it is now running out of leeway to target US imports further.

When the latest levy goes into force on Monday, US$110 billion of the total US$150 billion in American imports to China will be affected.

Tariffs on the remaining US$40 billion – including key manufacturing components such as semiconductors – would hamstring Chinese manufacturers.

It’s becoming increasingly clear to Chinese officials that the chances of a swift end to the trade war are diminishing rapidly, forcing them to explore new ways to respond.

Arthur Kroeber, research head and co-founder of the financial services company Gavekal, noted that Chinese leaders’ previous tactics – including “a few buying missions” to Washington, a red-carpet welcome for Trump in Beijing and an attempt to cut a deal with Treasury Secretary Steven Mnuchin – had all failed.

“China will respond with its own tariffs, start squeezing US companies where it can, and dig in for a war of attrition,” Kroeber predicted.

The focus of debate in China is shifting to finding new ways of hurting the US.

Government officials and state media are proposing, among other things, embargoing exports of certain important components to the US and levying “asymmetrical” tariffs on US products – putting different tariff rates on different products.

An opinion piece published on the official social media account of People’s Daily, the Chinese Communist Party’s official mouthpiece, argued on Wednesday that China must go beyond the dollar-for-dollar tariff tactics, since China cannot match Washington in a tit-for-tat battle.

But the opinion piece, published under a pen name, said China could not “seek revenge” in terms of quantity, but could “pick its own battles” and fight on in its own way.

The piece argued that China could impose relatively low tariffs on imported US materials for which it is “hard to find alternatives” and charge much higher tariffs on products such as “raw materials with easy alternatives, luxury items and discretionary consumer product and manufactured products that are in direct competition with China’s own manufacturers”.

China is running out of US imports to tax. Photo: Getty Images/AFP

Lou Jiwei, China’s former finance minister and now the chairman of the National Council for Social Security Fund, told the China Development Forum on Sunday that the country could move beyond tariffs and impose export embargoes on certain materials and components that are sold to the US.

Lou also argued that it was not hard to spot the Chinese products that matter most to the US.

“We can pick some of those products being excluded from the US list [of new tariffs] or those items being dropped after loud complaints from US businesses,” Lou said.

Nearly 300 Chinese products were fully or partially removed from the original tariffs list after lobbying by US businesses.

One of the items dropped was rare earth metals – a vital mineral for hi-tech manufacturers of which China is the world’s biggest exporter.

Smart watches and Bluetooth gadgets were also exempted, partly at the urging of tech giant Apple, along with health and safety products like bicycle helmets and high chairs for children.

“There will be no winner in the trade war, but regarding these [exported] products, China’s marginal loss will be small but US’s marginal loss will be big,” Lou said.

Donald J. Trump


China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me. What China does not understand is that these people are great patriots and fully understand that…..

The People’s Daily article also argued that China could take advantage of the trade war by replacing imported products with home-made ones.

Much of China’s retaliatory tariffs have been aimed at US agriculture and energy products, many of which come from states that strongly supported Trump in the 2016 presidential election.

The US president has expressed fury that China is targeting his supporters, tweeting on Monday: “China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me.”

He threatened that “there will be great and fast economic retaliation” if they continued to be targeted.

Trump Gaining Allies in Trade War Against China

September 19, 2018

Trump pressure on partners pays off as they succumb to the art of the deal

South China Morning Post

PUBLISHED : Wednesday, 19 September, 2018, 9:16pm
UPDATED : Wednesday, 19 September, 2018, 11:19pm
US President Donald Trump has touted the success of trade negotiations with US allies which could leave China exposed in the trade war. Photo: EPA

China risks standing alone against the United States in US President Donald Trump’s trade war, with its allies showing signs of compromise, a former American trade official has warned.

Wendy Cutler, vice-president of the Asia Society Policy Institute and a former deputy US trade representative, made the assessment from the sidelines of the World Economic Forum in Tianjin, northeast China, following sustained pressure from Trump on US allies to compromise in trade negotiations.

Trump has touted the success of negotiations with Mexico to revise the North American Free Trade Agreement, while Canada is showing signs it may make concessions in its Nafta talks with the US. In July, meanwhile, the EU and US reached a deal pledging zero tariff and zero barriers on non-car products.

Former deputy US trade representative Wendy Cutler warns China risks standing alone against the US in Donald Trump’s trade war. Photo: Bruce Yan

Despite efforts by South Korea and Japan to diversify trade patterns, Seoul is about to sign a trade deal with Washington in the coming weeks and Tokyo, a close ally, is also on Trump’s agenda in trade talks.

“So with all of these trading partners, it looks like the Trump administration is close to finding a path forward, a way to resolve differences,” Cutler said.

She said she expected the US administration would be able to focus more on China and probably ask its allies to “support the US position on China and to work with the US to urge China to open its market and to reform”.

China’s major trading partners share US concerns about the sluggish progress in opening Chinese markets significantly, as well as heavy state interference in the economy and technology, which may squeeze foreign business out of China.

Observers are bracing for the growing likelihood that the trade dispute may last for some time as both China and the US have refrained from backing down first.

The two countries have engaged in a series of retaliatory moves, imposing 25 per cent tariffs on US$50 billion worth of each other’s imports.

In a further escalation this week, the US announced it would impose 10 per cent tariffs on an additional US$200 billion worth of Chinese products from September 24, with the tariff rate increasing to 25 per cent on January 1 next year unless China makes concessions. China responded by imposing tariffs on US$60 billion worth of US goods.

“We all need to get prepared for a world where there will be significant tariffs in place between the two countries for the foreseeable future,” Cutler said.

Chinese Vice-Premier Liu He is reported to be organising a meeting to discuss China’s response to the latest US trade tariffs. Photo: Reuters

Chinese Vice-Premier Liu He was reported to be organising a meeting to discuss the response to the latest US tariffs which have fuelled concerns about an already slowing Chinese economy.

There have been suggestions China may go beyond using tariffs, using instruments such as regulatory harassment of US firms operating in China, or even depreciating the yuan and dumping Chinese holdings of US Treasury bonds.

Cutler warned China faced a “conundrum” as such moves could further provoke the Trump administration and add to the difficulties of finding a negotiated solution.

The opening up of the “Made in China 2025” sectors, however, could send a signal to the US about China’s seriousness to resolve the issue, she said.

A former assistant US trade representative speaking on the sidelines at the World Economic Forum said he expected China would move very cautiously to avoid further escalating the situation.

Timothy Stratford, now managing partner in law firm Covington & Burling’s Beijing office, said he believed the Chinese government had come to the conclusion that the Trump administration was very serious about addressing issues stemming from the systemic differences between the two countries.

“Now that this new round of tariffs is being imposed by both sides, the most realistic goal for our countries to focus on next would be to agree on a moratorium on any further sanctions – so that each side has a chance to evaluate the impact of the existing tariffs and consider the best path forward,” he said.

“This would probably require them to agree on a process, agenda, and time frame for negotiations in the systemic issues.”

China denies meddling in US elections, demands ‘respect’

September 19, 2018


China on Wednesday called on the United States to show “respect” in their trade dispute and rejected President Donald Trump’s claims that it was meddling in the US midterm elections by taking aim at his political base.

The comments follow a combative series of tweets claiming Beijing’s retaliatory tariffs on US goods were seeking to influence knife-edge midterm congressional elections in November.

Chinese foreign ministry spokesman Geng Shuang rejected the claims, saying: “Anyone who has some knowledge of China’s diplomacy will know that we will not interfere in other countries’ domestic affairs.”

“We don’t want others to interfere in our domestic politics, and we will not interfere in the domestic politics of others,” Geng said at a regular press briefing.

© AFP/File | Donald Trump claims that Beijing is seeking to influence midterm elections in the US by targeting his political base with tariffs

Accusations of election meddling are especially sensitive in the US, given the political maelstrom over Russia’s alleged intervention to support Trump in the 2016 presidential vote.

China separately also rejected claims — made by Trump in the past — that it has manipulated the value of the yuan downwards to compensate for the effect of US tariffs on its exports.

“China will never rely on the depreciation of the renminbi (yuan) to stimulate exports, because a one-way depreciation of the renminbi exchange rate will have more disadvantages than advantages,” Premier Li Keqiang told an economic forum.

The US announced Monday that it would push ahead with tariffs on $200 billion in Chinese goods, on top of $50 billion already targeted.

This means the additional levies will hit more than half of US goods from China — its largest source of imports.

After China retaliated on Tuesday with duties on $60 billion of American products, Trump accused China of trying to sway the elections.

– ‘Great and fast’ retaliation –

“China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me,” Trump wrote on Twitter.

“China has been taking advantage of the United States on Trade for many years. They also know that I am the one that knows how to stop it,” he added, warning of a “great and fast economic retaliation” if China targets American farmers and industrial workers.

Some of the items included in the new tariffs announced Tuesday include daily necessities like diapers and furniture — which would hit US consumers hard — as well as solar panels and liquified natural gas.

Beijing had in July announced a 25 percent increase in tariffs on soybeans, dealing a blow to Trump’s rural base in the soy-growing American heartland.

China, the world’s biggest importer of soybeans — used in cooking oil and animal feed — bought about one third of its beans from the US last year.

The US also accuses China of seeking global industrial dominance through industrial espionage and through forced transfers of technology  from foreign companies; state-sponsored corporate acquisitions; illicit market interventions; subsidies and dumping.

Despite the escalating trade tensions, Washington last week asked China for a new round of trade talks led by US Treasury Secretary Steven Mnuchin.

– ‘Mutual respect’ –

“On the one hand the US is making contact for dialogue and extending invitations but on the other hand it is threatening with sanctions, with pressures,” Geng said on Wednesday.

“These little actions by the US have become the routine, and we are prepared for them,” he said, calling on Washington to show “mutual respect”, “sincerity” and “good faith”.

Meanwhile, Premier Li railed against “unilateralism” in a veiled allusion to the trade war while also calling for disagreements to be worked out through consultations.

“It is essential that we uphold the basic principles of multilateralism and free trade,” Li said in his speech at the summer session of the World Economic Forum in the eastern Chinese city of Tianjin.

Li also rejected claims of currency manipulation. Still, he acknowledged China faced problems, like infrastructure investment levels falling to record lows and external trade friction.


China Ready To End Trade Tariffs With U.S.

September 19, 2018

Sources in Beijing tell Peace and Freedom that China is prepared to announce a “win” in the trade war.

Without making any concessions or admitting any fault, China will announce its intention of moving forward to secure “free and fair trade” for all from Beijing through Europe and to the United States.

Xi Jinping, who has wisely stayed out of the trade dispute thus far, will be the winner, vowing to abide by WTO rules, end unfair trade practices and agree to international norms on intellectual property.

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Xi’s message masters are already working on his first statement — made to get the attention of the international community and Donald Trump and put in place a cease-fire on tariffs.

Then the negotiating process can begin. And in the arena of negotiations, China believes it has the upper hand over Trump — who also believes he has the upper hand.

With China’s equity markets and currency down, it knows it has to make some changes before more nations outside the U.S. lose interest in China trade and investments.

Already, Europeans are becoming nervous about China’s monster economy and China’s voracious Belt and Road appetite of eating smaller economies and presenting them with a bill for the debt.

Europe knows it cannot stop the Belt and Road but it can be the gateway western hub of all trade with China — if it plays its cards right.

The key is to save face. Xi can blame his Commerce Ministry and Li Keqiang for any past misunderstandings while taking credit for his wisdom in solving a difficult problem.

Donald Trump will take himself for the winner — at least until the results of any agreements which could be years away become clearly known to all.

In the meantime, China can get its markets going again while negotiations with the likes of Steven Mnuchin and Robert Lighthizer get moving in earnest.

China believes it can be the master of it all.

Related image

See also:

Europe Turns Down Chinese Offer For Grand Alliance Against The US



China Knows: China is stealing American intellectual property, and Trump’s tariffs are a chance to stop it

September 19, 2018
Trump is confronting China and winning. Playing by the accepted rules is good for everyone. China’s way is doomed to fail.

A U.S.-China tariff war is sure to produce very real economic consequences, and political fallout, in both nations. It also presents an opportunity to re-examine the trade relationship between the world’s two largest economies and perhaps set a new course that would address some of the elephant-in-the-room issues of China’s trade practices.

Whatever else one might think of President Donald Trump’s actions, he is confronting China about its unfair trade practices and theft of American intellectual property when too many others shy away from the truth for fear of Chinese reprisal.

By Charlene L. Fu and Curtis S. Chin

This summer, Trump imposed 25 percent tariffs on a total of $50 billion worth of Chinese goods, and Beijing retaliated. Trump this week added more Chinese products — $200 billion worth — to that list. The response in the U.S. has been stock market volatility and hand-wringing about rising manufacturing costs and consumer prices.

It bears remembering that the Chinese trade practices that irk Trump truly do bedevil Americans and others doing business with China, and they go back decades, at least to the mid-1980s, when China under Deng Xiaoping was opening to the world.

Cargo was stacked high on a China Shipping Line freighter at Miami Beach, Fla., in 2006.(File Photo/Agence France-Presse)
Cargo was stacked high on a China Shipping Line freighter at Miami Beach, Fla., in 2006.
(File Photo/Agence France-Presse)

Once the U.S. formally recognized the People’s Republic in 1978, American businesses were tantalized by the prospect of China’s untapped market of 1 billion consumers. What American companies soon discovered, though, was that this trade partner did not play by the accepted rules.

The single best example of this disregard for rules remains McDonald’s experience in the mid-1990s. The Beijing municipal government broke the company’s 20-year lease after just two years and effectively evicted McDonald’s from its flagship, three-story, 700-seat restaurant in the heart of the capital to make way for a massive shopping complex. As a U.S. news report at the time said, “the dispute has come to epitomize an entrenched Chinese notion that terms of contracts can be altered at will.”

Although the McDonald’s example is just one case, we saw many similar situations firsthand when we were, respectively, a wire service reporter and a business executive in Beijing.

China’s repeated and unashamed theft of intellectual property has been especially egregious and damaging. A 2017 report by the independent and bipartisan U.S. Commission on the Theft of American Intellectual Property put the annual cost of IP theft by all parties at $255 billion to $600 billion in counterfeit goods, pirated software and stolen trade secrets; these figures do not include the full cost of patent infringement. The commission named China “the world’s principle IP infringer.”

When Sino-American trade operated under the framework of “most-favored nation status,” Congress conducted an annual review before continuing normal trade relations with China. This gave Washington a mechanism to pressure China to change unacceptable behavior in trade relations and human rights. That mechanism was rendered moot when Beijing won entry into the World Trade Organization in 2001. The WTO negotiations on China’s membership were the last, best chance to stop Chinese IP theft. But instead of refusing to admit Beijing until it took real steps to stop violations of IP rights, the WTO simply took China at its word that it would follow the rules that bind other members. The past 17 years have shown this to be a false promise.

A now-emboldened China is pushing its “Made in China 2025” campaign, an ambitious plan not only to upgrade Chinese industry — most notably in advanced sectors like information technology, robotics and pharmaceuticals, where IP is key — but to compete with and ultimately displace foreign companies domestically and globally. To that end, it has continued to aggressively push foreign companies to hand over technology and IP rights in exchange for market access — a possible violation of WTO rules.

China’s leaders no doubt see things very differently, and the Chinese expression huo gai might well apply. Loosely translated, it means “you had it coming.” If you leave your door unlocked and get burgled, huo gai — it was your own fault because you didn’t lock up. Similarly, if U.S. businesses do not take measures to protect their own intellectual property, it’s huo gai if China waltzes in and makes off with it.

Trump’s approach, while unpalatable to some and unsettling in the short term, could result in a much-needed new chapter in U.S.-China trade, one in which Beijing can be compelled to at least abide by the rules it agreed to when it won WTO membership. If nothing else, Trump has unequivocally called out China for behavior that should not be tolerated, and paved the way for other nations to do so too.

It appears that may have started to happen. News reports last week tracked an “unprecedented global backlash” against Chinese foreign investment, a “wariness, sharpened and accelerated by the Trump administration.”

The United States remains the one player that can effectively challenge China’s unfair practices. Trump’s tariffs have set the stage for policymakers, trade negotiators and China experts to develop a U.S.-led, worldwide strategy that is clear, forceful and has teeth, even if it means short-term economic hardship at home.

Charlene L. Fu is a freelance editor, reporter and translator. She worked in Beijing from 1986 to 2008, much of that time as an Associated Press correspondent. 

Curtis S. Chin, a former U.S. ambassador to the Asian Development Bank, is managing director of advisory firm RiverPeak Group. 

This column was first published in the Los Angeles Times.



Asian markets ride positive wave on hopes for trade resolution

September 19, 2018

Asian markets rose Wednesday as tit-for-tat tariffs by China and the United States were considered lighter than feared, while there are hopes the two sides can eventually hammer out a deal to avert an all-out trade war.

Donald Trump on Monday said he would press ahead with 10 percent levies on another $200 billion of imports, sparking a response from Beijing to target $60 billion of US goods with five to 25 percent taxes.

The developments were a clear step up in the months-long stand-off between the world’s top economies but analysts said dealers had been expecting the measures and essentially took the lower rates as a positive sign.

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Donald Trump takes questions during a joint news conference with Poland’s President Andrzej Duda

Wall Street’s three main indexes rallied and Asia picked up the baton.

Tokyo ended the morning 1.5 percent higher, with a shift out of the safe haven yen supporting Japanese exporters, while Hong Kong and Shanghai each gained more than one percent.

Sydney rose 0.4 percent, Singapore edged up 0.2 percent and Taipei increased 0.7 percent. Wellington, Manila and Jakarta also posted strong performances. Seoul was flat.

“The bottom line why the market didn’t react negatively was the lack of shock and awe given the tariffs were so well telegraphed,” said Stephen Innes, head of Asia-Pacific trade at OANDA.

Dealers are now keeping an eye on possible talks between Washington and Beijing after US Treasury Secretary Steven Mnuchin sent an invite to avert a trade war, which many fear could destabilise the world economy.

“It?s more likely that there will be some negotiated resolution coming through in the near term,” George Schultze, founder and CEO of Schultze Asset Management in New York, told Bloomberg TV.

“Cooler heads will eventually prevail because otherwise both sides are shooting themselves in the foot.”

However, Innes warned of further upheaval for investors.

“Despite the market taking the bluster in stride, history tells us that tariffs are detrimental for global trade and commerce,” he said. “As such the current levels of market buoyancy belie the possible groundswell that could overrun markets.”

On oil markets both main contracts edged down after rallying more than one percent Tuesday on the back of comments from OPEC kingpin Saudi Arabia that it is happy with prices rising above $80 a barrel.

On foreign exchanges the broadly upbeat sentiment provided support to embattled high-yielding and emerging market currencies, with Indonesia’s rupiah up 0.2 percent, the Australian dollar 0.3 percent higher and the Thai baht 0.1 percent up.

The Mexican peso, Russian ruble and South African rand were around 0.4 percent up.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 1.5 percent at 23,776.69 (break)

Hong Kong – Hang Seng: UP 1.1 percent at 27,370.81

Shanghai – Composite: UP 1.1 percent at 2,728.43

Euro/dollar: DOWN at $1.1658 from $1.1680 at 2100 GMT

Pound/dollar: DOWN at $1.3142 from $1.3146

Dollar/yen: DOWN at 112.30 yen from 112.33 yen

Oil – West Texas Intermediate: DOWN 15 cents at $69.70 per barrel

Oil – Brent Crude: DOWN 20 cents at $78.83 per barrel

New York – Dow Jones: UP 0.7 percent at 26,246.96 (close)

London – FTSE 100: FLAT at 7,300.23 (close)

Some US business groups criticise latest Trump tariffs on China — European firms swinging toward U.S. side…

September 19, 2018

Trade associations say there are better ways to prod China to open markets
Treasury Secretary Steve Mnuchin last week invited Chinese officials to Washington for more negotiations on President Trump’s tariffs.
Treasury Secretary Steve Mnuchin last week invited Chinese officials to Washington for more negotiations on President Trump’s tariffs.PHOTO: EVAN VUCCI/ASSOCIATED PRESS

Critics calls President Turmp’s latest tariffs ‘a tax on American families’ © Getty

Andrew Edgecliffe-Johnson in New York 

Donald Trump’s newest round of tariffs on Chinese imports put off the worst of the impact until after US retailers’ critical Christmas season and spared a few businesses, including smartwatches and high chairs, but corporate America still decried the move as a costly and counterproductive answer to its concerns about China.

Washington’s largest trade associations have spent months ramping up their campaigns against the escalating trade war, identifying state by heartland state how many jobs and export dollars they put at risk. In public hearings, small business owners making everything from fishing nets to wooden crates urged Washington to reconsider, but Mr Trump tuned out the chorus.

“As thousands of businesses have testified and explained in comments to the administration, tariffs are a tax on American families,” National Retail Federation president Matthew Shay lamented after the new 10 per cent tariff on $200bn of Chinese imports was announced. It was “disappointing” that the administration had ignored the voices of those affected, he said.

Gary Shapiro, president of the Consumer Technology Association, said his industry appreciated the exemption of some connected devices but was still worried about the impact on printed circuit assemblies, routers and networking equipment.

Now is the time for talk — not just tariffs

National Association of Manufacturers

Tariffs were an ineffective — and possibly illegal — tool, he argued. “Congress has not given the president or the [US trade representative] a blank check to pursue a trade war.”

The Trade Act of 1974 says that the president must consult with the private sector and “shall take the advice received” into account in setting trade policy, John Murphy, senior vice-president for international policy at the US Chamber of Commerce, echoed on Twitter.

Several US business group support the idea of pushing China to open its markets to US imports, and penalising it for intellectual property infringements, but disagree with Mr Trump’ tactics.

“The administration has correctly identified the real problem of China’s discriminatory trade practices. But unilaterally imposing tariffs is the wrong way to achieve real reforms,” the Business Roundtable said, urging Washington to work with its allies to push for long-term reforms in China.

Craig Allen of the US-China Business Council, which represents about 200 US companies that do business with China, said the administration’s focus on market access, IP rights and technology transfer was correct but using tariffs was “counterproductive”.

Tom Donohue, the Chamber’s president, agreed that the US had “serious issues to resolve with China on market access, unfair subsidies, technology theft, and cyber security” but expressed dismay that the administration did not heed US companies’ warnings about rising costs and lost jobs.

Before announcing the latest measures, Mr Trump played down the extent to which tariffs were increasing prices, tweeting that “cost increases have thus far been almost unnoticeable”. Companies from Coca-Cola to Whirlpool have announced price increases, however, expressing confidence in a strong economy allowing them to pass the burden to customers.

“We cannot afford further escalation, especially with the holiday shopping season right around the corner,” the NRF’s Mr Shay said. The administration’s decision “has not gone the way we hoped it would,” Macy’s chief executive Jeff Gennette told a CNBC conference on Tuesday: “We’re going to see how the customer votes on this.”

Some business groups said the biggest disruption came from the uncertainty produced by the trade dispute. “With every day that passes without progress on a rules-based, bilateral trade agreement with China, the potential grows for manufacturers and manufacturing workers to get hurt,” the National Association of Manufacturers said. “Now is the time for talk — not just tariffs”.

The escalation of the trade tensions comes at the start of the US reporting season, when companies are expected to spell out the impact on their earnings and outlook. FedEx, the Memphis-based courier that is seen as a bellwether of global business confidence, said on Monday it had started to see economic activity “moderate” in China as a result of the trade tensions.

Hours before Mr Trump announced the latest tariffs, Fred Smith, FedEx chairman and chief executive, told analysts that the US-China trade dispute was “worrisome to everyone . . . because history is very, very clear that countries that pursue the most open markets are the ones that prosper the most”.

Rajesh Subramaniam, FedEx’s chief marketing officer, said China-US business represented only about 2 per cent of the company’s revenues, of which only about a quarter could be affected by the promised new US tariffs. It had not yet seen significant shifts in customers’ supply chains, he added, but expected them to diversify their sources of supply if the trade tensions continued.

Several companies remain unsure of the administration’s next steps. Thomas Joyce, chief executive of Danaher, told analysts last week that the industrial group had no privileged insight into the administration’s thinking despite being headquartered in Washington. “The narrative out of the White House . . . and the US trade representatives changes as often in our minds as it does in yours,” he said.

Additional reporting by James Politi in Washington


European firms consider pulling out of China amid US-China trade war

September 19, 2018

The European Union Chamber of Commerce in China says the issue can be easily resolved if Beijing opens up further, takes away market access barriers and conducts more economic reforms

South China Morning Post

European companies operating in China are extremely worried about getting caught in the US-China trade war crossfire and some are considering relocating to Southeast Asia as punitive tariffs slapped by the world’s two largest economies take a toll on multinational firms, according to the European Union Chamber of Commerce in China.

US President Donald Trump announced on Tuesday an additional 10 per cent levy on US$200 billion worth of Chinese imports from next Monday, the latest round of punitive trade tariffs on the world’s second-largest economy.

China’s Ministry of Commerce said it would fight back by taking “synchronised counter measures” against the tariffs.

A survey by the business lobby group found that nearly 54 per cent of nearly 200 respondents feel the US tariffs will cause significant disruptions to the global supply chain and some 7 per cent have either moved or are planning to move their production out of the mainland. And that percentage could rise as some companies were still assessing the impact from the trade war before they make their decision.

The survey also showed that 5.2 per cent European companies have either moved or are moving US-based production facilities out of the market.

“We believe that if China would open up more, take away the market access barriers, conduct more economic reforms without creating stronger state-owned enterprises, all of those [trade war and trade tensions] can be avoided,” said Carlo Diego D’Andrea, vice-president of the EU chamber.

Multinational companies plan to move production capacity to Southeast Asian markets such as Vietnam and Philippines to dodge the additional tariffs levied on the key parts which are imported from the US and used for assembling and processing in China.

The survey also anticipated that the trade war will result in slower economic growth, millions of job losses, less trade, higher production costs and weaker demand in China.

“Both [sides] are prone to losing companies as a result,” the EU chamber said.

The EU chamber said the cause for the trade war and the tensions in the global economic system was China’s reform and opening failing to keep pace with its rapidly maturing economy.

“European companies have for a long time been stifled by the efforts of China’s reform deficit, and now they are taking collateral damage from the US-China trade war,” said Mats Harborn, president of the EU chamber in China.

Last week, the American Chamber of Commerce in Beijing and Shanghai found in a survey that three-quarters of US companies operating in China would be negatively impacted if the tariffs on US$200 billion worth of Chinese goods were implemented.

More than 47 per cent of respondents from a survey of 430 US companies said they were expecting a “strong negative impact” from the tariffs.

Is China About To Move on Trade? — China pledges equal treatment for foreign investors

September 19, 2018
Pledges to release financing to China’s beleaguered private businesses
Image may contain: 1 person, eyeglasses and suit

© AP

By Lucy Hornby in Tianjin 

China’s Premier Li Keqiang pledged a series of pro-business policies including equal treatment for foreign investors, in an effort to retain investor confidence in the wake of additional tariffs imposed by the US.

On Monday the White House imposed 10 percent tariffs on an additional $200bn in Chinese imports, escalating its trade war. Nearly half of all Chinese shipments to the US now fall under President Donald Trump’s tariff regime.

China in turn announced retaliatory tariffs on $60bn in imports from the US.

China would cut taxes, roll out equal treatment for foreign investors and unlock financing for private businesses, Mr Li said.

“Chinese and foreign companies can compete on a level playing field in this big market. That gives better vitality to Chinese economy,” he said, triggering prolonged applause from an audience that ranged from foreign high-tech equipment manufacturers to small businesses from provincial cities.

Mr Li said China would not deliberately devalue the renminbi, but would keep its currency “at an adaptive and equilibrium level”.

For Mr Li’s audience, the most welcome announcement was his pledge to release financing to China’s beleaguered private businesses. “The pool is full of water, the challenge is to unblock the channels”, he said.