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PostPosted: Thu Apr 05, 2018 11:08 am    Post subject: Trade War thread ... Reply with quote

China Declares Trade War Victory: Gloats At US "Suffering" After "Crushing Counterattack"
by Tyler Durden
Thu, 04/05/2018 - 10:56

Barely a day after China dropped the hammer on US stock markets by unveiling retaliatory tariffs on $50 billion in US imports that - unlike US measures that mostly targeted obscure industrial products - actually struck at key industries like soybean farmers, automobiles and airplanes, the Communist Party crowed about what it already sees as its "victory" in the nascent trade war in an editorial published by the Global Times, China's state-owned, English-language tabloid and extremely hawkish party mouthpiece.

In the editorial, China swatted away US claims - repeated most recently by Larry Kudlow during this morning's interview with Fox Business's Maria Bartiromo - that China has somehow victimized the US via its trade agreements while gloating about the leadership's decision to strike at a "massive weak spot" for the US economy.

While the tit-for-tat tariffs could hurt both economies, the damage to China's economy caused by the US's Section 301 tariffs will "pale in comparison to the damage done to the US economy via China's retaliations."

And just to illustrate that point, literally, a Chinese cartoonist showed that another way Beijing will hurt the US is by a "stockmarket squeeze." [cartoon in original]

Furthermore, in standing up to America's "bullying tactics", China warns that the pleasure the US had derived from its sanctions in the past "will now cause them suffering as their financial and political gains diminish to zero."

This is Beijing's clear show of retaliation toward the proposed tariff list on Chinese products from the US. Beijing showed an impressive response time for its retaliation efforts, taking less than 12 hours to announce its trade countermeasures. Chinese officials agree that its country's countermeasures match those imposed by the US and that they showcase China's determination to win this trade war.

It is worth noting that China strikes the US side by targeting its most valuable imports, such as soybeans, automobiles and chemical products. These aspects were targeted because they represent key pillars in the US imports and can create a massive weak spot for the US economy if their profitability is at risk.

Although China will sustain financial losses thanks to the US' Section 301 investigation tariffs, they will pale in comparison to the damage done to the US economy via China's retaliations.

China's counter tariffs are a spectacular way of standing up to America's bullying tactics, not only for itself, but for other countries threatened by the US's new trade policies.

And with China digging in for a long, protracted trade conflict, one from which it will never surrender, if it is indeed Kudlow's - and the Administration's - hope that China will concede to US trade demands, then there will be much disappointment all around.

Underscoring China's preparation for a "scorched earth", and tit-for-tat escalating war, the Chinese government has told its citizens it is prepared to go toe-to-toe in its fight with Washington. In fact, more and more Chinese citizens think that an "epic trade war" is inevitable, which would knock some common sense into the US government so that it will change its way of dealing with China.

Hawkish politicians in Washington have obviously overestimated the capability and endurance of the US economy in a trade war, since they believe they can do whatever they like. China has shown a great deal of restraint for now, but if the US persists in this trade war, China is ready to fight to the end.

Washington will eventually see what they have lost, thanks to their actions, and it will only serve to embarrass the US. This trade war will serve as a good example to the US that it cannot use intimidating trade tariffs as a form of diplomacy.

Before China announced its recent retaliatory tariffs on US products, Washington enjoyed crushing and threatening other countries on trade sanctions. Now, as China deploys its counterattack, the pleasure that the US achieved from those tariffs will now cause them suffering as their financial and political gains diminish to zero.

If a trade war does happen, China has contingency plans to help its economy avoid a slump.

And, in a dramatic break with precedent, China warned it could even take steps to weaken the US dollar, something that, if history is any guide, should be a concern to the Treasury market as it would suggest that China may be thinking of liquidating its Treasurys .

Many believe that the Trump administration's $50 billion tariff on Chinese products is meant to pressure China to submit to the US demands. If that is the case, the US will undoubtedly lose. This is because the Chinese government has rallied its citizens and is prepared to go toe-to-toe in its fight with Washington. In fact, more and more Chinese citizens think that an "epic trade war' is inevitable, and could knock some common sense into the US government, so that it will change its way of dealing with China.

If the trade war happens, China will show that it has just as many reserve plans as the US, if not more. Chinese experts suggest that China could even take actions to weaken the strength of its currency. Since China is the world's largest trading economy and the largest buyer of commodities like oil products, China could use its influence to push its own currency, RMB, in global markets to reduce the dominance of the US dollar. That would be a heavy blow to Washington.

If this trade war comes to pass, it will be an evenly matched total war between China and the US economies, and not some small scuffle. It would be delusional for the US to think it will be victorious at the end of this trade war. China comes up with the conclusion in confidence, and will not shy away from letting Washington know in this situation.

And while taking overt steps to weaken a currency would violate a G-20 communique agreeing to avoid currency wars through competitive devaluations, we doubt that would stop Beijing should Trump push it too far.

Meanwhile, a greater - and more likely - risk than a Treasury dump by Beijing is another devaluation: after all the Yuan is already back to where it was in the days just before the Yuan's 2016 deval. Fears about an impending yuan devaluation akin to the drop that unleashed turbulence across global markets back in August 2015 have historically had a negative impact. Traders will remember 2016, when markets got off to one of their worst early performances in decades as continued daily, if less acute, Yuan devaluations hurt stocks.

While this warning appears to have been largely overlooked by markets, it's definitely something to keep in mind.

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PostPosted: Fri Apr 06, 2018 9:38 am    Post subject: Reply with quote

It looks like Trump is ready to go to the mat.

"We May Take A Hit": Trump Warns Investors To Prepare For "Pain" In The Market
by Tyler Durden
Fri, 04/06/2018 - 09:39

Two days ago, when we commented on the early morning plunge in stocks (which was subsequently fully reversed by the close in a historic 800 point Dow reversal), we said that a long-standing question - will Trump pick plunging stocks or trade war - had finally gotten its answer when CNBC's Eamon Javers said that a "White House official said the the WH recognizes that Trump’s actions are hitting the stock market, but this is “a longer term thing,” and the president has to follow through on a key campaign promise."

Moments ago, Trump himself confirmed that when in a radio interview on Friday morning, the president said that U.S. markets could face some “pain’’ from the trade standoff with China and other countries, but - like on Wednesday - asserted that in the long-run, Americans would be better off due to his protectionist actions.

Speaking on WABC Radio's “Bernie & Sid in the Morning’’ program, Trump said "I’m not saying there won’t be a little pain so we might lose a little of it but we’re going to have a much stronger country when we’re finished, and that’s what I’m all about.’

"We have to do things that other people wouldn’t do. So we may take a hit, but you know what, ultimately we’re going to be much stronger for it,’’ Trump said during the radio interview on Friday. “It’s something we had to do, and ultimately if you take a look it’s not only trade with China - it’s everybody."

To be sure, stocks have fluctuated dramatically in the past few weeks when Trump drastically intensified trade actions and jawboning against several countries, mostly China. Indicating that he is willing to accept some notable losses in the S&P, Trump said in the interview Friday that “the market’s gone up 40% or 42%.” Which suggests that the president would be ok with a drop of 20% or so if it means winning trade war against China.

Meanwhile, as reported earlier, in response to Trump’s latest tariff announcement, China said it would counter U.S. protectionism "to the end, and at any cost," as a war of words over Trump’s proposed tariffs on Chinese imports escalated.

"The Chinese side will follow suit to the end and at any cost, and will firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people,” the Commerce Ministry said in a statement on its website on Friday.

Finally, recall that China yesterday admitted that "squeezing" the US stock market is perhaps its biggest leverage. It now has a green light from the president himself to do just that...

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PostPosted: Fri Apr 06, 2018 10:00 am    Post subject: Reply with quote

"So we may take a hit..."
By "we" he means "you".

"Indicating that he is willing to accept some notable losses in the S&P"

It is easy to take losses with other people's money and jobs.

China's trade policies need to be addressed but a trade war will only encourage the offender and punish the innocent.

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PostPosted: Fri Apr 06, 2018 11:20 am    Post subject: Reply with quote

The US has a negative balance of trade of half a $trillion a year. It can't let this go on.

Just so you know how big a half a $trillion is -- if you started counting off seconds, you would get to half a trillion in 15,844 years.

It's very difficult to see the patterns of history if you are focussed on hypotheticals about the motives of the main players.

Perhaps it would be "fairer" if we compared hypothetical motives of Trump and his recent opponent, Hillary Clinton? Or Xi Jinping? Or is this not one of those cases where we demand "fairness"? What you might call "partisan fairness".

The point is that this is happening.

My view: This is the initial drumbeats in a bit of Kabuki that means the two parties are engaged. Each side is displaying their ability to damage the other. We are at the brink of taking another step that can't be reversed. Where it will lead isn't certain. It could lead to new terms of trade between China and the rest of the world, including currency reform. Or it could put us on the path to a cessation of trade and even war. We could go into a replay of the Cold War.

So Trump's motives aren't so clearly the vital fact here. Something like this has been in the cards for a decade or longer. It would have been better if Obama had done it then ... but ... you know ... his motives ... making America like Kenya, perhaps? Stirring up racial antagonism ... he just didn't see how balancing trade would fit in.

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PostPosted: Fri Apr 06, 2018 12:26 pm    Post subject: Reply with quote

I'm not questioning President Trump's motive. I question his strategy. Treat China the same way you treat a mark. Anybody can be had. The United States has to relearn finesse.

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PostPosted: Fri Apr 06, 2018 3:05 pm    Post subject: Reply with quote

And what is the other strategy?

I think both sides are working from similar playbooks. Trump is showing his hand, one card at a time. China is responding the same way. Fierce rhetoric flies. It will result in two sides coming to the bargaining table aware of their vulnerabilities.

This may be an unfamiliar concept, but countries have a right to set their own trade policies through treaties. It isn't that the US is trying to cheat China. If anything, China cheats America through currency games and stealing intellectual property, but that, too, is within the power of sovereign states.

"Cheating" isn't really a useful concept here.

Trump has the Chinese at the table. The negotiations are complicated by the fact that Trump is leaning on China to abandon their client state in North Korea.

The trade threats are there. Trump is preparing the stock market people for a "hit". The Chinese are reacting publicly to mobilize their population. So where do we go from there to balance trade, Mr Xi Jinping?

Trump comes with a question: Does China want us to balance trade by buying more from America or does America buy less from China?

That's really what China has to decide. China is the only party that has a positive choice -- that is to buy more in the USA. The only choice the Americans have is to achieve balance by cutting $500.000,000,000 worth of trade. If China retaliates, then Trump will have to go further. That's the negative cycle that both sides are forcing the other side to contemplate.

This is a huge decision for China. It has used its trade surpluses to increase their productivity by almost 20 times. Hundreds of millions of people have migrated to new cities the size of London. It's a migration of a population as big as all of Europe. It's phenomenal, but it can't go on. Their choice is an attractive one, though it threatens the Communist Party. To keep the growth they have to become their own market. They have to create a consumer economy for a billion people.

That's what Trump is trying to push them to do.

Anyone who thinks the Chinese can't handle themselves in negotiations is probably uninformed. In the meantime, I hope some of our conservative pals can decide which side of their toast the butter is on.

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PostPosted: Fri Jun 15, 2018 1:09 pm    Post subject: Reply with quote

Uh-oh ... it's on!

Trump’s China Tariffs Met With Retaliation Vow From Beijing
By Andrew Mayeda and Jenny Leonard
June 15, 2018, 8:08 AM EDT Updated on June 15, 2018, 10:22 AM EDT
First set of tariffs to hit July 6, another round under review
Move will help U.S. achieve more balanced trade, Trump says

The Trump administration moved the U.S. to the edge of a trade war with China by announcing tariffs on $50 billion in Chinese imports and pledging additional investment restrictions, which Beijing immediately vowed to retaliate against.

The response from China signaled a rapid escalation of the dispute. China will impose tariffs with “equal scale, equal intensity” on imports from the U.S. and all of the country’s earlier trade commitments are now off the table, the Commerce Ministry said in a statement on its website late Friday.

President Donald Trump on Friday pledged more tariffs if China follows through on the retaliation threats, without specifying an amount. In April, he asked officials to consider an additional $100 billion in levies. Meanwhile, U.S. Trade Representative Robert Lighthizer said an announcement on U.S. investment restrictions on China will follow in the next two weeks.

“Our hope is that it doesn’t lead to a rash reaction from China,” Lighthizer said in an interview on Fox Business Network on Friday. “We hope that this leads to further negotiations and we hope it leads to China changing its policies, at least with respect to us, and opening up their market.”

The first wave of tariffs will hit $34 billion in goods and take effect July 6, with another $16 billion still to be reviewed, the U.S. Trade Representative said in a separate statement.

The USTR’s final list includes 1,102 product lines, down from about 1,300 initially, mainly focused on China’s Made In 2025 plan to become dominant in high-technology industries such as robotics, aerospace, industrial machinery and automobiles. Consumer goods including mobile phones and televisions aren’t being hit with the tariffs.

Trump defended his decision on Friday, saying the U.S. requires a fairer trade relationship with China as he played up his personal friendship with Chinese President Xi Jinping.

“Look, he’s my friend, President Xi. He’s a great man, he’s a wonderful guy, but at some point we have to straighten it out,” Trump said in an interview on Fox News. “So much of our secrets -- you know, we have the great brainpower in Silicon Valley. And China and others steal those secrets, and we’re going to protect those secrets. Those are crown jewels for this country.”

U.S. and European stocks fell and bonds gained on the news. [....]

It didn't take long.

China Strikes Back - Retaliates With $50 Billion Tariffs On US Goods
by Tyler Durden
Fri, 06/15/2018 - 13:40

Just as China promised, they have responded "immediately" to President Trump's "very big tariffs" and just unveiled $50 billion in tariffs against US goods including soybeans, light aircraft, orange juice, whiskey and beef, starting July 6th.

Mirroring the US tariffs scheme, China's Ministry of Finance is setting a two-tier system with $34bn on July 6th and $16bn more to follow...

On June 15, 2018, the U.S. government issued a list of goods subject to tariffs, which will impose a tariff of 25% on about 50 billion U.S. dollars of goods imported from China, of which about US$34 billion will be goods from July 6, 2018. It began to impose tariffs and began to solicit public opinions on about 16 billion U.S. dollars in tariffs. The U.S. measures violated the relevant rules of the World Trade Organization and it is contrary to the consensus reached in the Sino-U.S. negotiations. It seriously violates our legitimate rights and interests and threatens the interests of our country and people.

According to the "People's Republic of China Foreign Trade Law," "The People's Republic of China Import and Export Tariff Regulations," and other laws and regulations and the basic principles of international law, the State Council Tariff Commission decided to impose an additional 25% on 659 items of US$50 billion imported goods originating in the United States. Tariffs, including 545 items of approximately US$34 billion in goods, have been subject to additional tariffs since July 6, 2018, and the implementation time of additional tariffs on other commodities has been announced separately.

This is exactly what Goldman Sachs was worried about: "We expect a minimal effect on growth and consumer price inflation from the tariffs, if implemented, but the announcement raises the odds that additional restrictions will be proposed over coming months."

In all probability, this is only the first round.

In 2015, the US exported $115.9 billion to China and imported $483.2 billion.
In 2016, the US exported $115.6 billion to China and imported $462.5 billion.
In 2017, the US exported $129.9 billion to China and imported $505.5 billion.

China has put tariffs on $50 billion of those imports. Two more such strikes, and they are out of ammunition, but the US -- if it matches the numbers -- has half a $trillion to strike at. Who wins that one?

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PostPosted: Sat Jun 16, 2018 7:14 am    Post subject: Reply with quote

Get ready for auto tariffs, U.S. congressman warns
Trump floated 25 per cent duties on vehicles after Trudeau's news conference at G7
Elise von Scheel · CBC News · Posted: Jun 16, 2018 4:00 AM ET | Last Updated: 4 hours ago

U.S. President Donald Trump isn't playing around — and Canada should brace itself for new tariffs on autos, U.S. Congressman Kevin Cramer warned this week.

"We have to take him at his word," Cramer, a Republican from North Dakota, told CBC Radio's The House on Friday.

Trump simultaneously withdrew his government's approval of the G7 communiqué and floated the idea of slapping 25 per cent tariffs on autos from Canada after Prime Minister Justin Trudeau's post-G7 summit news conference, during which the PM repeated his government's message that Canada would not be "pushed around" by the United States.

ANALYSISWhy Trump's threats could give Canada a trade advantage it never sought: Don Pittis
Trudeau government working on retaliation plan in event U.S. imposes auto tariffs
Canadian retaliatory tariffs in response to U.S. tariffs on steel and aluminum come into effect July 1. Senior government officials are quietly drawing up a list of ways for Canada to retaliate if it's hit with even more tariffs by its closest ally.

No matter what threats emerge from Washington D.C., Ralph Goodale, Public Safety minister and vice-chair of the cabinet committee on U.S.-Canada relations, said Canada's position remains unchanged.

The dollar-for-dollar tariffs looming from Canada will be imposed "more in sorrow than anger," he said.

"We've been very clear that whatever the tactics from the other side, we will stand firm."

Goodale said the federal government will continue to engage in "a very vigorous dialogue" with Washington, but it won't "engage in ad hominem rebuttals."

The president is pushing his 'America first' message on the trade file, Cramer said — and he'll sign a deal when it looks like a win for Americans. Whether such a deal would work for the other two NAFTA partners remains unclear.

Trump also has pushed the idea of negotiating bilateral deals instead of the three-party NAFTA, but two European ambassadors to Canada told The House it's important — both within North America and internationally — to continue to fight for larger trade deals.

"We have no choice but to stick to multilateralism," French Ambassador Kareen Rispal told host Chris Hall, acknowledging that Trump clearly has problems with that notion.

German Ambassador Sabine Sparwasser agreed, adding that tariffs and trade wars hurt Americans too.

More than 850,000 German cars are produced in the U.S. annually and about half of them are exported after assembly, according to VDA, Germany's automotive industry association.

"Tariffs would not just hit Germany. They would hit the American workers," Sparwasser said. [....]

Thanks Justin!
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