US - Trade War (China)

[winston]

4 powerful weapons China has in its arsenal to win the US-China trade war

Last week the U.S. launched a trade war with China revealing a list of tariffs it could slap on $200 billion worth of Chinese goods.

Today President Trump says he is willing to put tariffs on all $505 billion of Chinese goods imported into the U.S.

China can retaliate beyond instituting tariffs on U.S. goods.

China holds $1 trillion worth of U.S. treasury bonds. If it stops buying new bonds, or sells off its holdings, it would trigger a hike in yields putting pressure on America's debt load.

Devaluing the yuan by 8 percent could make tariffs moot.

The Chinese government could make it harder for U.S. companies to operate in China.

by Bryan Borzykowski

Source: CNBC

https://www.cnbc.com/2018/07/19/4-letha ... KW,1NOKE,1

[behappyalways]

More ships join those lying idle off Chinese ports as import restrictions bite
https://www.hellenicshippingnews.com/mo ... ions-bite/

[winston]

China’s two big mistakes in trade war may lead the country into middle-income trap

After misjudging Donald Trump and misjudging the alliance between Washington and Brussels, Beijing needs to act fast

by Zhang Lin

US's National Defence Strategy report: the US would no longer tolerate Beijing’s trade and economic practices. The message was that Beijing could not earn money from the United States while at the same time posing a challenge to it.

Washington and Brussels will “work closely together with like-minded partners” to address a long list of issues such as “intellectual property theft, forced technology transfers, industrial subsidies, distortions created by state-owned enterprises, and overcapacity”.

Source: SCMP

https://www.scmp.com/news/china/economy ... dle-income

[winston]

China to slap tariffs up to 25 per cent on US$60 billion of US goods

The move comes in reaction to President Donald Trump’s escalation of the US-China trade dispute

Source: SCMP

https://www.scmp.com/news/china/diploma ... n-us-goods

[winston]

U.S. tariffs are taking a toll on the Chinese economy

The solar industry is in trouble, the yuan is depreciating, and foreign manufacturers are shifting their supply chains outside of China to avoid tariffs.

Source: Epoch Times

[behappyalways]

China plans tariffs after latest US trade threat
https://www.bbc.com/news/business-45061511

[winston]

Risks outweigh rewards for US in trade war

by Andrew Wong

The trade war between China and the United States currently appears to favor the United States but does it mean that America is not at risk from this trade war at all?

People believe America has an advantage because China relies on many high-end products from the United States.

For instance, Boeing has contributed to China's aviation industry over the past decades. Even if Europe's Airbus steps up its game, it cannot fully replace the American giant's role in China. Moreover, it will be a while before China is able to build planes that match Boeing and Airbus in terms of quality and safety. In other words, China will find it hard to stop buying American aircraft.

Meanwhile if China were to slap tariffs on US planes, the ultimate losers will be a number of mainland airlines who will end up with large amounts of foreign debt.

Planes are just one of the many things that China imports, and from medicines to computer chips to food, China still relies on imports from the United States and Europe due to safety, quality and other reasons. This is why China is weak in a trade war.

But this does not mean the America has a comprehensive advantage. In a recent article, Nobel laureate Joseph Stiglitz pointed out that if the United States' domestic investment continues to exceed its savings, it will have to borrow money and have a large trade deficit. And because of tax cuts, the US fiscal deficit is reaching new records which means the trade deficit almost surely will increase, whatever the outcome of the trade war.

And even if the trade war reduces the US deficit with China, will only increase its deficits with other countries.

The bigger question is whether American consumers are willing to forsake "Made in China" goods for higher-priced products from other countries. Even if they were, it would only add to inflationary pressures in the US and trigger a faster rise in US interest rates, which would ultimately hurt the US economy and increase domestic opposition to trade wars, putting US President Donald Trump under even greater pressure.

What's more, most of the trade between China and the United States is actually intermediate goods. Raising taxes on these products will only eventually increase the cost of American goods and hurt the profits of American companies.

Trump must know all this but he just wants to revive America's status through a trade war, as part of his "America First" campaign. Therefore, unless there is a change in public opinion before the November midterm polls, Trump will not look at the economic risks at this stage but only continue to put pressure on China.

Source: The Standard

http://www.thestandard.com.hk/section-n ... 0806&sid=2

[behappyalways]

Trump triumphant

Is China losing the trade war against America?

A weak Chinese stockmarket gives America the edge, at least in confidence

WHEN Donald Trump tweeted on August 5th that tariffs were working “big time”, American media sprang into action to test the claim (see article). In China, editors were more circumspect. No major Chinese-language newspaper reported his tweets.

One of his claims—that China’s stockmarket has fallen 27% in the past four months—was an exaggeration. But why would any self-respecting propagandist in Beijing dwell on that? Chinese stocks have indeed fallen sharply (see chart), which officials do not wish to emphasise.

And this is just one of a series of awkward facts for China as its trade war with America deepens. The yuan is down 8% against the dollar since April, and near its weakest in more than a year. A shrinking trade surplus produced a current-account deficit in the first half of 2018,

China’s first such gap in at least two decades. More broadly, China’s growth is slowing at a time when America’s economy is expanding at its fastest pace since 2014. No wonder Mr Trump feels that he is on the right path, and that Chinese investors are jittery.

Making matters worse for China is a whiplash effect. Until recently officials and executives believed their own declarations of technological prowess. Privately, advisers were confident that Mr Trump could be placated with promises to ramp up imports from America. Now both views look wanting.

An agreement for China to buy more American natural gas and soyabeans collapsed in June. Chinese officials are keenly aware of vulnerabilities; had America maintained its sanctions on sales of semiconductors to ZTE, the Chinese telecoms giant might well have gone out of business. Those with a conspiratorial mindset see things in a darker light. “The Americans don’t want a deal. They want to screw us,” says a fund manager.

The asymmetry in the trade war is another uncomfortable fact. Since America buys far more from China than vice versa, America has more scope to impose tariffs. This imbalance, long discussed in theoretical terms, is close to becoming a hard reality.

Mr Trump has instructed his trade team to consider 25% tariffs on $200bn of Chinese imports as early as September, taking the total affected by its tariffs to about $250bn, with room for twice that amount.

China’s threatened retaliation, announced on August 3rd, will be tariffs on $60bn of American imports. This would take the total under its tariffs to $110bn, with little room for more.

China has other weapons at its disposal. It can disrupt the lucrative Chinese operations of American businesses, from Apple to Starbucks. But that would have downsides. Declaring bogus justifications (health violations, say) would reinforce foreign criticism of government meddling in China’s economy.

And the nature of such interference, unlike tariffs, is that it will not be announced in advance, meaning it can take longer to register the impact.

The timing of the trade war is most inconvenient for China. Over the past two years the government has waged a campaign to rein in debt levels. Finally this has started to bite, with credit growth slowing sharply. Officials could opt to abandon their tightening stance in order to counteract the trade turmoil. But that might erase the gains from the deleveraging.

This explains their restraint so far. At a meeting of the Politburo on July 31st, China’s leaders noted that it was a priority to support growth amid the “clear change” in the external environment, but also pledged to press on with their efforts to control debt. Investors who had hoped for more easing were disappointed.

So there is cause for concern about China’s growth outlook. But markets may be unduly pessimistic. One conclusion from the past few weeks is that policymakers now accept that the trade war is real, and are starting to cushion the economy. The boost to exports from the falling yuan, down about 6% on a trade-weighted basis since mid-June, should be “roughly proportionate” to the blow from the first $50bn of American tariffs and some of the next $200bn, says Andrew Tilton, the chief Asia economist at Goldman Sachs.

At the margins, he adds, China is shifting to a more active fiscal policy. Officials have made it easier for cities to get funding for infrastructure projects. One government adviser says there is discussion of a bigger stimulus, likely to be focused on promoting consumption rather than investment.

The economic backdrop to the trade war could also change over the next year. As China tiptoes towards easing, its credit growth should pick up. Meanwhile, America may be near the top of its growth cycle, with gains from last year’s tax cut set to dissipate.

Louis Kuijs of Oxford Economics, a research firm, says the divergence in their stockmarkets might reflect overconfidence in America and an evaporation of confidence in China. “Both reactions seem exaggerated,” he says. With no resolution to the trade war in sight, there will be time enough to test this proposition.

Source: The Economist

[winston]

China needs to put its house in order as the trade war goes from bad to worse

Aidan Yao says the China-US trade war is likely to continue, if not worsen, since it is rooted in a competition much deeper than trade imbalances, and therefore the Chinese side needs to prepare for the worst

Source: SCMP

https://www.scmp.com/comment/article/21 ... -bad-worse

[winston]

This is China’s most dangerous trade-war weapon

by Rick Newman

An abrupt selloff of the roughly $1.5 trillion in U.S. government securities.

China holds around $1.2 trillion worth of Treasury securities, along with another $200 billion or so in debt from U.S. government agencies such as Fannie Mae. There’s another $100 billion worth of Treasuries China reportedly holds through custodians in other countries.

But its holdings only total about 6% of all Treasury debt. All foreign entities combined hold only about 30% of U.S. debt. Americans, in various forms, own the other 70%.

China itself would be negatively affected by rising interest rates, just as other nations would be. It would have to find new liquid investments to replace its massive Treasury holdings, which could further destabilize a turbulent market. And the value of China’s currency, the yuan, would most likely rise as the value of the dollar fell.

Source: Yahoo Finance

https://finance.yahoo.com/news/chinas-d ... 59706.html