Author Topic: China Escalates Trade War with U.S.  (Read 635 times)

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Offline Femacamper

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China Escalates Trade War with U.S.
« on: April 02, 2018, 10:00:06 am »

China Escalates Trade War with U.S. 

Beijing is preparing to pay for oil imports in yuan, striking another blow to the petrodollar. 

Apr 2 

The quickly escalating trade war between the U.S. and China saw the official reaction from Beijing this weekend over President Donald Trump’s new targeted tariffs on steel and aluminum.

As was largely expected, China unveiled retaliatory tariffs on U.S. imported food products, ranging from 15 to 25 percent. In a statement, the Chinese Finance Ministry said Washington had “violated the relevant rules of the World Trade Organization,” adding (translated):

“In order to safeguard China’s interests and balance the losses caused by the U.S. 232 measures to our country’s interests, I have suspended duties on seven categories of 128 imported goods originating in the United States from duty duties on April 2, 2018, based on the current applicable tariff rates. Tariffs have been imposed on the importation of tariffs on 120 items of imported goods such as fruits and products, and a tariff rate of 25% on 8 items such as pork and products. The current policy of tax-free and tax-exemption remains unchanged.”

The move was far from the most explosive taken by Chinese officials. Before the tariffs had even been announced, Beijing announced last week that it will now only pay for oil imports in yuan.

This move, separate from the launch of yuan-backed oil futures contracts, is planned to begin in as little as three months. According to Reuters, which broke the story late last week, Beijing has already asked some financial institutions to prepared for “pricing crude imports in the yuan.”

Currently, 94 percent of all oil contracts are bought and sold using the Brent and West Texas Intermediate benchmarks, both of which are priced on the dollar. But, that remaining 6 percent market share is on the Shanghai benchmark, priced on the yuan, and it’s only been around for four trading days.   

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Offline Femacamper

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U.S.-China Trade War Escalates
« Reply #1 on: April 04, 2018, 09:49:40 pm »

China’s retaliation may hurt its people more than the U.S. tariffs.

Despite attempts to negotiate a settlement, the U.S. and China each followed through Tuesday night with their plans to implement billions of dollars in new tariffs on products from each other.

Round 1 began with President Donald Trump’s implementation of tariffs on imported steel and aluminum, which indirectly targeted China. The Chinese responded with a round of tariffs against a wide array of imported products from states that constituted the president’s political base.

Round 2, which was initiated Tuesday, began when U.S. Trade Representative Robert Lighthizer released a 44-page list of roughly 1,300 items that will now face increased tariffs. The list includes many of the top U.S. imports from China, including:

• telecommunications equipment,

• computers,

• toys,

• office equipment,

• furniture,

• automotive parts, and

• televisions.

Washington listed the dollar value at approximately $50 billion for 2018. The statement said the tariffs were appropriate “both in light of the estimated harm to the U.S. economy, and to obtain elimination of China’s harmful acts, policies, and practices.”

The USTR’s Office used a computer algorithm to decide which products to impose tariffs on, picking items most likely to inflict “maximum pain” on China while limiting the impact on most U.S. consumers. Chinese President Xi Jinping struck back immediately by hitting key imports like aircraft, cars, chemicals, and one that stuck out as a potential “game changer”: soybeans.

Global markets were caught off-guard by the severity of the Chinese tariffs, which led to major losses in overnight trading. But, the move also suggests China wants to see a quick end to the trade war—its growing middle class won’t stand long for higher food prices, and it cannot get the volume of soybeans elsewhere in the world it gets from the U.S.

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Round 3: Trump Asks for $100B in New Chinese Tariffs
« Reply #2 on: April 06, 2018, 09:22:49 am »


China vows to continue with retaliatory moves ‘at any cost.’

In response to China’s retaliation to his first $50 billion in tariffs, President Donald Trump is now considering an additional $100 billion in import duties as part of the U.S.’s “Section 301” findings of unfair trade practices.

The president announced:

“In light of China’s unfair retaliation, I have instructed [U.S. Trade Representative Robert Lighthizer] to consider whether $100 billion of additional tariffs would be appropriate under Section 301 and, if so, to identify the products upon which to impose such tariffs.”

The additional $100 billion would bring the total value of sanctioned goods at $150 billion, which was the target amount early reports suggested the White House had originally considered. It amounts to nearly one-third of all Chinese imports, most of which can be “replaced” by products in the U.S. or from other countries.

The president’s new chief economic adviser, Larry Kudlow, said he had been working to develop a “coalition of the willing” of countries that have been impacted by China’s unfair trade practices over the past several years.

China quickly responded through its state-run Xinhua news agency, vowing to “retaliate immediately, intensively, without any hesitation” to any additional U.S. tariff proposals. The Commerce Ministry statement that followed said:

“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. We don’t want a trade war, but we are not afraid of one.”

A Chinese trade envoy walked out of negotiations in protest, and urged the European Union to join in the trade war against the U.S.

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Xi Appears to Blink
« Reply #3 on: April 10, 2018, 09:20:17 am »

But, there’s still a long way to go to avoid a devastating trade war.

Chinese President Xi Jinping gave a speech overnight that suggested his country will seek a “win-win solution” to the brewing threat of a trade war with the U.S., sending global stock markets soaring.

During his speech at the Boao Forum, China’s version of the Davos Conference, Xi outlined a number of government reforms related directly to trade, including lowering import tariffs on cars. His plan also calls for increased market access for foreign investors, stronger protections for intellectual property rights, and establishing a more appealing environment for potential foreign investors.

He also sought to dial-down tensions over trade war talk with the U.S. Most observers noted the speech was certainly more “conciliatory” than previous Chinese government statements on the issue, and global investors appear to have agreed, creating a “Xi Bounce” in all the major markets.

According to Hong Kong market analyst Ben Kwong:

“Markets will welcome this rational, measured response from President Xi. By emphasizing that China will seek cooperation with other countries to achieve a win-win solution, Xi is projecting himself as the gentleman here.”

While it appears to be a step in the right direction, there’s still a long way to go to fully avoid a trade war that would be incredibly painful for both countries. For starters, the U.S. is going to want to see action, not just rhetoric before it begins to unwind its reciprocal tariffs.

Bloomberg may have taken some of the wind out of the Xi Bounce’s sails already by reporting during the overnight that trade talks between the U.S. and China “broke down” last week over disagreement on support for high-tech industries.

China also has reportedly initiated a dispute procedure with the World Trade Organization over Washington’s tariffs on aluminum and steel.

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China Renews Trade War Concerns
« Reply #4 on: April 14, 2018, 12:11:18 am »

Chinese regulators are now refusing to review corporate deals to allow U.S. companies to buy in the technology sector.

Immediately after denying President Xi Jinping’s speech earlier this week at the Boao Forum was a “concession” to President Donald Trump, the Chinese government ramped up trade war concerns by “delaying” its review of all further corporate deals.

The Wall Street Journal is reporting this morning that several people familiar with negotiations say China is holding up reviews that would allow U.S. companies and investors to buy into its semiconductor industry. The delays are directly tied to “trade tensions,” according to the report.

The first deal affected by the move is Qualcomm’s $44 billion bid to acquire the Dutch semiconductor company NXP Semiconductors NV. China has an ownership stake and must sign off on the deal, but has refused to do so.

As a result, the deal—which the WSJ reports is “critical to Qualcomm’s future—may fall apart. Stocks of both companies are now in freefall over the stalled trade review.

The second deal affected by China’s move is Toshiba Corporation’s $19 billion plan to sell off its chip unit to a consortium led by the U.S. private equity firm Bain Capital. A senior Toshiba official quoted in the WSJ report said the Chinese review process is “basically on pause.”

The move comes amid reports the White House is already working on a deal that would soften the blow of potential tariffs on U.S. agricultural exports for American farmers. Several reports have suggested that China has also begun divesting itself of U.S. Treasuries, even though no tariff increases have yet happened, aside from increases on aluminum and steel.

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