Markets Tumble As China Strikes Back, May Dump “Some Treasuries”
After vowing over the weekend to “never surrender to external pressure”, Beijing has defied President Trump’s demands that it not resort to retaliatory tariffs and announced plans to slap new levies on $60 billion in US goods.
From Marc A. Thiessen at the WaPo:
Those who suggest Trump started this trade war with China have it backward. Beijing has been waging economic warfare on the United States for years — stealing our intellectual property, forcing our companies to transfer technology as a price of doing business in China and subsidizing state-owned enterprises to prevent U.S. businesses from competing in dozens of sectors of the Chinese economy. The difference now is Chinese leaders are facing a president who is willing to fight back…
While the United States has added about half a million manufacturing jobs since Trump took office, China’s manufacturing sector is shedding jobs…
In other words, our dynamic, growing, low-inflation economy can handle a trade war with China.
From Christopher Whalen at The American Conservative:
China accounted for just 7.2 percent of overall American exports in 2018…
China currently owns $1.13 trillion in Treasurys, a fraction of the total $22 trillion in U.S. debt outstanding…
Moreover, were the Bank of China to sell its Treasury paper, there is a long list of central banks and governments that would be happy to purchase it from them…
China needs the U.S. surplus more than the U.S. needs China’s trade and finances.
From Marshall Auerback at Naked Capitalism:
The United States has increased tariffs on $200 billion worth of Chinese products to 25 percent, and Beijing has responded in kind on $60 billion worth of American goods. More tit for tat appears to be on the way: the Trump administration is now openly deliberating whether to impose additional tariffs on a further $325 billion of Chinese goods exported to the United States…
Trump’s incessant focus on reducing his country’s bilateral trade deficit with Beijing means diverting Chinese purchases away from other trade counterparties…
Tariffs are certainly effective as an attention-getting mechanism. But if the goal is ultimately to encourage more jobs at home, they will be ineffective if unaccompanied by a national industrial policy that focuses on American re-industrialization in order to create skilled, high-paying private sector jobs capable of profitably supporting workers with solid middle-class incomes…
International Monetary Fund (IMF) and World Bank loans ensured that the developing world would increasingly depend on Western agriculture to feed itself, Western engineering expertise to supply energy infrastructure, and Western finance centers to manage—and leverage—their economies.
Michael Lind: “Under presidents of both parties, the Pentagon drew up war plans against China while the Commerce Department blessed the offshoring by U.S.-based multinationals of much of America’s industrial base to Chinese soil. This combination of ‘containment’ and ‘engagement’ inspired a name that itself was a contradiction: ‘congagement…’”
For America’s trade nationalists, this sort of a deal also has the happy byproduct of undermining the multilateral trade framework established by the World Trade Organization because enforcement mechanisms are left in the hands of the two parties to the agreement…
While managed trade might well dislocate many existing “Chimerica” supply chains, such disruption would likely come at the economic expense of America’s traditional allies in Europe, Japan, Taiwan and Korea.
From Robert W. Merry at The American Conservative:
As the Pentagon’s strategic paper posits, China’s overriding foreign policy goal is to squeeze America out of East Asia and force it back to the Hawaiian islands as its forward position in the Pacific…
While the National Defense Strategy paper suggests that U.S. officials understand the threat, America’s actions reveal an incapacity to grapple with this reality in any concentrated fashion…
Since the end of the Cold War, the sheer folly of Trump’s Iran policy has been exceeded only by George W. Bush’s Iraq invasion…
In no way did it serve America’s national interest to stir up tensions with Iran while the far more ominous China threat loomed…
Instead, America under Trump has created a crisis where none need exist…
But he can’t extricate himself from his own folly so long as he has Bolton and Pompeo pushing him toward ever more bellicosity in ever more areas of the world…
Of all the developments percolating in the world today, none is more ominous than the growing prospect of an anti-American alliance involving Russia, China, Turkey, and Iran…
If China’s global rise is to be thwarted, it must be prevented from gaining dominance over Eurasia. Only Russia can do that…
The Soviet Union is gone, and the 1.3 million Russian and client state troops it placed on Western Europe’s doorstep are gone as well…
Does anyone seriously think that Russia poses a serious threat to Europe or that Europe needs the American big brother for survival, as in the immediate postwar years?..
NATO shouldn’t be abolished. It should be reconfigured for the realities of today. It should be European-led, not American-led. It should pay for its own defense entirely.
From Jamie Ross at The Daily Beast:
China’s three biggest airlines have united to demand compensation from Boeing to make up for losses caused by the grounding and delayed deliveries of 737 MAX jets.
From the SCMP:
The hyper-globalisation of the last twenty years is unsustainable given the real geopolitical constraints…
From manufacturing, technology to finance – if a foreign company wants access to China’s 1 billion consumers then it typically has to form a joint venture with a Chinese firm and share know-how to operate legally…
In a data-driven age, Huawei has long been seen by the US military and defence establishment as a national security threat, open to exploitation by China’s intelligence agencies…
By removing the Chinese company’s access to critical US tech such as Google’s Android operating system and a variety of US chips, the US can stop Huawei’s overseas expansion in its tracks and at the same time check China’s rapid technological rise…
Even the software that is required for chip design is currently monopolised by US companies.
Bad Republic 