Global Trade Wars and Tariffs

By pjain      Published Aug. 7, 2020, 8:51 p.m. in blog Invest   

International Tracking, Trade War

North America Deals on Trade Settle down

US - EU Trade Battle

The other non-China "trade wars" have been rather tame, and not really pursued by US administration.

China Aggressions and Territory Grab

China Trade War 3 years

For nearly three years, President Trump’s trade war with China strained relations between the world’s largest economies. Now, the trade pact the two countries signed in January appears to be the most durable part of the U.S.-China relationship.

Trump views tariffs as one of his most effective and reliable tools, a powerful cudgel to wield against foreign countries that doesn’t require the approval of Congress.

Security Fence around China as it Grabs Territory

  • Trump rattles a Saber, Indo-China clash on Galwan
  • Tensions rise again with saber-rattling in South China Sea
  • US supply of drones to Taiwan burnt China feelings
  • Indo-China clash on Galwan
  • Australia, India, Japan and USA do military exercises

China gets a free pass from even Mideast and Pakistan on Abuse of Xianjiang

  • US criticizes its human rights abuses in Xinjiang

Hong Kong special status gone - Critical FDI and Western Gateway into to China

  • US removed Hong Kong's special exemptions after Chinese crackdown and new Security law
  • China is considering whether to extend new internet controls to Hong Kong, e.g. TikTok USA version removed its offices and services there.

China's IP theft, PLA Cyber Warfare, Great Firewall gets fireback by India, USA bans

  • US criticizes security threats and sanctions violations by Chinese technology and while the Trump administration is weighing potential action against Chinese-owned social media services, like TikTok and Tencent’s WeChat.

Trump took mild actions against China, including tightening export controls, enhancing investment screening, challenging Chinese technology companies, and blunting the Belt and Road Initiative.

China runs FDI+Trade deficit to earn trillions from US Trade, and Impact

During the 2016 presidential campaign, a consistent refrain from then-candidate Trump was to point to U.S. trade with China, and the agreements that enabled it, as a primary cause of the loss of U.S. manufacturing jobs and intellectual property and massive one-sided trade deficits. Indirectly he was targetting the Wall Street and neo-liberal globalists supporting Democrats like Obama that closed their eyes to "cheap Chinese shit" imports boosting profits for US MNCs.

Year China Surplus Notes
2016 $346 b
2018 $420 b Did US cos front-run tariffs for Q4'18 season?
2019 $345 b
  • As of 2018 China surplus was at $400 B per year. This means it earns $1T in just 2.5 years.

Impact of Tariffs on Trade Deficits - Cut MNC profits, Few US Jobs generated

While the U.S. deficit with China decreased, its overall trade deficit did not. Trump’s unilateral tariffs on China diverted trade flows from China, causing the U.S. trade deficit with Europe, Mexico, Japan, South Korea, and Taiwan to increase as a result.

U.S. companies primarily paid for U.S. tariffs nearly $46 B, facing lower profit margins, cut wages and jobs for U.S. workers, defer potential wage hikes or expansions, and raise prices for American consumers or companies.

US “farmers have lost the vast majority of what was once a $24 billion market in China - Am.Farm Bureau.

Beijing lowered its tariffs for its other trading partners as it reduced its reliance on U.S. markets.

Details of Tariffs by Goods

  • Between July 2018 and August 2019, the United States announced plans to impose tariffs on more than $550 billion of Chinese products, and China retaliated with tariffs on more than $185 billion of U.S. goods.
Time US tariffs China tariffs Notes
201807 $34 b $34 b
201808 $16b $16b
201809 $200b@10% $60b@10% $250b in US tariffs by end 2018, another $325b threat
201905 $200b@25%
201906 $60@25%
202001 --- phase I------

  • These are additional tariffs ON TOP OF RATHER LOW 2-5% levels of 2017 - Src: BBC

  • China countered by strategically targeting products made in Republican districts by NOT importing them, especially goods that can be purchased elsewhere from Brazil/Argentina, like meat, grains and soybeans.

Phase I BUST China dragged feet on implementing

Trump had threatened 25%+ tariffs on another $325b of imports from China, but deal signed Jan 15, 2020 Phase I stopped this escalation.

Under the so-called "phase one" deal signed in January, China pledged to boost US imports by $200bn above 2017 levels and strengthen intellectual property rules. The US agreed to halve some of the new tariffs it had imposed on China.

Phase I was supposed to - Strengthened China's intellectual property protections. - Required China to purchase additional $200B of American goods by the end of 2020, esp agricultural goods like soybeans, pork and corn from farm states that are crucial to Mr. Trump’s re-election chances.

China IOU : Exports rise higher in Phase I, Imports stagnant - "Pent up 2019 demand"

China in the first half of 2020 had purchased only 23% of the total purchase target for the year. Instead of buying $60b more in 2020 over 2017, in reality net US goods exports to China were significantly below 2017. - Bloomberg

Tariff pressures haven't really hit companies or retailers or even manufacturers as biggest tariffs were delayed to save 2019 holiday season

Covid-19 Dec'19-Jan-end SUPPRESSED and Xi/Trump compromised to sign Phase I done

Blaming coronavirus, it is slowly ramping up purchases of American products but in areas like oil it grabbed ultra low cheap deals from Iran/Saudi and is taking all the soybeans it can from Brazil.

  • imports from the United States were up 15.1 percent in June from the same month last year, in renminbi,
  • There was 5.2 percent increase in China’s exports to the United States - however the total trade balance was still heavily in China's favor

Trump compromised on Human Rights, HKO protests suppression to get Phase I done

  • Trump downplayed his earlier protests about “a million people in reeducation camps, internment camps .. because we’re making…great trade deals.” And later in Feb 10,2020 in NH - "Last month, we signed a groundbreaking trade agreement with China that will defeat so many of our opponents."

According to then NSA Bolton, Trump told Xi to go ahead with building camps to detain 1 million or more Uyghur Muslims in Xinjiang, saying it was exactly the right thing to do, and asked Xi Jinping to help him win the upcoming presidential election by increasing purchases of soybeans and wheat. However Trump denied this.

No Phase II to happen, as First Phase highly Deficient

Missing from the deal was any forward movement on subsidies, state-owned enterprises, and China’s uses of industrial policy to advantage its own firms over foreign competitors. Progress on market access also proved underwhelming outside of the financial sector.

2021 Biden will soothe over or Trump will do deal before Nov'20

Based on what we’ve seen with NAFTA/USMCA, it took nearly 2 years to reach an agreement, and we’re still working to get the deal approved by Congress. We just recently reached an agreement to lift steel and aluminum tariffs on Mexico and Canada to help get the agreement ratified. For China, step 1 will be coming to an agreement. Step 2 will be addressing the tariffs that are already in place, which could drag out the timeframe. - Andy Kapyrin


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