Trade War Diary: August 15, 2018

As the US vs. The World trade war trudges along, we are compiling a regular running list of the day’s relevant headlines, along with a bit of commentary as the news warrants.

China’s Finance Minister Liu Kun attends a session of the New Development Bank third annual meeting in Shanghai, China May 28, 2018. REUTERS/Aly Song

Trump’s trade war is rattling China’s leaders — NYT

• “ ‘The recent Sino-American trade war has, in particular, revealed underlying weaknesses and the soft underbelly of the system,’ wrote Xu Zhangrun, a law professor at Tsinghua University in Beijing, in a denunciation of Mr. Xi’s hard-line policies that was shared widely despite censorship. ‘All of this has only served to exacerbate a widespread sense of insecurity in society at large.'”
• “Censors have quashed discussion of such scenarios. There also has been almost no news coverage of the substance of American complaints about China’s trade practices. Instead, the state news media have been ordered to stop mentioning Made in China 2025, the industrial plan to transform the country into a high-tech superpower that Washington has criticized as unfair and predatory.”
• “The leadership can still divert criticism by blaming the United States. So far, it has not ratcheted up anti-American propaganda beyond the usual volume nor encouraged protests or boycotts of the sort directed at Japan in the past.Asked on a recent afternoon about the trade tensions, a worker making digital control panels at a factory in the southern city of Zhongshan paused before she replied. ‘If we are going to fight a trade war,’ she said, ‘even if my job may be affected, I will still support our country.’”

China ramps up spending as the trade war bites, adding to the burden of its long-term debt — South China Morning Post

• “The trade war has come at the worst time for China. The government has less leeway to stimulate the economy through monetary or fiscal measures, as the economy is already slowing and the government is struggling to reduce the debt burden amid a very big debt overhang.”
• “The long-term impact is that uncertainty is likely to lead to sweeping diversification or substitution among consumers and suppliers in the well-established supply chain. As a result, assembly lines will move away from China, and business orders will be shifted to other countries, which will deal a deadly blow to the future growth of the export-oriented economy.”

New law bans US gov’t from buying tech from Chinese giants ZTE and Huawei — Ars Technica

• “President Trump yesterday signed a defense funding bill that included a sweeping ban on the US government using technology supplied by Chinese telecommunications giants ZTE and Huawei.”
• “Obviously, being banned from selling to the US government is a significant blow to these companies. But overall the bill actually represents something of a reprieve for ZTE. Back in June, the US Senate passed a version of the bill that would have re-imposed an export ban that would have been a de facto death sentence for ZTE because ZTE is heavily dependent on components like Qualcomm chips and Google’s Android operating system.”

Import prices fell slightly in July, helped by strong dollar — WSJ

• “WASHINGTON—As escalating trade disputes threaten to drive up the cost of imported goods for U.S. consumers and businesses, economists say a stronger dollar may be helping to offset some of the pain.”

Turkish president calls for boycott of US electronics including the iPhone — NYT

• “ ‘Every product that we buy in foreign currency from outside, we will produce them here and sell abroad,’ Mr. Erdogan said during a speech in Ankara, drawing applause and cheers. ‘We will boycott the electronics products of the U.S. . . . If they have the iPhone, there is Samsung’ as an alternative, he continued, referring to Apple’s principal rival in the smartphone business.”
• “The comments by the Turkish leader were particularly remarkable given that he and several of his top ministers are frequently seen with iPhones. In mid-2016, as he battled the coup attempt, Mr. Erdogan used FaceTime to call for his supporters to take to the streets.”

Turkey retaliates against Trump tariffs, hiking fees on US imports in spiraling dispute — The Washington Post

• “ISTANBUL — Turkey on Wednesday raised tariffs on a number of products imported from the United States, including passenger cars, tobacco and spirits, retaliating for President Trump’s decision last week to double tariffs on Turkish metals.”
• “A list published in Turkey’s official Gazette on Wednesday raised tariffs on tobacco products to 60 percent, spirits to 140 percent and passenger cars to 120 percent. Tariffs were also boosted for cosmetics, rice and coal. In 2017, the United States exported $9.7 billion dollars in goods to Turkey, according to the U.S. Census Bureau.”

China files WTO challenge to US tariffs on solar panels — AP

• “BEIJING (AP) — China says it is challenging a U.S. tariff hike on solar panels before the World Trade Organization, adding to its sprawling conflicts with President Donald Trump over trade and technology.”
• “China has tried to portray itself as a defender of the WTO-based trading system. It has attempted to recruit European and other governments as allies against Washington, but they echo U.S. complaints about Chinese market barriers and industrial policy.”

What’s in your shopping cart? A battleground for global trade — NPR

• “NPR set off to see: How much does global trade show up in the basket of regular American shoppers? Very few supermarket items have so far been directly affected by the escalating trade dispute. But the next wave of tariffs is expected to hit more consumer-oriented products. It’s unclear how much companies will be able to eat the costs instead of hiking up the prices for shoppers.”
• “[Natalie] Mondesir is particularly worried about one big-ticket item she wants to buy this year — a new car. The auto industry is bracing to be swept up in a costly tariff war. ‘I know that prices of cars will probably go up by the time I’m ready to buy a car,’ Mondesir says. ‘So I’m also mentally preparing myself to maybe dish out a little more to get my car.'”

US crop export prices fall at steepest rate since 2011 — The Hill

• “U.S. agricultural export prices fell by 5.3 percent in July as retaliatory tariffs on American crops kicked into effect, according to Labor Department data released Tuesday.”
• “Prices for U.S. crops sold abroad fell last month at the fastest rate since October 2011, led by a 14.1 percent decrease in soybean prices. Export prices for corn, nuts, wheat and fruits also fell in July, likely due to tariffs imposed by nations including China, Canada and Mexico, as well as the European Union.”

Sow tariffs, reap retaliation — The Weekly Standard

• “ ‘I spent probably 10 years training the Chinese engineers how to do things. And then, all of a sudden, we find product on the market which was not ours but was built exactly the same way,’ [Missouri farmer and engineer] Denny] Mertz says. ‘I think many people, they understand the unfairness if you do things which aren’t right, the pirating of the high-tech industry and all that stuff. If you’re going to deal with a trading partner, there has to be sort of an ethicalness and an honesty in your trading and your dealings. Whether it hurts us more than it hurts them—I don’t know where that goes.'”
• “So far, it has hurt farmers plenty. As a matter of economics, the problem is simple. China imports enormous amounts of U.S. agricultural goods—particularly Midwestern crops like soybeans, which are used as feed for livestock. According to the American Soybean Association, China imported 31 percent of total U.S. soybean production in 2017, to the tune of $14 billion.”
• “So when Beijing retaliated against America with tariffs of its own, agriculture was the obvious target—not to mention a political pressure point, given President Trump’s relative popularity among the ag crowd. On July 6, China slapped duties on $43 billion worth of U.S. goods, nearly $17 billion of it in agricultural products, including soybeans, sorghum, and pork. The move hit markets like a lightning bolt out of a clear sky: Soybean prices dropped a dollar a bushel when the tariffs were announced and another dollar when they were implemented, plummeting to a near-decade low below $9 a bushel.”

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