Print Page - “It's time for a Trade War” said President Dumb aka Cadet Bone Spurs

from the print edition of the Los Angeles Times....

China trade war fear grows

U.S. could see strong backlash from Beijing if Trump follows up on tough rhetoric.

By DON LEE | Tuesday, January 16, 2018

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President Trump speaks to Chinese President Xi Jinping in front of First Lady Melania Trump and Xi's wife, Peng Liyuan, in the
Great Hall of the People in Beijing in November. Trump has made oft-repeated promises to get tough with China on trade.
— Photograph: Jim Watson/Agence France-Presse/Getty Images.

WASHINGTON — For years, one bright spot in the United States' huge trade imbalance with China has been the Asian nation's soaring appetite for American agriculture.

But this month, China abruptly imposed stricter requirements on billions of dollars of American soybeans in a way that threatens to curb the exports and punish a wide swath of the U.S. heartland.

And that could be just the beginning, if President Trump follows through on his oft-repeated promise to get tough with Beijing on trade.

Although Chinese media attributed the new policy to quarantine officials who reported finding mildew contamination in some shipments, the tactic was all too familiar and the message unmistakably clear.

“It was kind of a warning shot that they're not going to take things lying down, and that there will be pain for U.S. exporters” should Trump levy trade sanctions on China, said David Loevinger, a former senior Treasury Department official for China affairs and now an analyst for TCW Emerging Markets Group in Los Angeles.

“Beans and Boeing,” quipped Derek Scissors, a China specialist at the American Enterprise Institute, listing the two most likely targets of Chinese retaliation. Soybeans and airplanes are America's top two exports to China, and farmers in particular have long held sway on Capitol Hill.

After a relatively quiet first year on China trade, the Trump administration is gearing up to announce several actions, including possible tariffs stemming from investigations into a range of Chinese behaviors that it views as distorting trade and hurting U.S. firms and workers.

Among these are allegations of intellectual property theft and forced technology transfer in which U.S. companies wanting to do business in China must turn over their tech and production secrets, which Chinese competitors then adopt. Trump officials launched the probe by dusting off an old provision of U.S. trade laws that gives the president broad powers to apply punitive measures.

Late on Thursday, the Commerce Department said it sent Trump the results of an investigation into whether steel imports threaten U.S. national security. The probe targets China, the biggest steel producer, and could lead to tariffs, import quotas or both. Trump has 90 days to decide.

Separately, the U.S. International Trade Commission decided on Friday that imports of Chinese aluminum were harming the U.S. industry, and will now proceed to determine what penalties would be appropriate. The Trump administration took the rare step of starting the aluminum case on its own, even though no U.S. firms had filed a complaint.

“Whatever you think the degree of trade friction was last year, it's going to be much more frictional and much more tit-for-tat in the coming year,” said David M. Lampton, director of China studies at the Johns Hopkins School of Advanced International Studies in Washington.

A decision to slap tariffs on Chinese aluminum, steel or solar panels, by itself, probably would not be enough to trigger a serious trade conflict.

Instead China probably would give a measured response, given their relatively small impact on the Chinese economy, said Andy Rothman, an investment strategist at Matthews Asia in San Francisco and former economic officer at the U.S. Embassy in Beijing.

Others say that if American jobs and wages keep growing as expected in the near term, Trump will have economic cover to put off action or continue to apply a light hand in his dealings with China, as he has so far.

The president last year declined to label China a currency manipulator despite his campaign promise to do so as soon as he took office. As a candidate, he had also threatened to impose tariffs of 45% on Chinese imports.

But last year, Trump courted a personal relationship with Chinese President Xi Jinping in hopes of using trade as leverage to win Beijing's help in reining in North Korea's nuclear ambitions. That strategy has had mixed results, at best.

And with his trade and economic team now largely in place, including top trade official Robert Lighthizer, Trump wants fundamental changes in China trade, not incremental improvements.

To that end, Trump officials already have made clear the United States won't support China’s yearning to be recognized at the World Trade Organization as a market-based economy.

His administration has signaled that Chinese investments in the United States will have a harder time getting approved.

And in a sharp departure from recent administrations, Democratic and Republican, Trump's National Security Strategy issued last month referred to China, along with Russia, as a threat to the United States, noting that the two nations “challenge American power, influence and interests, attempting to erode American security and prosperity.”

Even with increased American exports of foods, planes and medical equipment, the overall U.S. trade deficit in goods with China has not only kept rising under Trump, but almost certainly reached a new record last year, exceeding the previous high of $367 billion in 2015. The full-year results will be released next month. (The Chinese government said on Friday its trade surplus with the United States last year was the largest ever.)

Trump has repeatedly denounced large deficits with trading partners, none of which is bigger than the one with China. The president is sure to come under increasing pressure from constituents in states where Trump's attacks on foreign trade found particular resonance and ultimately helped catapult him into the White House.

In the past, Beijing could count on American corporations to press the White House and Congress to soften their stance on China, but there's a lot more ambivalence today. U.S. businesses have grown increasingly frustrated at Chinese policies favoring domestic companies, and with the central government's broad retreat from its 2013 road map to step up economic reforms and let market forces drive growth in the country.

The political climate in the United States isn't likely to help, either. Even without Trump stirring the pot, China figures to be a popular target ahead of the mid-term elections, as in the past.

“We're in an election year that's not going to reward moderation, and we've got two nationalistic leaders who are pretty full of themselves,” said Lampton, referring to Trump and Xi. For his part, Xi has raised his political stature to something like the status of supreme leaders Mao Tse-tung and Deng Xiaoping by purging political opponents and tightening control of the internet and media.

“He is exuding a confidence that China has arrived on the international scene in a big way, and they're not going to be bullied and pushed around, and if you want to mess with China, then China will mess with you back,” David Bachman, a China scholar at the University of Washington in Seattle, said of Xi.

Nor does Trump's character suggest a White House that will turn the other cheek, even though both Gary Cohn, Trump's top economic advisor, and Treasury Secretary Steven T. Mnuchin are said to be urging their boss to refrain from drastic actions such as across-the-board tariffs on Chinese goods that could ignite a trade war. That in turn would damage the stock market and economic growth, not to mention upset Trump's base of blue-collar workers who depend on cheap goods from China and whose jobs could be hurt as well. China's economy would suffer as well.

“I don't see this as a kind of Armageddon type of confrontation because I think that after turmoil of some degree, there is enough pragmatism when it comes to the economy that there will be shifting ground on both sides,” said Claire Reade, a senior counsel at Arnold & Porter and former assistant U.S. trade representative for China affairs.

Even so, Reade and many others are worried that Trump and his trade team will misjudge the political and economic calculus in the relationship, believing the United States has the leverage to win fundamental changes in the way China operates its economy.

Many experts think the Trump administration would be more effective in opening Chinese markets by working with allies to put pressure on China, instead of imposing harsh measures unilaterally.

Though important, American products, know-how and investments represent a smaller part of the Chinese economy than in the past, and Beijing has increasingly sought to diversify and expand its reach in the global economy. China could buy its soybeans from Brazil, its airplanes from Europe and its beef from Australia.

“The U.S. isn't the driver in China as it once was,” said Russell Johnson, president of China Array Plastics.

American companies in China may be grumbling more today, he said, but ultimately they want to be there because of China's big market. After four decades of doing business in China, Johnson says things are about as good for manufacturers as ever, and he remains “guardedly optimistic” that a trade war won't erupt.

“The wild card in this whole thing is Trump. You just don't know what he's going to do on any particular front,” Johnson said.

__________________________________________________________________________

• Don Lee covers the U.S. and global economy out of Washington, D.C. Since joining the Los Angeles Times in 1992, he has served as the Shanghai bureau chief and in various editing and reporting roles in California. He is a native of Seoul, Korea, and graduated from the University of Chicago.

http://enewspaper.latimes.com/infinity/article_popover_share.aspx?guid=b6073d1e-27a9-440e-b1d6-0ffb6cad55e7 (http://enewspaper.latimes.com/infinity/article_popover_share.aspx?guid=b6073d1e-27a9-440e-b1d6-0ffb6cad55e7)

from the Los Angeles Times....

Trump slaps big tariffs on imported solar panels
in major escalation of a trade fight with China

By EVAN HALPER and DON LEE | 5:20PM EST — Monday, January 22, 2018

(http://www.latimes.com/resizer/O8RJtjxAQIBI2THcNQ5PuwR1Njk=/1400x0/arc-anglerfish-arc2-prod-tronc.s3.amazonaws.com/public/73AUFHAZVZF5FPFIFWSDAQHN6E.jpg) (http://www.latimes.com/resizer/O8RJtjxAQIBI2THcNQ5PuwR1Njk=/1400x0/arc-anglerfish-arc2-prod-tronc.s3.amazonaws.com/public/73AUFHAZVZF5FPFIFWSDAQHN6E.jpg)
The solar business in the U.S. has boomed in recent years, driven by falling prices for panels, thanks in part to cheap imports.
— Photograph: Susan Montoya Bryan/Associated Press.

THE TRUMP ADMINISTRATION Trump administration announced on Monday that it would impose hefty tariffs on the cheap, imported panels that have driven the rapid expansion of solar power in the United States, a move that industry groups warned would slow the spread of renewable energy and cost thousands of jobs.

The tariffs come as President Trump has vowed to take a tough line against cheap foreign imports that he blames for undercutting American manufacturing industries.

The administration also announced it would impose hefty tariffs on imported large residential washing machines. In both cases, inexpensive imports — mostly from China in the case of the solar panels — have undercut U.S. manufacturers, administration officials said.

Imports from China have been a particular target of Trump's rhetoric. The tariffs are the most concrete step that he has taken to put those words into action. They mark the start of what many analysts expect will be a series of tougher actions on trade by Trump in the coming months, especially against China, with whom the U.S. has a huge trade deficit.

The administration also has taken moves against imports of Chinese-made steel and aluminum and is considering sweeping sanctions against China for allegedly stealing U.S. intellectual property and forcing American companies to hand over technology secrets to do business in China.

Trump acted after the government's International Trade Commission “found that U.S. producers had been seriously injured by imports,” said U.S. Trade Representative Robert Lighthizer. “The president's action makes clear again that the Trump administration will always defend American workers, farmers, ranchers and businesses.”

But the move against imported solar panels also threatens some of the very types of jobs that Trump has vowed to protect. Companies that install solar panels will probably trim their workforces, industry analysts warned, as the tariff — which starts at 30% on the imported panels and gradually declines each year — threatens to substantially raise the price of solar power in the United States.

Imposition of the tariffs drew protests from environmentalists, who said the move would set back efforts to combat global warming, and from the solar power industry.

The levies, said Abigail Ross Hopper, chief executive of the Solar Energy Industries Association, “will create a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs.”

California, where the renewables industry has taken off, will be among the states hardest hit by the new levies.

The industry trade group estimates the tariffs on solar panels will cost 23,000 jobs nationwide within the year, and that billions of dollars in potential investment in solar power will evaporate because of them.

The move also drew protest from some Republicans who said it violated the party's long-standing support for free trade.

"Here's something Republicans used to understand: Tariffs are taxes on families," said Senator Ben Sasse (Republican-Nebraska).

The case for tariffs was filed at the International Trade Commission by two American firms that say their businesses have been crushed by cheap imports from Asia and Europe (http://www.latimes.com/politics/la-na-pol-trump-solar-20170815-story.html), which by now account for more than 90% of the solar panels installed in the U.S.

The trade commission voted last month 4-0 in favor of imposing tariffs. It said the action was needed to confront the near-extinction of an American industry.

The commission found that the cheap imported panels had played a major role in a boom in solar power. The tripling of solar capacity in the U.S. was “spurred on by artificially low-priced solar cells and modules from China,” the commission said.

But the import boom also has contributed to more than two dozen U.S. solar manufacturers closing since 2012.

Government incentives in China have enabled its solar panel makers to produce 61% of the world's solar panels, the trade commission said. In 2005, China produced just 7%.

Few analysts, however, beyond those hired by the firms that filed the trade petition, project the tariffs will revive the panel-manufacturing industry.

The companies that filed the complaint had pushed for far steeper tariffs than Trump ultimately imposed, aiming for a remedy that would have lifted the cost of imported panels from 35 cents per watt to 78 cents, which is around the cost of the American product.

Under Trump's plan, the initial 30% tariff would decline by 5 percentage points each year. The tariff would last for four years. The first 2.5 gigawatts of imported solar panels would be exempted from the tariff each year.

The tariffs on washing machines are even steeper than those on solar panels: Trump approved tariffs of up to 50% on imports of finished washers as well as on major parts that go into them, such as plastic tubs and metal drums.

The tariffs, set for three years, were sought by the appliance maker Whirlpool Corporation, which operates washer plants in the United States (http://www.latimes.com/business/la-na-ohio-trade-battle-20171005-story.html) and employs about 15,000 manufacturing workers.

The action targeted two Korean companies, Samsung and LG, which have made significant gains in U.S. market share for residential washers in recent years. Both companies recently have moved to open assembly plants in the U.S., but the new tariffs on imported washer parts means that the machines will be more expensive for them to produce even on American soil.

Whirlpool argued that Samsung and LG were exporting washers at unfair prices and that they had repeatedly avoided previous country-specific tariffs by shifting production from Korea and Mexico to China and most recently to Thailand and Vietnam.

The unfair competition, Whirlpool said, had hurt its sales and curbed its employment, despite large investments at plants like the one in Clyde, Ohio, where some 3,000 people work.

“This announcement caps nearly a decade of litigation and will result in new manufacturing jobs in Ohio, Kentucky, South Carolina and Tennessee,” Whirlpool Chairman Jeff M. Fettig said in a statement on Monday.

But officials in South Carolina and Tennessee, where the two Korean companies have factories, had warned that a tariff could cost jobs in their states.

“Today's announcement is a great loss for American consumers and workers,” Samsung said in a statement. “This tariff is a tax on every consumer who wants to buy a washing machine. Everyone will pay more, with fewer choices.”

The two firms that brought the solar case — Georgia-based Suniva, which is in bankruptcy, and Oregon-based Solar World Americas, a struggling subsidiary of the bankrupt German firm SolarWorld AG — sought relief through the filing of what is known as a “section 201” case.

That provision of the nation's trade law allows the president to broadly impose tariffs if the trade commission finds the move is needed to protect an American industry from economic peril.

The provision had not been exercised since 2001, when President George W. Bush invoked it to protect U.S. steelmakers from imports. Other nations retaliated, and the World Trade Organization ultimately voided the levies.

The solar tariffs could ultimately meet the same fate. The World Trade Organization applies a high standard for proving injury. But even if it ultimately rejects the administration's tariffs, the levies will remain in place until it does.

The firms applauded Trump's move. “The president is sending a message that American innovation and manufacturing will not be bullied out of existence without a fight,” said a statement from Suniva.

On the other side, the Natural Resources Defense Council, a leading environmental group, said the decision would reverse the progress toward greater use of solar energy.

“Higher-priced panels will dramatically reduce the pace of new solar energy installations, increase climate-changing emissions, and lead to significant job losses nationwide,” the group said.

__________________________________________________________________________

• Evan Halper writes about a broad range of policy issues out of Washington D.C., with particular emphasis on how Washington regulates, agitates and very often miscalculates in its dealings with California. Before heading east, he was the Los Angeles Times bureau chief in Sacramento, where he spent a decade untangling California's epic budget mess and political dysfunction.

• Don Lee covers the U.S. and global economy out of Washington, D.C. Since joining the Los Angeles Times in 1992, he has served as the Shanghai bureau chief and in various editing and reporting roles in California. He is a native of Seoul, Korea, and graduated from the University of Chicago.

http://www.latimes.com/nation/la-na-pol-solar-tariffs-20180122-story.html (http://www.latimes.com/nation/la-na-pol-solar-tariffs-20180122-story.html)

The stockmarket is over-hyped and is going to crash soon, big-time.

I betcha Trump (who is falsely claiming credit for the current sharemarket boom) will suddenly disassociate himself from it when that occurs.

That's because Donald J. Trump is a total fraud who as a businessman has had his company go bankrupt seven times.

Not a very successful businessman, eh? More like a rip-off artist who rips-off everybody around him to save his own neck whenever he has mismanaged his company to the extent that it has gone bankrupt. A ponzy scheme operator. A criminal.

And about that rosy economic outlook.....

from The Telegraph....

World finance now more dangerous than in 2008,
warns central bank guru

By AMBROSE EVANS-PRITCHARD | 12:53PM — Monday, 22 January 2018

(http://www.telegraph.co.uk/content/dam/business/2018/01/22/davos-oecd_trans_NvBQzQNjv4BqqVzuuqpFlyLIwiB6NTmJwfSVWeZ_vEN7c6bHu2jJnT8.png) (http://www.telegraph.co.uk/content/dam/business/2018/01/22/davos-oecd_trans_NvBQzQNjv4BqqVzuuqpFlyLIwiB6NTmJwfSVWeZ_vEN7c6bHu2jJnT8.png)

THE world financial system is as dangerously stretched today as it was at the peak of the last bubble but this time the authorities are caught in a ‘policy trap’ with few defences left, a veteran central banker has warned.

Nine years of emergency money has had a string of perverse effects and lured emerging markets into debt dependency, without addressing the structural causes of the global disorder.

“All the market indicators right now look very similar to what we saw before the Lehman crisis, but the lesson has somehow been forgotten,” said William White, the Swiss-based head of the OECD's review board and ex-chief economist for the Bank for International Settlements.

Professor White said disturbing evidence of credit degradation is emerging almost daily. The latest horror is the revelation that distressed UK construction group Carilion quietly raised £112m through German Schuldschein bonds. South African retailer Steinhoff also tapped this obscure market, borrowing €730m.

Schuldschein loans were once a feature of rock-solid lending to family Mittelstand companies in Germany. The transformation of this corner of the market into a form of high-risk shadow banking, apparently to evade scrutiny, shows how badly the lending system has been distorted by quantitative easing (QE) and negative interest rates.

Professor White said there is an intoxicating optimism at the top of every unstable boom when people latch on to good news and convince themselves that risk is fading, but that is precisely when the worst mistakes are made. Stress indicators were equally depressed in 2007 just before the storm broke.

This time central banks are holding a particularly ferocious tiger by the tail. Global debt ratios have surged by a further 51 percentage points of GDP since the Lehman crisis, reaching a record 327 percent (IIF data). Every part of the world economy is exhibiting some deformed pathology.

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Professor William White is the ex-chief economist for the Bank for International Settlements. — Photograph: Real Vision.

This is a new phenomenon in economic history and can be tracked to QE liquidity leakage from the West, which flooded East Asia, Latin America, and other emerging markets, with a huge extra push from China pursuing its own torrid venture. “Central banks have been pouring more fuel on the fire,” he told the Daily Telegraph, speaking before the World Economic Forum in Davos.

“Should regulators really be congratulating themselves that the system is now safer? Nobody knows what is going to happen when they unwind QE. The markets had better be very careful because there are a lot of fracture points out there,” he said.

“Pharmaceutical companies are subject to laws forcing them to test for unintended consequences before they launch a drug, but central banks launched the huge social experiment of QE with carelessly little thought about the side-effects,” he said.

The US Federal Reserve is already reversing bond purchases — ignoring warnings by former Fed chair Ben Bernanke — and will ratchet up the pace to $50bn a month this year. It will lead to a surge in supply of US Treasury bonds just as the Trump Administration's tax and spending blitz pushes the US budget deficit toward $1 trillion, and just as China and Japan trim Treasury holdings.

It has the makings of a perfect storm. At best, the implication is that yields on 10-year US Treasuries — the world's benchmark price of money — will spike enough to send tremors through credit markets. We are not close to the danger point but the yield crept up to a three-year high of 2.66 percent last week. It has broken out of its 36-year downtrend, prompting loud warnings of a secular bond rout.

The edifice of inflated equity and asset markets is built on the premise that interest rates will remain pinned to the floor. The latest stability report by the US Treasury's Office of Financial Research (OFR) warned that a 100 basis point rate rise would slash $1.2 trillion of value from the Barclays US Aggregate Bond Index, with further losses once junk bonds, fixed-rate mortgages, and derivatives are included. It said losses could dwarf the “bond massacre” that bankrupted Orange County California in 1994 — and detonated Mexico's Tequila Crisis.

The global fall-out from such a shock could be violent. Credit in dollars beyond US jurisdiction has risen fivefold in 15 years to over $10 trillion. “This is a very big number. As soon as the world gets into trouble, a lot of people are going to have trouble servicing that dollar debt,” said Professor White. The offshore dollar funding markets would dry up, triggering a liquidity squeeze. Borrowers would suffer the double shock of a rising dollar, and rising rates.

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The world financial system is dangerously stretched, a former BIS chief economist has warned.

The OFR report makes unsettling reading. “The cyclically adjusted price-to-earnings ratio of the S&P 500 is at its 97th percentile relative to the last 130 years,” it said. Margin debt on Wall Street has risen to an all-time high, as has the share of risky bonds with minimal protection. So-called ‘covenant-lite’ contracts are now running at 51 percent of all issuance. The top decile of macro hedge funds has raised leverage to 15 times, accounting for $800bn in gross assets.

While banks now have high capital buffers, the risk has migrated elsewhere: to investment funds concentrated in crowded trades. The share of equities traded in “dark pools” outside the exchanges has mushroomed to 33 percent. “A lack of market liquidity may lead to fire-sale risk, a downward price spiral,” it said.

One worry is what will happen to ‘risk parity’ funds when the inflation cycle turns. RBI Capital warned in its investor letter that these funds could lead to a “liquidity crash”. Deutsche Bank has advised clients to take out June 2018 ‘put’ options on the S&P 500 — a hedge against a market slide — arguing that the rally looks stretched and that risk parity funds will amplify any correction.

These funds manage risk by matching bonds and equities through dynamic weighting. The strategy worked marvelously during the ‘Goldilocks’ phase of low inflation and rising stock markets. Both wings of the trade did well. The danger is that both could go wrong at the same, setting off a vicious cycle in the opposite direction.

Funds have doubled-down on the trade with leveraged bets on Treasuries to boost returns. “A breakdown of this strategy poses the greatest threat to the overall market,” says Peter Tchir from Brean Capital. In a sense, risk parity funds may be today's equivalent of the ‘portfolio insurance’ that accelerated the crash in October 1987.

Whether the inflation cycle is really turning, and how fast, is the elemental question of this bull market. What is clear is that the US has closed the output gap and is hitting capacity constraints. The New York Fed's underlying inflation gauge rose to a 12-year high near 3 percent in December.

The great disinflation of the last three decades was essentially a global ‘supply shock’. The opening-up of China and the fall of the Berlin Wall added 800 million workers to the traded economy and labour pool, depressing wages and unleashing a tsunami of cheap goods. The ‘Amazon effect’ of digital technology capped price rises. The demographics of the baby boom era played its part by boosting the global savings glut.

(http://www.telegraph.co.uk/content/dam/business/2016/12/14/US-fed_trans_NvBQzQNjv4BqpiVx42joSuAkZ0bE9ijUnEvfX_p6SFMi1h6moBw3wqs.jpg) (http://www.telegraph.co.uk/content/dam/business/2016/12/14/US-fed_trans_NvBQzQNjv4BqpiVx42joSuAkZ0bE9ijUnEvfX_p6SFMi1h6moBw3wqs.jpg)
The US Federal Reserve is reversing bond purchases.

But there was another feature that is often neglected. Central banks intervened “asymmetrically” with each cycle, letting booms run but stepping in with stimulus to cushion busts. The BIS says one result was to keep insolvent ‘zombie’ companies alive and block the Schumpeterian process of creative destruction that leads to rising productivity. This artificially stopped supply returning to balance. It has been a cause of the deflationary malaise.

“Everything could now go into reverse: the baby boomers are gone; China's working age population is falling; and zombie companies are going to be forced out of business at last as borrowing costs rise,” White said.

While higher inflation is needed in one sense to right the global ship — since it lifts nominal GDP faster, and whittles down the debt stock — the obvious danger is that the shock of higher rates will hit first. Debt dynamics could spin out of control. Japan and Italy are in the firing line. The US has more margin but is being cavalier with fiscal expansion a l'outrance and no reform of its entitlement programmes.

“This raises the danger of ‘fiscal dominance’. The moment that markets start to fear this happening, it becomes totally self-fulfilling. They won't lend to governments and the whole thing basically implodes,” he said.

Central banks are now caught in a ‘debt trap’. They cannot keep holding rates near zero as global inflation pressures build because that will lead to an even more perilous financial bubble, but they cannot easily raise rates either because it risks blowing up the system. “It is franky scary,” he said.

The BIS critique is that ever-lower rates and more radical stimulus at the bottom of each successive cycle has itself had the complex effect of lowering the ‘Wicksellian’ natural rate of interest. Prosperity has been drawn from the future and led to a corrosive ‘intertemporal’ imbalance. In the end this catches up with you.

The authorities may not yet have reached the end of the road but this strategy is clearly pregnant with danger. Global finance has become so sensitive to monetary policy that central banks risk triggering a downturn long before they have built up the safety buffer of 400 to 500 basis points in interest rate cuts needed to fight recessions. Fiscal buffers are not exhausted but they are ever thinner.

“We are running out of ammunition. I am afraid that at some point this is going to be resolved with a lot of debt defaults. And what did we do with the demographic dividend? We wasted it,” he said.

__________________________________________________________________________

• Ambrose Evans-Pritchard reported from Davos, Switzerland.

• Ambrose Evans-Pritchard is International Business Editor of The Daily Telegraph. He has covered world politics and economics for 30 years, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels.

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Related to this topic:

• China promises bank rescue in next crisis as market prophets warn on rising US rates (http://www.telegraph.co.uk/business/2018/01/23/china-promises-bank-rescue-next-crisis-market-prophets-warn)

http://www.telegraph.co.uk/business/2018/01/22/world-finance-now-dangerous-2008-warns-central-bank-guru (http://www.telegraph.co.uk/business/2018/01/22/world-finance-now-dangerous-2008-warns-central-bank-guru)

from The New York Times....

Trump to Impose Sweeping Steel and Aluminum Tariffs

The president said he would sign the measure next week. Stock markets,
foreign officials and Republicans were rattled by the news.

By ANA SWANSON | Thursday, March 01, 2018

(https://static01.nyt.com/images/2018/03/02/business/02DC-STEEL1/merlin_134751366_af5a6a50-3591-4b3f-9bd5-6bcac38b85bd-superJumbo.jpg) (https://static01.nyt.com/images/2018/03/02/business/02DC-STEEL1/merlin_134751366_af5a6a50-3591-4b3f-9bd5-6bcac38b85bd-superJumbo.jpg)
A steel furnace in Germany. At a White House meeting on Thursday, President Trump said that he did not want any nation to be exempted from the order.
— Photograph: Alexander Koerner/Getty Images.

WASHINGTON — President Trump said on Thursday that he would impose stiff tariffs on imports of steel and aluminum, making good on a key campaign promise and rattling stock markets as the prospect of a global trade fight appeared imminent.

In a hastily arranged meeting with industry executives that stunned many inside the West Wing, Mr. Trump said he would formally sign the trade measures next week and promised they would be in effect “for a long period of time.” The action, which came against the wishes of Mr. Trump's pro-trade advisers, would impose tariffs of 25 percent on steel and 10 percent on aluminum, effectively placing a tax on every foreign shipment of those metals into the United States.

The president told more than a dozen executives that he wanted the tariffs to apply to all countries, one executive in attendance said. Mr. Trump argued that if one country was exempt, all other countries would line up to ask for similar treatment, and that metals could end up being shipped to the United States through exempted countries.

Mr. Trump's authority to impose such sweeping tariffs stems from a Commerce Department investigation that concluded last month (https://www.commerce.gov/sites/commerce.gov/files/the_effect_of_imports_of_steel_on_the_national_security_-_with_redactions_-_20180111.pdf) that imported metal threatened national security by degrading the American industrial base. The administration has said it wants to combat cheap metals flooding into the United States, particularly from China, but a broad set of tariffs would fall most heavily on allies, especially Canada, which supplies steel and aluminum to American companies as well as the military.

“People have no idea how badly our country has been treated by other countries,” Mr. Trump said on Thursday. “They've destroyed the steel industry, they've destroyed the aluminum industry, and other industries, frankly.”

“We're bringing it all back,” he added.

On Friday morning, Mr. Trump tweeted that a trade war would be a positive development in the context of the United States' current position with its trading partners.

(http://i378.photobucket.com/albums/oo227/Kiwithrottlejockey/New%20York%20Times%20pix/20180301twdjt_TwitterDonaldJTrump_zpszr6devr7.jpg~original) (https://twitter.com/realDonaldTrump/status/969525362580484098)

Stocks fell in response to the potential tariffs, with declines in the industrial sector outpacing the overall market. The Standard & Poor's 500 industrial sector was down 1.9 percent, compared with a decline of about 1.3 percent in the overall benchmark index. Shares of American automakers, all large consumers of steel and aluminum, declined, as did shares of Boeing, a large exporter that could be hurt if other nations retaliate against United States tariffs.

Mr. Trump's announcement came despite months of heavy pushback from American companies that use metals in their products, like automakers and food packagers, and foreign officials, who warned that tariffs would strain relations and could prompt retaliatory trade actions. It also elicited a swift and severe response from Republican lawmakers, who said the action would ultimately hurt American companies, workers, consumers and the economy.

The announcement capped a frenetic and chaotic morning as Mr. Trump summoned more than a dozen executives from the steel and aluminum industry to the White House, raising expectations that he would announce his long-promised tariffs.

Mr. Trump raised the specter of action with an early morning Twitter post (https://twitter.com/realDonaldTrump/status/969183644756660224), saying: “Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer.”

Yet the legal review of the trade measure had not been completed and, as of Thursday morning, White House advisers were still discussing various outcomes for tariff levels and which countries could be included, according to people familiar with the deliberations. Just an hour before Mr. Trump made his remarks, a White House spokeswoman said that no announcement was expected that morning.

Advisers have been bitterly divided over how to proceed on the tariffs, including whether to impose them broadly on all steel and aluminum imports, which would ensnare allies like the European Union and Canada, or whether to tailor them more narrowly to target specific countries.

Imposing tough sanctions would fulfill the president's promises but could tip off trade wars around the world as other countries seek to retaliate against the United States. Foreign governments, multinational companies and the Pentagon have continued to push against broad tariffs, arguing that the measures could disrupt economic and security ties (https://www.nytimes.com/2018/02/25/business/trump-trade-sanctions-aimed-at-china-could-ensnare-canada.html).

Brazil, Canada, Germany, Mexico and South Korea were the largest suppliers of steel to the United States in 2017, while Canada, Russia and the United Arab Emirates shipped the largest share of aluminum imports in 2016.

(http://i378.photobucket.com/albums/oo227/Kiwithrottlejockey/New%20York%20Times%20pix/20180301_WhereSteelImportsComeFrom_zps7v77z28q.jpg~original) (https://www.nytimes.com/2018/03/01/business/trump-tariffs.html)

On Thursday, Canada, the European Union and other countries said they might have no choice but to retaliate in response.

The president of the European Commission, Jean-Claude Juncker, called the measure “blatant intervention to protect U.S. domestic industry” and said the European Union had been a close security ally of the United States for decades.

“We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk,” Mr. Juncker said.

Chrystia Freeland, the Canadian minister of foreign affairs, called any measure that deemed Canadian trade a national security threat “entirely inappropriate.”

“Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers,” she said.

That is the exact situation Mr. Trump's pro-trade advisers have long feared and worked to prevent. Gary D. Cohn, the director of the National Economic Council, had been lobbying for months alongside others, including Defense Secretary Jim Mattis and Rob Porter, the staff secretary who recently resigned under pressure (https://www.nytimes.com/2018/02/07/us/politics/rob-porter-resigns-abuse-white-house-staff-secretary.html) from the White House, to kill, postpone or at least narrow the scope of the measures, people familiar with the discussions said.

But in recent weeks, a group of White House advisers who advocate a tougher posture on trade has been in ascendance, including Robert E. Lighthizer, the country's top trade negotiator and a former steel industry lawyer; Wilbur Ross, the commerce secretary who led the metals investigation; and Peter Navarro, a trade skeptic who had been sidelined but is now in line for a promotion (https://www.nytimes.com/2018/02/25/us/politics/peter-navarro-trade.html).

Mr. Cohn threatened to resign if the White House followed through with stiff and sweeping tariffs, according to people who have spoken with him in recent days.

The departure of Mr. Porter, who organized weekly trade policy meetings and coordinated the trade advisers, has helped fuel a chaotic situation that has descended into an all-out war among various trade advisers, people close to the White House said.

The White House has been on the brink of announcing steel and aluminum tariffs several times in the past eight months, including in June. In recent days, the president appears to have grown impatient for action.

Supporters of the tariffs have begun broadcasting televised ads in recent days during programs that Mr. Trump has been known to watch. One such ad ran on Fox News minutes before the president's Twitter post on Thursday morning.

But the tariffs have divided industries, workers and policymakers. American manufacturers of steel and aluminum pressed the White House to take action against cheap imports, which they say hurt their ability to compete. Companies that use steel and aluminum in their products say tariffs would raise their costs, eating into profits or forcing them to raise prices or lay off workers.

Scott N. Paul, the president of the Alliance for American Manufacturing, which represents steel companies and workers, said the president made “an encouraging show of support” on Thursday morning but now needed to act.

“The president's enforcement action must be broad, robust and comprehensive,” Mr. Paul said.

Republican lawmakers blasted the announcement, underlining how far Mr. Trump has strayed from the party's traditional orthodoxy of embracing free and open markets. Senator Orrin G. Hatch, Republican of Utah and the chairman of the Senate Finance Committee, called tariffs “a tax hike the American people don't need and can't afford.”

“Let's be clear: The president is proposing a massive tax increase on American families,” said Senator Ben Sasse, Republican of Nebraska. “You'd expect a policy this bad from a leftist administration, not a supposedly Republican one.”

But Sherrod Brown, Democrat of Ohio, defended the president, calling the announcement a “long overdue” action for steelworkers in his state.

The prospect of tariffs seemed likely to incite a period of fierce lobbying by foreign governments and multinational companies who will argue that their products should be exempted from any sanctions. It could also result in protracted fight at the World Trade Organization.

The World Trade Organization provides substantial leeway for countries to pursue trade measures in their national security interest, but few countries have tested those permissions.

Jennifer A. Hillman, a professor at Georgetown Law, said she expected countries to bring challenges and that the outcome could be negative, whether the United States wins or loses.

A ruling against the United States might feed an opinion already popular in the Trump administration (https://www.nytimes.com/2017/12/10/business/wto-united-states-trade.html) that global trade rules compromise American sovereignty, and provide a reason to potentially withdraw from the organization.

Even a ruling in Washington's favor could prompt others to follow the United States in using national security concerns to justify a vast array of measures to shut off their own markets from American products.

“Arguably every other country in the world can do the same thing,” Ms. Hillman said. “You've really now walked away from a rules-based trading system.”

__________________________________________________________________________

• Matt Phillips contributed reporting to this story from New York.

• Ana Swanson writes about trade and international economics for The New York Times. She previously covered trade, the Federal Reserve and the economy for The Washington Post.

__________________________________________________________________________

Related to this topic:

• Trump Administration Proposes Stiff Penalties on Steel and Aluminum Imports (https://www.nytimes.com/2018/02/16/us/politics/trump-administration-recommends-stiff-penalties-on-steel-and-aluminum-imports.html)

• Trump Trade Measures Set Off a Global Legal Pushback (https://www.nytimes.com/2018/02/09/us/politics/trump-trade.html)

https://www.nytimes.com/2018/03/01/business/trump-tariffs.html (https://www.nytimes.com/2018/03/01/business/trump-tariffs.html)

from The New York Times....

Trump Calls Trade Wars ‘Good’ and ‘Easy to Win’

In a series of early-morning tweets, the president defended
his decision to impose stiff tariffs on steel and aluminum.

By ANA SWANSON | Friday, March 02, 2018

(https://static01.nyt.com/images/2018/03/03/business/03DC-TRADE3/merlin_134801892_ed8a91bd-b2fd-485c-9262-f488d8f6c4b4-jumbo.jpg) (https://static01.nyt.com/images/2018/03/03/business/03DC-TRADE3/merlin_134801892_ed8a91bd-b2fd-485c-9262-f488d8f6c4b4-superJumbo.jpg)
A steel production site in Germany. The European Union, Germany, Canada and other nations have threatened retaliation since President Trump
announced plans for tariffs on imported steel and aluminum. — Photograph: Tobias Schwarz/Agence France-Presse/Getty Images.

A DAY after stunning markets, Republican lawmakers and even his own advisers by announcing stiff tariffs on steel and aluminum imports, President Trump doubled down on his approach on Friday, saying in an early morning tweet that “Trade wars are good, and easy to win.”

Mr. Trump appeared eager to defend his decision to levy sweeping tariffs on all imports of those metals, issuing a series of morning tweets explaining the need for tariffs. “Our steel industry is in bad shape. IF YOU DON'T HAVE STEEL, YOU DON'T HAVE A COUNTRY!” he said in one tweet (https://twitter.com/realDonaldTrump/status/969558431802806272).

Markets fell in response to Mr. Trump's announcement on Thursday that he would impose tariffs of 25 percent on steel and 10 percent on aluminum, effectively placing a tax (https://www.nytimes.com/2018/03/01/upshot/trump-tariff-steel-aluminum-explain.html) on every foreign shipment of those metals into the United States. Mr. Trump, at a hastily arranged meeting with industry executives on Thursday, said he would formally sign the trade measures next week and promised they would be in effect “for a long period of time.”

On Friday, he wrote (https://twitter.com/realDonaldTrump/status/969525362580484098) that the measures would help to reduce the trade deficit, which is the gap between what the United States exports to other countries and what it imports. Mr. Trump has long lambasted the trade deficit as a sign of United States weakness.

“When a country Taxes our products coming in at, say, 50%, and we Tax the same product coming into our country at ZERO, not fair or smart. We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us. $800 Billion Trade Deficit-have no choice,” he wrote (https://twitter.com/realDonaldTrump/status/969572374977839106).

Steel and aluminum companies and their workers greeted the measure as a much-needed salve for their industries. But the doubling down is only likely to further inflame tensions with other nations, which are already indicating they may take reciprocal measures and place taxes on United States exports.

The European Union, Germany, Canada and other nations have threatened retaliation (https://www.nytimes.com/2018/03/02/business/europe-steel-tariffs-trump.html), and denunciations flowed in on Friday from governments, lawmakers, metals makers and labor unions.

Steffen Seibert, a spokesman for the German chancellor, Angela Merkel, said on Friday that the government “rejects” the tariffs, adding that such measures could lead to a global trade war, which “can't be in anyone's interest.”

__________________________________________________________________________

• Ana Swanson writes about trade and international economics for The New York Times. She previously covered trade, the Federal Reserve and the economy for The Washington Post.

__________________________________________________________________________

Related to this topic:

• Trump's Tariffs Prompt Global Threats of Retaliation (https://www.nytimes.com/2018/03/02/us/politics/trump-tariffs-steel-aluminum.html)

• E.U. Leader Threatens to Retaliate With Tariffs on Bourbon and Bluejeans (https://www.nytimes.com/2018/03/02/business/europe-steel-tariffs-trump.html)

• Trump's Steel Tariffs Raise Fears of a Damaging Trade War (https://www.nytimes.com/2018/03/02/business/trump-tariffs-trade-war.html)

• New York Times Editorial: Trade Wars Are Destructive. Of Course Trump Wants One. (https://www.nytimes.com/2018/03/02/opinion/sunday/trump-trade-steel-aluminum-tarriffs.html)

https://www.nytimes.com/2018/03/02/business/trump-calls-trade-wars-good-and-easy-to-win.html (https://www.nytimes.com/2018/03/02/business/trump-calls-trade-wars-good-and-easy-to-win.html)

I love this. While Trump is being a dick and Europe & Canada are planning retaliation, China is being very adult and mature about it.

What this means is that Trump will come out of it looking like the arsehole he is, whereas China will look like the mature elder-statesman country.

And China should be able to turn that into influential gold at various world forums, while Trump's America looks like an idiot pariah state.

Yep....while ~~Nero~~ Trump fiddles, ~~Rome~~ America burns.

from The Washington Post....

China grumbles at Trump's tariff move,
but Europe takes aim at Harleys and bourbon

Beijing expects little impact from duties on steel and aluminum and is unlikely to
start a trade war, experts said. But the E.U. plans to hit the U.S. with tariffs its own.

By SIMON DENYER and RICK NOACK | 2:40PM EST — Friday, March 02, 2018

(https://img.washingtonpost.com/rf/image_1111w/2010-2019/WashingtonPost/2018/03/02/Foreign/Images/AFP_11M6QO-5181.jpg) (https://img.washingtonpost.com/rw/2010-2019/WashingtonPost/2018/03/02/Foreign/Images/AFP_11M6QO-5181.jpg)
A Chinese worker cuts steel in Qingdao in China's Shandong province. China has reacted with measured disapproval to President Donald J. Trump's plan
to impose tariffs on steel and aluminum imports. — Photograph: Agence France-Presse/Getty Images.

BEIJING — China reacted with cautious criticism Friday to President Trump's plan to impose tariffs (https://www.washingtonpost.com/news/business/wp/2018/03/01/white-house-planning-major-announcement-thursday-on-steel-and-aluminum-imports) on imported steel and aluminum, urging the United States to abide by multilateral trade rules and do nothing to damage the fragile global economic recovery.

In Europe, however, Thursday's announcement triggered a sharp backlash, including threats of retaliation.

“We will put tariffs on Harley-Davidson, on bourbon and on blue jeans — Levi's,” European Commission President Jean-Claude Juncker said, according to the Reuters news service. “We cannot simply put our head in the sand.”

China is the world's dominant steel producer, but experts said the tariff plan would not greatly affect it because the country accounts for only 2 percent of U.S. imports. Beijing is not about to start a trade war over the decision, they added, framing it as self-defeating.

“What an extremely stupid move,” said Li Xinchuang, vice secretary general of the China Iron and Steel Association. “A desperate attempt by Trump to pander to his voters, which I think in fact runs counter to his ‘America First’ pledge.”

Li, who is also director of the China Metallurgical Industry Planning and Research Institute, said the tariffs would only make U.S. industries fall further behind globally at a time when “China is in its prime.”

Foreign Ministry spokeswoman Hua Chunying said on Friday that world trade would be harmed if other countries follow the U.S. example. “The basis for the global recovery is still unstable,” she said. “All countries should make concerted efforts to cooperate to resolve the relevant issues, instead of taking trade-restrictive measures unilaterally.”

It is not clear whether the tariffs would affect only certain countries or apply globally.

The tariff proposal met with more outrage in Europe, particularly in Germany, where Foreign Minister Sigmar Gabriel called it “unfathomable.”

“With this, the declaration of war has arrived,” said Bernd Lange (http://www.deutschlandfunk.de/us-strafzoelle-damit-ist-die-kriegserklaerung-da.694.de.html?dram:article_id=412039), a German Social Democrat and head of the European Parliament's trade committee, speaking on German public radio. “They have a mercantile trade model in their heads that dates back 200 years.”

Although Germany exports more steel to the United States than any other European country, last year it accounted for just 3 percent of U.S. steel imports, through September. Far more originated in Canada, South Korea and Mexico, countries that also have raised major concerns about the policy.

But many European officials see the tariffs as part of broader fears they have about Trump's “America First” agenda, given the bloc's long-standing reliance on U.S. partnership. Lange and others also worry that the tariffs could be expanded to other fields, such as computers.

“It's a bottomless pit,” he said.

France also condemned the move. In a strong statement on Friday, Bruno Le Maire, France's economy minister, said that if a trade war ensues between the United States and the European Union, there will be “only losers.”

Top British government officials had no immediate public comment, but a senior representative of Britain's steel industry warned that the tariffs (http://www.itv.com/news/2018-03-02/donald-trumps-proposed-steel-import-tariffs-could-have-significant-impact-on-uk-unions-warn) could have a “significant impact.”

“Measures such as these smack of short-termism, protectionism, and would be rife with unintended consequences for global trade and for the users of steel in the U.S.,” said Richard Warren, head of policy at U.K. Steel.

The possibility of global trade frictions unsettled markets on Friday, with Asian and European stocks following their U.S. counterparts lower. “Tariffs on steel and aluminum are not the end of the world,” said Richard Jerram, chief economist at the Bank of Singapore. “The risk is escalation. How aggressively China reacts and America's response to that will worry the markets.”

Later on Friday, Reuters reported that the European Union is considering imposing duties on U.S. imports worth about $3.5 billion if the White House pursues its plan. An E.U. official confirmed the report, saying, “This is broadly the figure we are looking at.” The official was not authorized to discuss the matter publicly and spoke on the condition of anonymity.

Trump's move is also expected to trigger legal challenges at the World Trade Organization by China, the European Union, Brazil and perhaps others. Wei Jianguo, a former Chinese vice minister of commerce, said the U.S. decision runs counter to WTO rules and hurts Sino-U.S. relations.

“China does not want to see a trade war with the United States. But if Trump insists, China is not afraid of it,” Wei said, noting that China imports a huge amount of U.S. goods, including Boeing planes, and agricultural and IT products.

But most analysts said the move is more of an irritant to China than anything serious at this stage.

Lu Zhengwei, chief economist at Industrial Bank in Shanghai, said China had already been working to cut overcapacity in its steel industry. Anti-dumping duties imposed on China by the Obama administration two years ago also had helped cut U.S. imports, experts said. Last year, China's steel exports fell 30 percent, and Lu said Trump's move came too late to make much of a difference.

Still, Beijing is not insensitive to the symbolism of the decision, aware that Trump's rhetoric has targeted it and wary of further measures to restrict trade and investment, experts said.

“China has to respond and fight for every inch of its own interests,” Lu said. “However, the result we are expecting is negotiation between both sides.”

The Trump administration is investigating China over intellectual property rights and technology-transfer policies and is expected to unveil more tariffs or penalties in coming months. Congress is also likely to strengthen and broaden controls on Chinese investment in the United States.

Andrew Polk, a founder of the Trivium consultancy in Beijing, said China's response to the tariffs probably would be more rhetorical than real. He predicted a similar reaction to the one that followed Trump's decision to slap tariffs on solar panels: “We don't like this, but we're going to downplay it and not really do anything.”

Trump's announcement came as President Xi Jinping's top economic adviser, Liu He, was in Washington trying to ease trade tensions. Hua, the Foreign Ministry spokeswoman, said the envoy had held “constructive consultations” with U.S. officials on Thursday and shared a candid exchange of views.

Rob Carnell, head of Asia-Pacific research at ING in Singapore, said China might join or hide behind other nations and trading blocs — such as Canada, the European Union, Japan and South Korea — in retaliating against the U.S. move. Taiwan and Brazil are also among those affected by the measure.

Working through the WTO could take a long time, he said, making “tit-for-tat retaliation” more likely. That would not be good news for the global economy, he said.

But ironically, it might not be bad news for China. Many will now wonder whether the United States is not a greater threat to the world trading system, said Arthur Kroeber, managing director of the Beijing-based research firm Gavekal Dragonomics.

“China can afford to play it pretty cool and measured, as they have been doing ever since Trump took office,” Kroeber said. “They take a small, really negligible, hit to their steel and aluminum exports, but strategically they come out way ahead by just letting Trump be Trump.”

__________________________________________________________________________

• Rick Noack reported from Berlin. Luna Lin, Shirley Feng, Amber Ziye Wang and Liu Yang in Beijing, James McAuley in Paris and Quentin Ariès in Brussels contributed to this report.

• Simon Denyer is The Washington Post's bureau chief in Beijing. He previously worked as The Post's bureau chief in New Delhi; a Reuters bureau chief in Washington, New Delhi and Islamabad, Pakistan; and a Reuters correspondent in Nairobi, New York and London.

• Rick Noack is a foreign affairs reporter for The Washington Post based in Berlin. Previously, he worked for The Post from Washington as an Arthur F. Burns Fellow and from London.

__________________________________________________________________________

Related to this topic:

• VIDEO: Trump announces tariffs on steel and aluminum (https://www.washingtonpost.com/video/adc8ba12-1d79-11e8-98f5-ceecfa8741b6_video.html)

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https://www.washingtonpost.com/world/china-steel-slams-trumps-stupid-protectionism-but-trade-war-is-unlikely/2018/03/02/33ec5274-1d94-11e8-98f5-ceecfa8741b6_story.html (https://www.washingtonpost.com/world/china-steel-slams-trumps-stupid-protectionism-but-trade-war-is-unlikely/2018/03/02/33ec5274-1d94-11e8-98f5-ceecfa8741b6_story.html)

from The Washington Post....

Trump escalates trade war, threatens European carmakers with stiff tariffs

Trump appeared to be responding to warnings from European leaders that his
promised tariffs would trigger retaliation from numerous major trading partners.

By DAMIAN PALETTA and JOSH DAWSEY | 1:32PM EST — Saturday, March 03, 2018

(https://www.washingtonpost.com/rf/image_999w/2010-2019/WashingtonPost/2018/02/07/National-Economy/Images/Botsford180206Trump24240.jpg) (https://www.washingtonpost.com/rw/2010-2019/WashingtonPost/2018/02/07/National-Economy/Images/Botsford180206Trump24240.jpg)
President Trump on March 1st announced tariffs on steel and aluminum. “Without steel and aluminum, your country is not the same,” Trump said.
— Photograph: The Washington Post.

PRESIDENT TRUMP on Saturday threatened to hammer European automotive companies with steep tariffs as his global trade war snowballed into a third day.

Trump, in a series of Twitter posts while at his Mar-a-Lago resort in Florida, appeared to be responding to warnings from European leaders that his promised tariffs on aluminum and steel would trigger retaliation from numerous major U.S. trading partners.

Bring it on, Trump wrote.

(http://i378.photobucket.com/albums/oo227/Kiwithrottlejockey/Washington%20Post%20pix/20180303twdjt_TwitterDonaldJTrump_zpsjfcucou5.jpg~original) (https://twitter.com/realDonaldTrump/status/969994273121820672)

The United States imposes a 2.5 percent tariff on the import of foreign cars and a 25 percent tariff on the import of foreign trucks and commercial vans. The European Union charges a 10 percent tariff on the import of cars.

On Thursday, Trump shocked the world — and many of his top advisers — with an off-the-cuff announcement that the United States would impose a tariff of 25 percent on steel imports and 10 percent on aluminum imports. Canada's leadership said they would retaliate with tariffs on U.S. exports. European Commission president Jean-Claude Juncker said his bloc planned to hit back at the U.S. by imposing tariffs on targeting Kentucky bourbon, Harley-Davidson motorcycles, and Levi's blue jeans.

On Friday, Trump wrote in another Twitter post that “trade wars are good, and easy to win.” He also promised to enact what he called “RECIPROCAL TAXES” on any country that has a tariff against any U.S. good or service.

Trump's message on Saturday continued to levy direct attacks at U.S. allies and some of the world's largest economies. The tariffs on aluminum and steel and large tariffs on European automakers would have the biggest impact on Canada, the United Kingdom, Germany, South Korea, Turkey, and Japan, countries with which the United States has extremely close national security ties.

During the 2016 campaign, Trump often said he planned to use the White House to focus squarely on what he viewed as trade imbalances caused by China and Mexico, but the moves he's threatened in the past week would likely have little impact on them. China has dramatically ramped up production of aluminum and steel in the past 20 years, leading to a glut of both metals that have hurt U.S. companies. But they don't account for a large share of U.S. imports in these metals, making it more difficult for the White House to impose direct penalties. Instead, the largest exporters of steel to the U.S. are Canada, Germany, South Korea, and other top allies.

On Friday, Canadian Prime Minister Justin Trudeau called the tariff proposal “absolutely unacceptable,” using the same phrase as Foreign Minister Chrystia Freeland, who also threatened retaliatory measures if Canada isn't exempted from the trade actions.

Trump's new attack on European automakers is mostly a direct threat at Germany, which exported $23 billion in cars to the United States in 2016, according to data aggregated by the Massachusetts Institute of Technology. But large German automakers also have a sizable presence in the United States, with BMW employing thousands of workers in South Carolina and Volkswagen employing thousands more in Tennessee. Those manufacturers produce hundreds of thousands of cars in the United States each year, many of which are later exported to buyers in Asia and Europe.

Trump often looks at trade relationships as a zero-sum game, complaining if the United States buys more goods and services from other countries than it sells to them. To that end, U.S. firms sold $53 billion in exports and imported $118 billion in goods from Germany last year, the kind of dynamic that he has often complained about.

But critics of Trump's approach have often complained that tariffs and trade wars only drive up costs for domestic consumers, a move that would make German cars more expensive in the United States. Trump also has said these sorts of threats could incentivize foreign companies to expand their U.S. operations so they don't have to pay the import fees.

Trump has been hammering the German auto industry (https://www.washingtonpost.com/news/innovations/wp/2017/01/16/trump-german-automakers-will-pay-tariff-on-cars-built-outside-u-s) since before taking office, incensed at their move to expand production in Mexico and threatening them with a 35 percent tariff on any cars brought into the United States.

One of Trump's top advisers, Peter Navarro, also holds the view that German automakers have stolen market share in the United States by importing cars but limiting the amount of U.S. cars sold into their country, two people involved in White House deliberations said. Navarro's stature within the White House has grown in recent weeks as Trump has turned toward advisers with protectionist views as he became frustrated that his trade agenda was foundering.

German officials have spent much of the past year trying to convince U.S. policymakers that they have a healthy trade relationship in the United States that benefits both countries. But Trump has a frosty relationship with German Chancellor Angela Merkel, and these personal relationships can spill into policy decisions at the White House.

White House officials have even discussed launching what's known as a “301 investigation” into German automakers, a step that could precede levying tariffs or other restrictions, a person familiar with discussions said.

__________________________________________________________________________

• Alan Freeman contributed to this report.

• Damian Paletta is White House economic policy reporter for The Washington Post. Before joining The Post, he covered the White House for The Wall Street Journal.

• Josh Dawsey is a White House reporter for The Washington Post. He joined the paper in 2017. He previously covered the White House for Politico, and New York City Hall and New Jersey Governor Chris Christie for The Wall Street Journal.

__________________________________________________________________________

Related to this topic:

• VIDEO: Trump announces tariffs on steel and aluinum (https://www.washingtonpost.com/video/adc8ba12-1d79-11e8-98f5-ceecfa8741b6_video.html)

https://www.washingtonpost.com/news/business/wp/2018/03/03/trump-escalates-trade-war-threatens-european-carmakers-with-stiff-tariffs (https://www.washingtonpost.com/news/business/wp/2018/03/03/trump-escalates-trade-war-threatens-european-carmakers-with-stiff-tariffs)

from The Washington Post....

Trump vows to strike back at European leaders
who warned of retaliation for his tariffs

Canada and Germany are among countries to speak out against Trump's proposals for aluminum and steel.

By STEVEN MUFSON and DAMIAN PALETTA | 8:25PM EST — Saturday, March 03, 2018

(https://img.washingtonpost.com/rf/image_1055w/2010-2019/WashingtonPost/2018/03/03/Editorial-Opinion/Images/Trump_22041.jpg-165a2.jpg) (https://img.washingtonpost.com/rw/2010-2019/WashingtonPost/2018/03/03/Editorial-Opinion/Images/Trump_22041.jpg-165a2.jpg)
President Donald J. Trump speaks during a meeting with steel and aluminum executives in Washington. — Photograph: Evan Vucci/Associated Press.

IN HIS expanding war over global trade, President Trump has aimed his harshest rhetoric at an unlikely target — the closest U.S. allies.

In Twitter posts while at his Mar-a-Lago resort in Florida on Saturday, Trump vowed to strike back at European leaders who said they would retaliate for his promised tariffs on aluminum and steel.

Bring it on, Trump warned.

“If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!” he tweeted.

The country that escaped Trump's tweeting ire was China, the very nation the president has wanted to hit hardest and the one that is largely responsible for flooding global markets with cheap steel. In return, China, which provides just 2 percent of U.S. steel imports, has been the most muted among leading trading partners in its response to Trump's tariff threats, calling them misguided but not threatening a response.

Instead, the biggest burden of Trump's new tariffs — 25 percent on steel and 10 percent on aluminum — would be borne by Canada, the largest trading partner with the United States.

Canada is the largest exporter of steel and aluminum to the United States, supplying $7.2 billion of aluminum and $4.3 billion of steel to the United States last year. Yet in goods and services, the United States runs a trade surplus with Canada, which buys $48 billion worth of U.S. automobiles and $40 billion of machinery, in addition to agricultural products.

The steel and aluminum tariffs would also hit the United Kingdom, Germany, South Korea, Turkey and Japan, countries with which the United States has extremely close national security ties.

“The president is going to quickly find out that you can't start a trade war with your allies and expect them to work with you on other issues,” said Jamie Fly, senior fellow at the German Marshall Fund. “The administration is squandering the little credibility they had with transatlantic partners at a time when they're asking them to help fix the Iran deal, fight terrorism and increase defense spending. It will not work.”

And while Trump has promoted his new tariffs as part of an “America First” plan, any benefit in terms of jobs could be far outweighed by increased steel costs for U.S. automobiles, wind turbines, shale oil and gas drilling rigs and more — in many cases doing unintended harm to some of his own strongest domestic constituencies.

Trump's tariffs “are inconsistent with the Administration's goal of continuing the energy renaissance and building world class infrastructure,” American Petroleum Institute President Jack Gerard said in a statement. “The U.S. oil and natural gas industry, in particular, relies on specialty steel for many of its projects that most U.S. steelmakers don't supply.”

Trade experts say the president has exaggerated and oversimplified the trade issues with Europe.

The United States already imposes a 2.5 percent tariff on the import of foreign cars and a 25 percent tariff on the import of foreign trucks and commercial vans. The European Union charges a 10 percent tariff on the import of U.S. cars.

The new tariffs and the president's truculent rhetoric triggered angry responses among the countries that are closest to the United States and that are part of the World Trade Organization, which has for years helped reduce global tariffs.

“Allies should not be treated as scape goats, Mr. President,” wrote a German member of the European Parliament, Reinhard Bütikofer, on Twitter. “Or is it your goal to make America lonely?”

Trump's new attack on European automakers is mostly a direct threat at Germany, which exported $23 billion in cars to the United States in 2016, according to data aggregated by the Massachusetts Institute of Technology.

But large German automakers also have a sizable presence in the United States, with BMW employing thousands of workers in South Carolina and Volkswagen employing thousands more in Tennessee. Those manufacturers produce hundreds of thousands of cars in the United States each year, many of which are later exported to buyers in Asia and Europe.

Some European lawmakers appeared frustrated that Trump was targeting automakers that have large U.S. manufacturing operations.

“The EU will be forced to respond to US protectionism, but does not want tradewar!” wrote a Dutch member of the European Parliament, Marietje Schaake, on Twitter. “By the way, German carmakers alone made [845,000] cars in the US in 2016, the bulk (around 2/3) for export. The world is interconnected, not zero-sum.”

Canada's leaders have said they would retaliate with tariffs on U.S. exports. On Friday, Canadian Prime Minister Justin Trudeau called Trump's move “absolutely unacceptable,” using the same phrase as Foreign Minister Chrystia Freeland, who also threatened retaliatory measures if Canada isn't exempted from the trade actions.

Likewise, European Commission President Jean-Claude Juncker said his bloc planned to hit back at the United States by imposing tariffs targeting U.S. products such as bourbon from Kentucky — Senate Majority Leader Mitch McConnell's home state — and Harley-Davidson motorcycles, which are partly manufactured in House Speaker Paul D. Ryan's home state, Wisconsin.

On Friday, Trump wrote in another Twitter post that “trade wars are good, and easy to win.” He also promised to enact what he called “RECIPROCAL TAXES” on any country that has a tariff against any U.S. good or service.

Trump has been cheered on by some union leaders and a few close advisers within the White House. They believe U.S. policy has been too complacent for decades and allowed foreign countries to steal away U.S. jobs through unfair government subsidies and unbalanced tariff rules. Even if Trump's approach shatters the status quo, they believe it is necessary.

“This whole idea that there’s a big downstream effect — it's just part of the fake news that's going to be put out to oppose these tariffs,” White House trade adviser Peter Navarro told Fox Business on Friday. “A penny for a six pack of beer — that's worth it to put Americans back to work in two industries that we need.”

Trump has been particularly critical of situations in which the United States buys more goods and services from other countries than it sells to them. To that end, U.S. firms sold $53 billion in exports and imported $118 billion in goods from Germany last year, the kind of dynamic that he has often complained about.

Still, the tariffs on steel and aluminum Trump unveiled last week are not crafted in a way that would target China, which last year sold $375 billion more goods and services in the United States than what it had ordered, according to the Commerce Department.

Chinese officials initially reacted to Trump's tariff threats with strong language.

“What an extremely stupid move,” Li Xinchuang, vice secretary general of the China Iron and Steel Association, said on Friday. “A desperate attempt by Trump to pander to his voters, which I think in fact runs counter to his ‘America First’ pledge.”

But beyond such rhetoric, Beijing has not threatened specific ways it would retaliate. And the overall tone has been more muted, analysts said. That may be because China exports so little steel and aluminum directly to the United States.

In contrast, Jean Simard, president of the Aluminum Association of Canada, said that his industry has been integrated into the U.S. economy for more than 50 years and that the Pentagon considers Canadian aluminum production a strategic military supply.

Simard said nine of 15 U.S. aluminum smelters have closed in the past four years, but he blames their demise on a surge in Chinese production and the fact that they face high power costs and have never been modernized.

Through access to cheap capital and electricity, and a soaring domestic construction boom, China's aluminum and steelmakers have grown sharply. China's steelmakers have gone from producing 15 percent of the world's crude steel in 2000 to producing 50 percent in 2016, according to the World Steel Association (https://www.worldsteel.org/en/dam/jcr:0474d208-9108-4927-ace8-4ac5445c5df8/World+Steel+in+Figures+2017.pdf). China produces eight times as much as the second biggest producer, Japan. (The United States ranks fourth.)

Critics of Trump's approach have often complained that tariffs and trade wars only drive up costs for domestic consumers, a move that would make German cars more expensive for U.S. consumers. Trump has also said these sorts of threats could incentivize foreign companies to expand their U.S. operations so they don't have to pay the import fees.

Trump has been hammering the German auto industry since before taking office, incensed at its move to expand production in Mexico and threatening a 35 percent tariff on any cars brought into the United States.

One of Trump's top advisers, Navarro, also holds the view that German automakers have stolen market share in the United States by importing cars but limiting the number of U.S. cars sold into their country, two people involved in White House deliberations said. Navarro's stature within the White House has grown in recent weeks as Trump has turned toward advisers with protectionist views as he became frustrated that his trade agenda was floundering.

German officials have spent much of the past year trying to convince U.S. policymakers that they have a healthy trade relationship with the United States that benefits both countries. But Trump has a frosty relationship with German Chancellor Angela Merkel, and these personal relationships can spill into policy decisions at the White House.

White House officials have even discussed launching what's known as a “301 investigation” into German automakers, a step that could preclude levying tariffs or other restrictions, a person familiar with discussions said.

“On trade policy, President Trump appears to be listening to advisers with views far outside mainstream economics,” said N. Gregory Mankiw, a Harvard economics professor who was chairman of President George W. Bush's Council of Economic Advisers. “I don't know any respected economist, conservative or liberal, who thinks this is the right approach to promoting prosperity.”

__________________________________________________________________________

• Michael Birnbaum in Brussels, Simon Denyer in Beijing and Alan Freeman in Ottawa contributed to this report.

• Steven Mufson covers energy and other financial matters for The Washington Post. Since joining The Post, he has covered the White House, China, economic policy and diplomacy.

• Damian Paletta is White House economic policy reporter for The Washington Post. Before joining The Post, he covered the White House for The Wall Street Journal.

__________________________________________________________________________

Related to this topic:

• VIDEO: New steel and aluminum tariffs set to start (https://www.washingtonpost.com/video/3cfcff1a-1ea9-11e8-98f5-ceecfa8741b6_video.html)

• Trump is so obsessed with winning that he might make America lose (https://www.washingtonpost.com/outlook/trump-is-so-obsessed-with-winning-that-he-might-make-america-lose/2018/03/01/70a69224-1cd1-11e8-b2d9-08e748f892c0_story.html)

http://www.washingtonpost.com/business/economy/trump-vows-to-strike-back-at-european-leaders-who-warned-of-retaliation-for-his-tariffs/2018/03/03/a7b96456-1f21-11e8-9de1-147dd2df3829_story.html (http://www.washingtonpost.com/business/economy/trump-vows-to-strike-back-at-european-leaders-who-warned-of-retaliation-for-his-tariffs/2018/03/03/a7b96456-1f21-11e8-9de1-147dd2df3829_story.html)

from The New York Times....

White House Unveils Tariffs on 1,300 Chinese Products

The Trump administration released a list of Chinese goods that it will subject to tariffs,
including electronics, iron and steel plates, engines and optical scanners.

By ANA SWANSON | Tuesday, April 03, 2018

(https://static01.nyt.com/images/2018/04/04/business/04dc-trade-1/04dc-trade-1-jumbo.jpg) (https://static01.nyt.com/images/2018/04/04/business/04dc-trade-1/04dc-trade-1-superJumbo.jpg)
A steel factory in Dalian, China. The Trump administration has placed tariffs on a number of items, including electronic touch screens,
iron and steel plates, medical devices, aircraft parts, batteries and other Chinese products. — Photograph: China Network/Reuters.

WASHINGTON — The Trump administration said on Tuesday that it will place a 25 percent tariff on Chinese products like flat-screen televisions, medical devices, aircraft parts and batteries, outlining more than 1,300 imported goods that will soon face levies as part of a sweeping trade measure aimed at penalizing China for its trade practices.

The move, which stems from a White House investigation into China's use of pressure, intimidation and theft to obtain American technologies, is likely to inflame an already-simmering trade war between the countries. On Monday, China said it would slap tariffs on 128 American products (https://www.nytimes.com/2018/04/01/world/asia/china-tariffs-united-states.html) in response to a separate White House plan to tax steel and aluminum (https://www.nytimes.com/2018/03/01/business/trump-tariffs.html) from China and other countries.

The products targeted by the White House are part of its plan to go after China's dominance in cutting-edge technologies like semiconductors, electric vehicles and advanced medical products — industries that China is pursuing dominance in as part of an industrial plan known as “Made in China 2025” (https://www.nytimes.com/2018/03/26/business/china-us-trade.html).

The Trump administration said that its analysts had identified products that benefit from these policies but refined the list to remove goods that were likely to cause disruptions to the United States economy or consumers.

The list of goods (https://ustr.gov/sites/default/files/files/Press/Releases/301FRN.pdf) excludes many Chinese-made consumer products available for sale at Target or Walmart, including clothing, shoes and toys. But it will most likely increase costs for American manufacturers that depend on imported parts because it concentrates heavily on machinery and high-tech components. The tariffs will be imposed on a total of $50 billion worth of Chinese products each year.

The designation of targeted products will be followed by a comment period in which American companies can provide feedback to the Trump administration on the product choices. The administration will hold a public hearing on the submissions on May 15 in Washington, and companies will have until May 22 to file final objections.

(https://static01.nyt.com/images/2018/04/04/business/04dc-trade-2/merlin_136349283_d3f232df-d8f7-44cb-827e-ba8017daa983-jumbo.jpg) (https://static01.nyt.com/images/2018/04/04/business/04dc-trade-2/merlin_136349283_d3f232df-d8f7-44cb-827e-ba8017daa983-superJumbo.jpg)
The products targeted by the White House are part of an effort to go after China's dominance in cutting-edge technologies like semiconductors,
electric vehicles and advanced medical products — industries that China is pursuing dominance in as part of an industrial plan known as
“Made in China 2025”. — Photograph: Gilles Sabrié/Bloomberg.

Business groups, concerned about the effect on companies and workers, swiftly criticized the move.

“Unilaterally imposing $50 billion of new tariffs without a long-term strategy that leads to economic reforms in China will only hurt America's businesses, workers, and families,” the Business Roundtable, a corporate trade group, said in a statement. “Instead, the administration should work with U.S. allies on an approach that advances meaningful reform in China without imposing significant harm on America's economy.”

Jay Timmons, the president of the National Association of Manufacturers, said that American manufacturers were concerned about the trade relationship with China, including intellectual property theft, counterfeit goods and unfair subsidies, but also that tariffs were not the best response.

In a strongly worded statement on Tuesday, the Chinese Embassy in the United States condemned the tariffs. “Such unilateralistic and protectionist action has gravely violated fundamental principles and values of the W.T.O.,” the statement said. “It serves neither China's interest, nor U.S. interest, even less the interest of the global economy.”

The Chinese would resort to “measures of equal scale and strength against U.S. products in accordance with Chinese law,” the statement said.

While many American companies say they are unfairly treated in China, they have rued the possibility of a trade war between the world's two largest economies, and the economic harm it could cause, and have begun pushing back against the White House's plans (https://www.nytimes.com/2018/04/02/business/china-us-trade-action-markets.html). China remains a crucial and growing market for companies like John Deere and Apple, as well as for soybean farmers and growers of other agricultural products.

(https://static01.nyt.com/images/2018/04/03/business/03dc-chinatrade-1/03dc-chinatrade-1-jumbo-v3.jpg) (https://static01.nyt.com/images/2018/04/03/business/03dc-chinatrade-1/03dc-chinatrade-1-superJumbo-v3.jpg)
A Chinese state-owned steel plant last year in Hebei. Many of the trade measures that President Trump has proposed, including tariffs on foreign
steel and aluminum, have divided his own advisers, the business community and the Republican Party. — Kevin Frayer/Getty Images.

Financial markets fell sharply on Monday as China imposed its own retaliatory tariffs on American products but regained most of their lost territory on Tuesday.

President Trump, who has repeatedly promised tough action on China's trade practices, said on Tuesday that he intended to get along with China but that its unfair trade behavior had gone on too long. “It's not something we can live with,” Mr. Trump said at the White House, adding, “I campaigned on that.”

Trump advisers have criticized past administrations for allowing China to receive the benefits of global trade while continuing to break the international trade rules imposed by organizations like the World Trade Organization — a charge China denies.

But the administration has struggled to persuade its critics that the kind of tough trade measures Mr. Trump favors can alter China's behavior without tipping the world into a trade war and ultimately harming American workers and consumers. In addition to the tariffs, the White House is preparing to restrict Chinese investment (https://www.nytimes.com/2018/03/28/business/trump-china-investment-technology.html) in American technology and innovation, and to start a case against China at the World Trade Organization.

“The administration is rightly focused on restoring equity and fairness in our trade relationship with China,” said Myron Brilliant, an executive vice president and the head of international affairs at the U.S. Chamber of Commerce. “However, imposing taxes on products used daily by American consumers and job creators is not the way to achieve those ends.”

The Coalition for a Prosperous America, an organization that has supported the president's trade agenda, called the China action a shift from “naïve” to “strategic” trade. “The age of appeasement must end,” said Paola Masman, the group's media director.

(https://static01.nyt.com/images/2018/04/03/business/03dc-chinatrade-2/03dc-chinatrade-2-jumbo.jpg) (https://static01.nyt.com/images/2018/04/03/business/03dc-chinatrade-2/03dc-chinatrade-2-superJumbo.jpg)
On Monday, China imposed tariffs on more than 100 American products, including pork. The 25 percent tariff is expected to be particularly
harmful among the Midwestern regions that supported Mr. Trump in 2016. Last year, American farmers sent more than a billion dollars'
worth of pork to China. — Photograph: Credit Gerry Broome/Associated Press.

But the administration's trade measures are prompting concern among many American companies, who are wary of Beijing's response.

The United States' largest exports to China last year were aircraft and aircraft parts, which totaled more than $16 billion, according to IHS Markit. These products featured heavily on Tuesday's list, setting off fears that China could retaliate with similar penalties (https://www.nytimes.com/2018/03/14/business/economy/boeing-tariffs-china.html) against American plane maker Boeing.

Dan Stohr, a spokesman for the Aerospace Industries Association, said the group was still reviewing the tariff list but would almost certainly file comments with the administration.

Farming communities, one of the country's largest exporters and a solid base for Mr. Trump, are among the most vulnerable. Chinese tariffs of 25 percent will particularly hurt American pork farmers, who sent more than $1 billion worth of products to China last year.

Senator Joni Ernst, Republican of Iowa, said American farmers were already struggling to make ends meet. “Increasing tariffs on exports will harm Iowa producers and undermine the rural economy,” Ms. Ernst said. “It's my hope that we can pursue policies that enhance our competitiveness, rather than reduce our access to foreign markets.”

__________________________________________________________________________

• Natalie Kitroeff and Ben Casselman contributed reporting from New York, and Keith Bradsher from Shanghai.

• Ana Swanson writes about trade and international economics for The New York Times. She previously covered trade, the Federal Reserve and the economy for The Washington Post.

__________________________________________________________________________

Related to this topic:

• Looming China Trade Action Divides Industry and Roils Markets (https://www.nytimes.com/2018/04/02/business/china-us-trade-action-markets.html)

• Trade Deals Take Years. Trump Wants to Remake Them in Months. (https://www.nytimes.com/2018/03/28/business/trump-china-world-trade.html)

• Trump Readies Sweeping Tariffs and Investment Restrictions on China (https://www.nytimes.com/2018/03/15/us/politics/trump-china-trade-measures.html)

https://www.nytimes.com/2018/04/03/us/politics/white-house-chinese-imports-tariffs.html (https://www.nytimes.com/2018/04/03/us/politics/white-house-chinese-imports-tariffs.html)

from The New York Times....

China Strikes Back at the U.S. With Plans for Its Own Tariffs

The measures, targeting $50 billion worth of soybeans, cars and other goods,
were the latest move in the countries' escalating trade confrontation.

By KEITH BRADSHER and STEVEN LEE MYERS | Wednesday, April 04, 2018

(https://static01.nyt.com/images/2018/04/05/world/05china-trade-1sub/merlin_136363158_a241cab9-8a8e-44b6-a53a-e38fdfd4c004-jumbo.jpg) (https://static01.nyt.com/images/2018/04/05/world/05china-trade-1sub/merlin_136363158_a241cab9-8a8e-44b6-a53a-e38fdfd4c004-superJumbo.jpg)
China on Wednesday outlined plans to impose tariffs on soybeans and other American goods. — Photograph: Daniel Acker/Bloomberg.

SHANGHAI — China hit back at the United States on Wednesday with proposed tariffs on $50 billion worth of American soybeans, cars, chemicals and other goods, in a move likely to stoke fears that the countries' escalating confrontation could become an all-out trade war.

Moving with unusual speed, Chinese officials outlined plans to make it more costly to import 106 types of American goods into China. They are intended to hit the United States square in the farm belt — a major section of President Trump's political support but also a major supplier of what China stocks in its supermarkets.

Beijing's plan to institute new tariffs was announced just hours after the Trump administration detailed its own protections (https://www.nytimes.com/2018/04/03/us/politics/white-house-chinese-imports-tariffs.html) on a similar value of Chinese-made aircraft parts, cars and car parts, televisions, steel and much more. Following a previous round of tit-for-tat tariffs unveiled over the past few days, the new measures have sparked concerns that the dispute could widen further, hurting jobs and growth in both countries.

Investors drove financial markets lower (https://www.nytimes.com/2018/04/04/business/stock-markets-trade-war.html) over the prospect that the two sides were not yet done fighting.

“China has never succumbed to external pressure,” Zhu Guangyao, vice minister of finance, said at a news briefing on Wednesday. He added, “External pressure will only make the Chinese people more focused on economic development.”

The question now is whether the two sides will intensify their efforts to punish each other before they sit down to negotiate. Neither set of tariffs go into effect right away, though the exact timing of the Chinese measures was not clear.

The dueling tariffs still do not impact the majority of trade between the two countries, which is valued at nearly $650 billion a year (https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china). Still, economists say that the clash could escalate quickly if the two sides fail to find a way to quickly resolve their differences, threatening a commercial relationship that is essential to the world economy.

Letting the dispute turn into a test of wills would be a mistake, said Jie Zhao, a senior research fellow at Fudan University in Shanghai.

“We should negotiate in a professional way,” Ms. Zhao said, “and make it less ideological and emotional.”

China's proposed new tariffs cover a significant chunk of what it buys from the United States. The protections on the $50 billion of goods announced on Wednesday, together with those on the $3 billion worth of products that Beijing unveiled earlier this week in retaliation for American tariffs on global steel imports (https://www.nytimes.com/2018/03/08/us/politics/trump-tariff-announcement.html), account for about a third of China's American imports.

By contrast, because the United States imports significantly more from China, tariffs on the same amount of products make up roughly one-ninth of its Chinese imports. That gives the United States more room to find other Chinese products to target.

(https://static01.nyt.com/images/2018/04/03/world/03china-tariffs/merlin_136285290_6d768f0f-cb27-4061-b034-dc92a3a86e9b-jumbo.jpg) (https://static01.nyt.com/images/2018/04/03/world/03china-tariffs/merlin_136285290_6d768f0f-cb27-4061-b034-dc92a3a86e9b-superJumbo.jpg)
A pig farm in Iowa in 2014. China will impose a 25 percent tariff on American pork, an important moneymaker, especially in farming regions
in states that voted for President Trump. — Photograph: Daniel Acker/Reuters.

Even as Chinese officials struck a defiant tone on Wednesday, they still said they wanted to avoid escalating the conflict.

“China's attitude is clear,” Mr. Zhu, the vice minister of finance, said. “We don't want a trade war because a trade war would hurt the interests of both countries.”

China could still fight back in other ways. Its control over its domestic economy and news media, and its homegrown internet, give it a strong hand in controlling public opinion and minimizing the potential impact on its consumers. In the past, China has mobilized its vast ranks of consumers to turn up their noses at products from Japan (https://www.nytimes.com/2012/09/17/world/asia/anti-japanese-protests-over-disputed-islands-continue-in-china.html), the Philippines and South Korea (https://www.nytimes.com/2017/03/09/world/asia/china-lotte-thaad-south-korea.html) during political disputes, though getting Chinese consumers to stop buying iPhones and Chevrolets could be trickier.

The two sides are clashing with the future in mind. President Trump instituted his latest round of tariffs against China while citing Beijing's government-driven efforts to retool the country's economy to focus on the technologies of the future. Known as the “Made in China 2025” (https://www.nytimes.com/2017/11/07/business/made-in-china-technology-trade.html) program, the plan specifies efforts to build up cutting-edge industries like robotics, aerospace and electric cars.

Many companies in Europe and the United States say they fear the program will create state-supported competitors, an argument that has won backing in the Trump administration. Some companies say that Beijing finds ways to force them to hand over technology if they want to sell their wares in China, an allegation that Chinese officials dispute.

China appears to show little interest in putting the “Made in China 2025” efforts on the negotiating table. A report in state-controlled media on Wednesday (http://www.xinhuanet.com/fortune/2018-04/04/c_1122636336.htm) described the development of advanced manufacturing as “an inherent requirement for the transformation and upgrading of China's manufacturing industry, and it is also the only way for China's economy to enter a high-quality development stage.”

For now, China's new tariffs could create a more immediate issue for the Trump administration.

While they include plenty of goods Americans make, they have a heavy focus on products Americans grow: soybeans, corn, cotton, beef, frozen orange juice, even tobacco and whiskey. Many of those products come largely from Republican-dominated states, where lawmakers might be expected to have some influence with President Trump and could therefore persuade him to back down from his latest trade demands.

For manufactured goods, the new Chinese tariffs include cars and car parts, plastics, aerospace products and chemicals. Many of those products are also sold by European companies, giving Chinese buyers alternatives. The new tariffs announced on Wednesday will amount to 25 percent on the American products.

Chinese officials — who blamed President Trump for provoking the clash — have appealed to the World Trade Organization, which sets trade rules and moderates disputes, to resolve the feud. But both sides risk censure by the W.T.O. — the Trump administration for its tariffs, and China for swiftly retaliating without a proper review.

“A key time has come for the United States and China to form a new consensus that includes intellectual property and the opening up of markets,” said Song Guoyou, the deputy chief of the Center for American Studies at Fudan University. “Otherwise, trade may fluctuate a lot.”

__________________________________________________________________________

• Keith Bradsher reported from Shanghai, and Steven Lee Myers from Beijing. Ailin Tang contributed research.

• Keith Bradsher is the Pulitzer Prize-winning Shanghai bureau chief for The New York Times, having reopened the Shanghai bureau on November 14th, 2016. He has previously served as the Hong Kong bureau chief and the Detroit bureau chief for The Times. Before those postings, he was a Washington correspondent for The Times covering the Federal Reserve and international trade, and a New York-based business reporter covering transportation and telecommunications for The Times. Born in 1964, Mr. Bradsher received a degree in economics from the University of North Carolina at Chapel Hill, where he was a Morehead Scholar. He received a master's degree in public policy with a concentration in economics from the Woodrow Wilson School at Princeton University. Prior to joining The New York Times, Mr. Bradsher wrote for the Los Angeles Times from 1987 until 1989.

• Steven Lee Myers is a veteran diplomatic and national security correspondent, now based in the Beijing bureau. He joined The New York Times in 1989, and has previously worked as a correspondent in Moscow, Baghdad and Washington, where he covered the State Department, the Pentagon and the White House. He is the author of “The New Tsar: The Rise and Reign of Vladimir Putin” (https://www.amazon.com/dp/0345802799), published by Alfred A. Knopf in 2015.

__________________________________________________________________________

Related to this topic:

• White House Unveils Tariffs on 1,300 Chinese Products (https://www.nytimes.com/2018/04/03/us/politics/white-house-chinese-imports-tariffs.html)

• China Slaps Tariffs on 128 U.S. Products, Including Wine, Pork and Pipes (https://www.nytimes.com/2018/04/01/world/asia/china-tariffs-united-states.html)

https://www.nytimes.com/2018/04/04/business/china-us-tariffs.html (https://www.nytimes.com/2018/04/04/business/china-us-tariffs.html)

A trade-war between America and China is an excellent idea.

Especially when Chinese retaliation trashes the jobs of stupid Trump-supporters in America, eh?

from The New York Times....

How U.S.-China Trade Spat Could Threaten Manufacturing

If the tariffs stand, along with China's retaliatory moves, they could damage
industries that have relied on a global supply chain for their recovery.

By NATALIE KITROEFF and BEN CASSELMAN | Wednesday, April 04, 2018

(https://static01.nyt.com/images/2018/04/05/business/05crossfire/merlin_136390923_9f8bd001-05f0-498f-be4e-1c59190ee890-jumbo.jpg) (https://static01.nyt.com/images/2018/04/05/business/05crossfire/merlin_136390923_9f8bd001-05f0-498f-be4e-1c59190ee890-superJumbo.jpg)
A Boeing 737 on the assembly line in Renton, Washington. Aircraft and their parts are the single largest American export to China,
making Boeing a tempting target in a trade war. — Photograph: Credit Kevin P. Casey/Bloomberg.

IN THE escalating economic showdown between the United States and China, President Trump is trying to put American shoppers first. The administration did not place tariffs on necessities like shoes and clothes, and mostly spared smartphones from the 25 percent levy on Chinese goods announced this week.

But by shielding consumers, Mr. Trump has put American manufacturers — a group he has championed — in the cross hairs of a potential global trade war. If the measures stand, along with China's retaliatory tariffs, they could snuff out a manufacturing recovery just beginning to gain steam.

“If you want to spare the consumer so you don't get this massive backlash against your tariffs, then there goes manufacturing, because that's what's left,” said Monica de Bolle, an economist at the Peterson Institute for International Economics. “The irony is, you cannot spare manufacturing from anything because manufacturing is globally integrated. The sector sources its parts and components from all over the world.”

That intricate supply chain often runs directly between the two countries, sometimes in both directions. Chinese factories make wing panels and doors for Boeing's Next Generation 737 planes, which are assembled by union workers in Renton, Washington. General Motors makes its Buick Envision, a sport-utility vehicle, in Shandong Province, and sells it to American consumers. Construction workers in Denver use building materials manufactured in China, made in part from ethane gas produced in Texas.

A central aim of Mr. Trump's America First agenda is to bring back pieces of the supply chain lying outside the country. The tariffs announced this week are just a bargaining point in a broader negotiation between the United States and China over trade.

“They are trying to force end-product manufacturers here to use more American content by making it more expensive for them to use Chinese content,” said William Reinsch, a trade expert at the Center for Strategic and International Studies.

(https://static01.nyt.com/images/2018/03/28/business/28PORTER2/merlin_135830262_fc496b80-696f-4785-8826-01c01fca1923-jumbo.jpg) (https://static01.nyt.com/images/2018/03/28/business/28PORTER2/merlin_135830262_fc496b80-696f-4785-8826-01c01fca1923-superJumbo.jpg)
A man rides past shipping containers in Shanghai. President Trump's tariffs signal an end to a policy of seeking to integrate China's economy
with the West. — Photograph: Aly Song/Reuters.

The United States trade representative, Robert Lighthizer, has said that the administration carefully conceived the tariffs using an algorithm that would “maximize the impact on China and minimize the impact on U.S. consumers.”

The result is a list of more than 1,300 targets, many of them obscure products that may not deliver a direct hit to consumers' wallets. The victims include industrial robots, chemicals, medical devices and heavy machinery used in everything from processing food to crushing rock.

Such industries have been a vibrant piece of the economy, adding 224,000 jobs in the past year, the strongest growth since the recession ended nearly nine years ago. But underpinning that rebound has been a strong global appetite for American goods — demand that could now be weakened.

“This is a pretty tenuous recovery, and employment is still at much lower levels than it was before the crisis,” said Mark Muro, an economist at the Brookings Institution. “This is not a super dynamic, healthy industry.”

Recent job growth has been concentrated in industries that could be affected by American tariffs on China, Chinese tariffs on the United States, or both.

(https://static01.nyt.com/images/2018/03/28/business/28PORTER3/merlin_135888957_05f8da53-299c-4bfa-ac04-1bd5308b695f-jumbo.jpg) (https://static01.nyt.com/images/2018/03/28/business/28PORTER3/merlin_135888957_05f8da53-299c-4bfa-ac04-1bd5308b695f-superJumbo.jpg)
In Beijing last week a woman carried a shopping bag from Coach, the New York-based handbag maker. American businesses have flocked to China
to tap its huge consumer market. — Photograph: European Pressphoto Agency/Shutterstock.

Some of the strongest gains in the past year have come from makers of metal products, industrial machinery and transportation equipment. All those industries rely heavily on steel and aluminum, goods that Mr. Trump hit with tariffs earlier this year in a move aimed indirectly at China's production.

In the latest salvos, the United States took aim at a multitude of technical components — items like circuit breakers, consoles and touch screens. Those tariffs could raise costs for electronics manufacturers, who have been hiring more aggressively lately and whose supply chains run through China.

Beijing, for its part, zeroed in on an array of American products, including plastics, a fast-growing export. Chinese companies imported $3.2 billion worth of plastic resins from the United States in 2017, according to the American Chemistry Council, a trade group. Chinese factories turn those resins into building materials, automobile instrument panels, eyeglasses and thousands of other products, many of which end up back in the United States.

The plastics tariffs alone could send ripples deep into Trump country. In recent years, companies have announced billions of dollars of investments seeking to capitalize on the boom in American natural-gas production. Some of those investments were to go into new plants in Pennsylvania, Ohio and other states to turn gas into chemicals and plastics, much of it bound for China.

Companies aren't likely to abandon those plans overnight, said Calvin M. Dooley, president of the American Chemistry Council. But if the trade barriers persist, projects could be in jeopardy. “That is going to impede our ability to capitalize on that competitive advantage,” Mr. Dooley said.

(https://static01.nyt.com/images/2018/03/14/business/14PORTER/merlin_89319644_f6931dd6-5da3-437d-a333-f79a00959af4-jumbo.jpg) (https://static01.nyt.com/images/2018/03/14/business/14PORTER/merlin_89319644_f6931dd6-5da3-437d-a333-f79a00959af4-superJumbo.jpg)
Ford F-150 pickups on a Michigan assembly line in 2014. Decades of trade actions and reactions have shielded Detroit's automakers
from foreign competition in light trucks. — Photograph: Credit Paul Sancya/Associated Press.

Even with the flurry of measures and countermeasures between the United States and China, the moves so far have touched only a fraction of their $650 billion in annual trade. But they are beginning to signal how much damage could be caused, and who would suffer most.

In some cases, the tariffs seem intended to deliver a message rather than a fatal blow. The United States said it would impose tariffs on aircraft parts — an important and high-profile American industry, but not one facing much competition from China. Beijing said it would impose tariffs on cars and S.U.V.s, the third-largest American export to the country. But the move may not hit American automakers as hard as it might seem.

China already has a 25 percent tariff on imported cars, so General Motors, Fiat Chrysler and Ford have all agreed to manufacture inside the country as joint ventures with domestic producers, to avoid the extra charge to consumers. Foreign carmakers operating in the United States — Daimler and BMW — do send vehicles to China from factories in the Southeast. A report by analysts at Evercore ISI suggests that those companies, rather than the Detroit automakers, would bear the brunt of the Chinese levies.

Tesla might have the most to lose. The electric-car company had been lobbying hard for permission to produce cars in Shanghai, but hasn't reached a deal. It sends vehicles to the Chinese market from its plant in Fremont, California, and its chief executive, Elon Musk, has expressed frustration even at the existing duties.

(http://i378.photobucket.com/albums/oo227/Kiwithrottlejockey/New%20York%20Times%20pix/20180404twem_TwitterElonMusk_zpss3id5mfr.jpg~original) (https://twitter.com/elonmusk/status/971811614411276288)

Aircraft and their parts are the largest single category of American exports to China, making Boeing a big target. For now, though, Beijing seems to be moving slowly. It said it would impose tariffs on planes between 15,000 and 45,000 kilograms, which includes some older models that Chinese buyers have ordered from Boeing. But it seemed to stop conspicuously short of whacking the company's newer 737 MAX 8, which weighs 45,070 kilograms empty.

That near miss is meant to convey to Boeing, and Mr. Trump, what China is capable of, said Richard L. Aboulafia, a long-time aviation and aerospace analyst at the Teal Group.

“Their attitude toward a trade war assumes that the other side will lie down and stay horizontal,” Mr. Aboulafia said. “I'm not sure the easy and fun approach to trade wars holds up against return fire.”

__________________________________________________________________________

• Keith Bradsher contributed reporting.

• Natalie Kitroeff covers the economy and heavy industry for The New York Times. Before beginning work at The N.Y. Times she covered the California economy for the Los Angeles Times until 2017. She previously reported on higher education and student debt at Bloomberg. Born outside of Philadelphia, she graduated from Princeton University.

• Ben Casselman writes about economics and other business topics for The New York Times, with a particular focus on stories involving data. He previously served as chief economics writer for the data-journalism web site FiveThirtyEight, and before that as a reporter for The Wall Street Journal. Mr. Casselman won a Loeb Award in 2011 for his coverage of the Deepwater Horizon disaster in the Gulf of Mexico, and was part of a team that was a finalist for the Pulitzer Prize for national reporting. A graduate of Columbia University, Mr. Casselman lives in New York with his wife.

__________________________________________________________________________

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https://www.nytimes.com/2018/04/04/business/economy/trade-impact.html (https://www.nytimes.com/2018/04/04/business/economy/trade-impact.html)

from The New York Times....

White House Tries to Tamp Down Trade War Fears as China Retaliates

As markets seesawed and industries fretted, American officials held out the possibility
that tariffs outlined this week might never go into effect.

By ANA SWANSON and KEITH BRADSHER | Wednesday, April 04, 2018

(https://static01.nyt.com/images/2018/03/23/world/05DC-TRADE-02/merlin_135876780_2e0122c9-9ecf-44f0-b0ae-e4548aa8a70a-superJumbo.jpg) (https://static01.nyt.com/images/2018/03/23/world/05DC-TRADE-02/merlin_135876780_2e0122c9-9ecf-44f0-b0ae-e4548aa8a70a-superJumbo.jpg)
Chinese border police officers watching the arrival of a container ship at a port in Qingdao, China. On Wednesday, China threatened to retaliate against
many of the American products and industries that President Trump has vowed to protect. — Photograph: China TopixAssociated Press.

WASHINGTON — White House officials moved quickly on Wednesday to calm fears of a potential trade war with China, saying the administration's proposed tariffs were a “threat” that would ultimately help, not hurt, the United States economy, hours after China said it would punish American products with similar levies.

The administration's insistence that a trade war was not imminent came as the United States and China traded tit-for-tat penalties (https://www.nytimes.com/2018/04/04/business/china-us-tariffs.html) that caused wild swings in stock markets from Hong Kong to New York. Led by more audacious leaders than either country has had in decades, China and the United States are now locked in a perilous game of chicken, with the possibility to derail the global economic recovery, disrupt international supply chains and destabilize the huge yet debt-laden Chinese economy.

White House officials reiterated on Wednesday that China must stop the “unfair” trading practices President Trump believes have disadvantaged American companies and workers, but they held out the possibility that tariffs on $50 billion worth of Chinese goods outlined on Tuesday might never go into effect.

“There's no trade war here,” Larry Kudlow, Mr. Trump's new top economic adviser, said in an interview on Fox Business Network (https://tinyurl.com/ycer6l8b). He described the threat of tariffs as “just the first proposal” in a process that would involve negotiations and back-channel talks. “I understand the stock market's anxiety,” he said. “But on the other hand, don't over-react.”

Behind the scenes, however, top officials remained split over the administration's approach as the United States and China move into a period of high-stakes negotiations. That includes how far to go in punishing China and the types of concessions the White House should accept to avoid a protracted and damaging trade war.

People familiar with the negotiations say Steven Mnuchin, the Treasury secretary, and Wilbur Ross, the commerce secretary, have at times argued for more dialogue with the Chinese and quicker concessions that would help diminish the trade deficit — the gap between what China imports to the United States and what America exports. Other top trade advisers, including long-time China critics like Robert Lighthizer and Peter Navarro, have taken a tougher stance, arguing that these changes would do little to address the mercantilist and protectionist trade policies China has adopted for decades.

Mr. Trump's advisers said the president remains resolute and views the pugilistic approach as the only way to force China to end two decades of industrial policies that have hollowed out American manufacturing and resulted in a ballooning trade deficit.

On Wednesday, Mr. Trump suggested in a tweet (https://twitter.com/realDonaldTrump/status/981492087328792577) that he saw no reason to back down, since the United States was already on the losing end of trade with China.

“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.,” he wrote. “Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!”

He added in another tweet (https://twitter.com/realDonaldTrump/status/981521901079146499), “When you're already $500 Billion DOWN, you can't lose!”

It remains unclear whether China will bend to the pressure and make significant changes to its economy — or whether the White House strategy will instead tip the two nations into a trade war that could harm both countries. Producers of American goods like soybeans, pork, automobiles and semiconductors depend on access to the Chinese market both for exports and production and say they are fearful about a conflict.

“Companies are definitely caught in the middle of this,” said Kenneth Jarrett, the president of the American Chamber of Commerce in Shanghai.

Economists predict that the direct effects of the tariffs will be relatively small for both China and the United States, since they apply to only a fraction of each country's economic output.

”It's hardly a life-threatening activity,” Mr. Ross said in an interview on CNBC. He added that the volume of the tariffs was in line with the White House's calculation that the Chinese have cheated the United States (https://www.nytimes.com/2018/03/22/us/politics/trump-will-hit-china-with-trade-measures-as-white-house-exempts-allies-from-tariffs.html) out of $50 billion worth of intellectual property through coercion and cyber-attacks.

While tariffs would affect a small part of the overall United States economy, they impinge on a relatively large share of American exports to China. If China places tariffs on $50 billion of goods from the United States, as promised, that would be more than one-third of American exports to China. In contrast, American tariffs on $50 billion of Chinese goods would affect only one-tenth of China's vast exports to the United States.

Within that slice of the economy, the pain could be acute. American farmers and manufacturers, in particular, could suffer. On Wednesday, China said it would penalize American soybeans, cars, chemicals and other goods (https://www.nytimes.com/2018/04/04/business/china-us-tariffs.html), hours after the United States announced tariffs on flat-screen televisions, medical devices and industrial machinery (https://www.nytimes.com/2018/04/03/us/politics/white-house-chinese-imports-tariffs.html).

(https://static01.nyt.com/images/2018/04/05/business/05dc-tradewar-1/merlin_136372668_980476d6-2848-48cd-ac16-41a524d08245-jumbo.jpg) (https://static01.nyt.com/images/2018/04/05/business/05dc-tradewar-1/merlin_136372668_980476d6-2848-48cd-ac16-41a524d08245-superJumbo.jpg)
Imported soybeans at a port in Nantong, China. China outlined tariffs on $50 billion worth of American goods, including soybeans,
cars and chemicals, in response to a Trump administration plan to hit Chinese products imported to the United States with tariffs.
— Photograph: Agence France-Presse/Getty Images.

The economic effects could also quickly escalate beyond tariffs. The United States is preparing restrictions that could prevent China from investing in high-tech industries (https://www.nytimes.com/2018/03/28/business/trump-china-investment-technology.html) like semiconductors and electric vehicles, and it may consider other restrictions, including visas.

China, in return, could make life more difficult for the many American companies that do business in the country, or pare back its purchases of United States debt. China is the largest foreign holder of American debt, holding about $1.17 trillion in United States bonds, notes and bills in January, according to the Treasury Department (http://ticdata.treasury.gov/Publish/mfh.txt).

“China has many ways it can make life exceedingly uncomfortable for a large number of American businesses, both those that are hoping for access to China's fast-expanding market, and those that use China as an important part of their supply chains,” said Eswar Prasad, a professor of international trade at Cornell University.

The Trump administration contends that if it does not challenge Beijing now, the Chinese government will heavily subsidize its companies to become dominant producers of cutting-edge industries from robotics to electric cars. That could imperil the United States' ability to create good-paying jobs for future generations, relegating the country to producing food, fossil fuels and financial services, while China extends its lead as the world's largest manufacturer.

But the administration's strategy for halting China's rise has been hard to discern, with some advisers insisting that China must remake its economy, while others say the priority is to reduce the trade deficit, prioritize market access for American companies or end China's infringement on American intellectual property. Some top officials have indicated the tariffs may never be implemented.

On Wednesday, Sarah Huckabee Sanders, the White House press secretary, refused to say whether the tariffs would ultimately go into effect, adding, “I would anticipate that if there are no changes to the behavior of China and they don't stop the unfair trade practices, then we would move forward.”

Companies have until May 22 to submit comments to the administration about the tariffs, with the penalties to be imposed at an undetermined date. Separate tariffs on steel and aluminum imports (https://www.nytimes.com/2018/03/01/business/trump-tariffs.html) from China and other nations went into effect late last month.

In the meantime, American officials including Mr. Mnuchin and Mr. Lighthizer have been in talks with the Chinese about ways to resolve their differences. Yet conversations have so far focused on concessions like China reducing tariffs on American cars, opening up its market for financial services and purchasing more semiconductors or natural gas — minor wins that are unlikely to satisfy Mr. Navarro and Mr. Lighthizer, who are pushing for significant and sweeping changes to China's market, according to people familiar with the negotiations.

The United States has also asked for a $100 billion reduction in the $375.2 billion trade deficit (https://www.nytimes.com/2018/02/06/us/politics/us-china-trade-deficit.html) it runs with China. But the goods China has offered to buy to narrow that gap — including semiconductors — are not products the Trump administration wants to export. And some advisers say these kind of sales will not do anything to address the underlying problems with the Chinese economy.

China experts say an inconsistent message and approach could undermine America's ability to successfully negotiate.

“We're all over the map,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies. “The Chinese are trying to take advantage of this lack of consensus and get the United States to take a quick deal that leaves China's industrial policy machine intact.”

Beijing is also eager to show other trading partners that it will not be bullied into changing its policies.

“I'm not very positive about large concessions or changes that are going to come from China,” said Heiwai Tang, an assistant professor of international economics at the Johns Hopkins School of Advanced International Studies. China's current government is more assertive than recent ones, he said, and the country is heavily dependent on technology transfers from advanced economies as it tries to transform its own.

For the Chinese to successfully negotiate, analysts said, they have to be able to present the deal to their own people as a win. But the United States has refused to give concessions and has painted the confrontation as one in which China must ultimately lose.

“Tariffs are seen as a direct slap in the face, and it will be very difficult for the Chinese government to sit back and take those blows without retaliating,” Mr. Prasad said.

On Wednesday, Cui Tiankai, the Chinese ambassador to the United States, said China preferred to resolve the conflict through talks but would keep its options open.

“Negotiation would still be our preference, but it takes two to tango,” Mr. Cui said. “We will see what the U.S. will do.”

__________________________________________________________________________

• Jim Tankersley and Alan Rappeport contributed reporting.

• Ana Swanson writes about trade and international economics for The New York Times. She previously covered trade, the Federal Reserve and the economy for The Washington Post.

• Keith Bradsher is the Pulitzer Prize-winning Shanghai bureau chief for The New York Times, having reopened the Shanghai bureau on November 14th, 2016. He has previously served as the Hong Kong bureau chief and the Detroit bureau chief for The Times. Before those postings, he was a Washington correspondent for The Times covering the Federal Reserve and international trade, and a New York-based business reporter covering transportation and telecommunications for The Times. Born in 1964, Mr. Bradsher received a degree in economics from the University of North Carolina at Chapel Hill, where he was a Morehead Scholar. He received a master's degree in public policy with a concentration in economics from the Woodrow Wilson School at Princeton University. Prior to joining The New York Times, Mr. Bradsher wrote for the Los Angeles Times from 1987 until 1989.

__________________________________________________________________________

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https://www.nytimes.com/2018/04/04/business/the-united-states-is-starting-a-trade-war-with-china-now-what.html (https://www.nytimes.com/2018/04/04/business/the-united-states-is-starting-a-trade-war-with-china-now-what.html)

from The New York Times....

Why China Is Confident It Can Beat Trump in a Trade War

Beijing has a strong grip on banks, the news media and politics, and it seems
willing to take advantage of vulnerabilities in the American political system.

By STEVEN LEE MYERS | 8:15 EDT — Thursday, April 05, 2018

(https://static01.nyt.com/images/2018/04/05/world/06china-trade-1/merlin_136408791_46d801f8-8247-4055-a55e-6c7cb09bff1d-jumbo.jpg) (https://static01.nyt.com/images/2018/04/05/world/06china-trade-1/merlin_136408791_46d801f8-8247-4055-a55e-6c7cb09bff1d-superJumbo.jpg)
Imported soybeans at a port in Nantong, China. The latest Chinese tariffs were intended to deliver a warning that American producers
and consumers would pay in a trade war. — Photograph: China Topix/Associated Press.

BEIJING — China's leaders sound supremely confident that they can win a trade war with President Trump.

The state news media has depicted him as a reckless bully intent on undermining the global trading system, while presenting the Chinese government as a fair-minded champion of free trade. And China's leader, Xi Jinping, has used the standoff to reinforce the Communist Party's message that the United States is determined to stop China's rise — but that it no longer can. China is already too strong, its economy too big.

“China is not afraid of a trade war,” the vice minister of finance, Zhu Guangyao, declared at a news conference to discuss possible counter-measures. More than once, he cited the history of the “new China” — which began its extraordinary economic revival four decades ago — as evidence that it would “never succumb to external pressure.”

Missing in the bluster and the propaganda are the questionable methods that China has adopted to squeeze foreign companies out of key technology markets — and the fact that in the cold-eyed calculus of economics, China is more vulnerable to a trade war than officials admit.

Exports account for a big share of Chinese economic growth. Because the United States buys so much from China, Washington has many more ways to hit Chinese manufacturers. By contrast, the retaliatory tariffs Beijing has proposed already cover more than one-third of what China buys from the United States, leaving it fewer options to strike back.

In the political realm, however, Mr. Xi enjoys advantages that may allow him to cope with the economic fallout far better than Mr. Trump can. His authoritarian grip on the news media and the party means there is little room for criticism of his policies, even as Mr. Trump must contend with complaints from American companies and consumers before important midterm elections in November.

(https://static01.nyt.com/images/2018/04/06/world/06china-trade-2/merlin_135750567_e9b479af-4603-44c6-9764-ab51ab8f083c-jumbo.jpg) (https://static01.nyt.com/images/2018/04/06/world/06china-trade-2/merlin_135750567_e9b479af-4603-44c6-9764-ab51ab8f083c-superJumbo.jpg)
The highly centralized government under President Xi Jinping and pervasive state control of the news media could allow China to withstand
economic shocks from a trade war. — Photograph: Credit Kevin Frayer/Getty Images.

The Chinese government also has much greater control over the economy, allowing it to shield the public from job cuts or factory closings by ordering banks to support industries suffering from American tariffs. It can spread the pain of a trade war while tolerating years of losses from state-run companies that dominate major sectors of the economy.

“My impression is that there is in Washington an exaggerated sense of how painful these tariffs might be” in China, said Arthur R. Kroeber, managing director of Gavekal Dragonomics, a research firm in Beijing.

At worst, he estimated, the American actions could shave one-tenth of a percentage point off China's economic growth — hardly enough to force a drastic reversal of policies, given the enormous benefits that Chinese leaders see in the state-heavy economic model they have relied on in recent decades.

At the same time, Chinese officials seem to believe they can take advantage of what they consider vulnerabilities in the American political system.

“The American agricultural sector is quite influential in the Congress,” said Wang Yong, a professor of economics at Peking University, explaining why China has targeted farm products such as soybeans with possible retaliatory tariffs. “China wants the American domestic political system to do the work.”

The president and his administration have sent drastically different messages this week.

Hours after China's announcement on Wednesday, administration officials sought to calm fears (https://www.nytimes.com/2018/04/04/business/the-united-states-is-starting-a-trade-war-with-china-now-what.html) that a trade war was imminent, suggesting that they might not pull the trigger on a plan to impose tariffs on $50 billion in Chinese goods.

But late Thursday, Mr. Trump said he would consider levying an additional $100 billion in tariffs on Chinese goods in response to its “unfair retaliation.” In a statement, he said, “Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers.”

(https://static01.nyt.com/images/2018/04/04/upshot/up-trade/merlin_136372647_38b9a3af-658d-406f-9111-b2296aac5438-jumbo.jpg) (https://static01.nyt.com/images/2018/04/04/upshot/up-trade/merlin_136372647_38b9a3af-658d-406f-9111-b2296aac5438-superJumbo.jpg)
Unloading imported soybeans at a port in Nantong, Jiangsu Province, China, on Wednesday. China has said it will raise tariffs on American soybeans,
among other products. — Photograph: Agence France-Presse/Getty Images.

Mr. Zhu, China's vice minister of finance, this week had thanked American soybean farmers and the association that represents them for declaring their opposition to the Trump administration’s plan.

In addition to soybeans, China threatened to retaliate with tariffs on American cars, chemicals and other products (https://www.nytimes.com/2018/04/04/business/china-us-tariffs.html). The 106 goods, many produced in parts of the country that have supported Mr. Trump, were selected to deliver a warning that American workers and consumers would suffer in a protracted standoff.

“If anyone wants to fight, we will be there with him,” Mr. Zhu said, more or less outlining the terms for an American surrender: the removal of unilateral tariffs and a resolution of any grievances through the World Trade Organization. “If he wants to negotiate, the door is open.”

Globally, China's strategy has been to isolate the United States, splitting it from allies in Europe and Asia who otherwise share American concerns about heavy-handed Chinese trade policies intended to protect key markets and to acquire technology from foreign firms.

Mr. Kroeber said a united front against China would be more effective than American tariffs alone, but so far Mr. Trump has not managed to build one.

Instead, Mr. Xi has largely succeeded in occupying the high moral ground on the world stage, projecting China as the sober-minded steward of international agreements on issues — from global trade to climate change — that Mr. Trump has been eager to walk away from.

“The American side is ready to launch a trade war at the slightest pretext,” the party's flagship newspaper, People's Daily, wrote in a blistering editorial (http://finance.people.com.cn/n1/2018/0405/c1004-29908728.html) on Thursday, condemning Mr. Trump's tariffs as “totally against the trend of economic globalization.”

“Today, it targets China, and tomorrow may take aim at other countries,” it said.

(https://static01.nyt.com/images/2018/04/06/world/06china-trade-3/merlin_136409622_3ba4715b-1cab-4e29-aa8c-a560938eeb84-jumbo.jpg) (https://static01.nyt.com/images/2018/04/06/world/06china-trade-3/merlin_136409622_3ba4715b-1cab-4e29-aa8c-a560938eeb84-superJumbo.jpg)
Ford cars at an automotive dealership in Shanghai on Thursday. American cars could also face new tariffs. — Photograph: Aly Song/Reuters.

The party has also seized on the trade dispute as new evidence that the United States is intent on undermining China's rise as a global power, a central narrative used to justify the party's, and Mr. Xi's, rule.

In December, the state news media also highlighted the new National Security Strategy unveiled by the Trump administration, which declared that China (https://www.whitehouse.gov/wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905.pdf) “sought to displace the United States in the Indo-Pacific region, expand the reaches of its state-driven economic model, and re-order the region in its favor.”

The document signaled a bipartisan shift in Washington's posture toward China after decades of economic cooperation and concessions. The party has argued that the United States is only now challenging China because it fears losing its privileged place in the world order.

“The latest U.S. measures against China carry a sense of containment, which purportedly is commonplace among U.S. politicians,” said an editorial in Global Times (http://www.globaltimes.cn/content/1096562.shtml), a nationalist state-run tabloid. “But they have overlooked the fact that China has grown to be another economic center of the world.”

It went on to note that China's market was now “no smaller or less attractive” than the American one — a bit of an exaggeration perhaps, but not as big as it would have been a decade ago. And that makes the country a more formidable opponent than Mr. Trump may have anticipated.

“To take China down,” the editorial said, “would mean an unimaginably cruel battle for the U.S.”

__________________________________________________________________________

• Olivia Mitchell Ryan and Echo Hui contributed research.

• Steven Lee Myers is a veteran diplomatic and national security correspondent, now based in the Beijing bureau. He joined The New York Times in 1989, and has previously worked as a correspondent in Moscow, Baghdad and Washington, where he covered the State Department, the Pentagon and the White House. He is the author of “The New Tsar: The Rise and Reign of Vladimir Putin” (https://www.amazon.com/dp/0345802799), published by Alfred A. Knopf in 2015.

__________________________________________________________________________

Related to this topic:

• If There's a U.S.-China Trade War, China May Have Some ‘Unconventional Weapons’ (https://www.nytimes.com/2018/04/05/upshot/us-china-trade-war-unconventional-retaliation.html)

https://www.nytimes.com/2018/04/05/world/asia/china-trade-war-trump-tariffs.html (https://www.nytimes.com/2018/04/05/world/asia/china-trade-war-trump-tariffs.html)

from The New York Times....

Trump Doubles Down on Potential Trade War With China

President Trump said he would consider imposing tariffs on an additional $100 billion worth
of Chinese goods in retaliation for China's plan to impose its own tariffs on American products.

By ANA SWANSON and KEITH BADSHER | 11:13PM EDT — Thursday, April 05, 2018

(https://static01.nyt.com/images/2018/04/06/us/politics/06dc-tariffs-TRUMP/merlin_136439370_4d6d9393-6437-42f3-939a-9689d035d2b6-jumbo.jpg) (https://static01.nyt.com/images/2018/04/06/us/politics/06dc-tariffs-TRUMP/merlin_136439370_4d6d9393-6437-42f3-939a-9689d035d2b6-superJumbo.jpg)
President Trump said on Thursday that he would consider hitting China with an additional $100 billion in tariffs.
— Photograph: Tom Brenner/The New York Times.

WASHINGTON — President Trump said on Thursday that the United States would consider slapping an additional $100 billion in tariffs on the Chinese, escalating a potentially damaging trade dispute with Beijing.

Mr. Trump said in a statement that he was responding to “unfair retaliation” by China, which published a list on Wednesday of $50 billion in American products that would be hit by tariffs, including soybeans and pork. That move was a direct reaction to the $50 billion in tariffs on Chinese goods (https://www.nytimes.com/2018/04/03/us/politics/white-house-chinese-imports-tariffs.html) that the White House detailed on Tuesday.

“Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers,” Mr. Trump said, adding that he has instructed the United States trade representative to determine if another $100 billion in tariffs were warranted and, “if so, to identify the products upon which to impose such tariffs.”

The announcement came one day after some of Mr. Trump's advisers tried to calm markets and tamp down fears of a trade war (https://www.nytimes.com/2018/04/04/business/the-united-states-is-starting-a-trade-war-with-china-now-what.html) between the world's two largest economies, saying that the tariff threats were the first step in a negotiation process. Mr. Trump said in his statement that the potential for new tariffs would not preclude discussions with the Chinese “to protect the technology and intellectual property of American companies and American people,” but any new tariffs are unlikely to make that already tough task easier.

The move is a high-stakes gamble aimed at cowing China into backing down and forcing it to make the kinds of changes that the United States is seeking — namely reducing the coercive tactics American officials say Beijing uses to try to dominate leading-edge industries like artificial intelligence, robotics and autonomous vehicles. But the move could ultimately bring about the kind of retaliation from Beijing that has spooked stock markets.

It also means that the United States would be somewhat more likely to place levies on Chinese products that American households routinely purchase, like furniture, clothing or shoes — an outcome the Trump administration said it sought to avoid with its initial round of tariffs.

The president's announcement was immediately criticized by manufacturers, retailers and politicians from states whose economies depend on agriculture.

Senator Ben Sasse, Republican of Nebraska, said Mr. Trump was “threatening to light American agriculture on fire.”

“Hopefully the president is just blowing off steam again, but if he's even half-serious, this is nuts,” Mr. Sasse said. “Let’s absolutely take on Chinese bad behavior, but with a plan that punishes them instead of us. This is the dumbest possible way to do this.”

A trade war could derail the current global economic expansion and cripple American businesses that depend on business with China. It could also further complicate geopolitical priorities given the Trump administration has enlisted the help of the Chinese in scheduling historic talks with North Korea (https://www.nytimes.com/2018/03/08/us/politics/north-korea-kim-jong-un-trump.html) next month.

In a statement, Robert Lighthizer, the trade adviser who is carrying out an investigation into Chinese practices, described the president's threat as “an appropriate response,” saying China should have responded to the initial tariffs levied by the United States by changing its behavior.

In the first hint of the Chinese government's response to Mr. Trump's latest action, the Weibo mini-blog of the official Xinhua news service said that “this move severely violates world trade regulations.”

Zhu Guangyao, China's vice minister of finance, made clear at a news conference on Wednesday afternoon that his country would not back down easily. “If anyone wants to fight, we'll be there with them. If he wants to negotiate, the door is open,” Mr. Zhu said.

Mr. Trump's effort to raise the stakes on Thursday seemed poised to send financial markets spinning, with futures on the Standard & Poor's 500-index down and the yen climbing against the dollar.

Companies potentially caught in the middle of a trade war called on the Trump administration to back down and try to work with the Chinese.

“The announcement that the administration may issue $100 billion in additional tariffs on Chinese products is irresponsible and destabilizing,” said Dean C. Garfield, the chief executive of the Information Technology Industry Council, which represents companies such as Amazon, Apple and IBM. “We call on both sides to halt unproductive and escalatory rhetoric, recognizing that these words and actions have global consequences.”

China experts have questioned whether Mr. Trump's aggressive negotiating style will leave Chinese leaders with enough political room to make concessions to the Americans. Bowing to the president's demands could be seen internally as weakness, and the changes that the administration wants — reducing China's dominance in cutting-edge manufacturing and technology — is not something Beijing is likely to agree to.

Wang Shouwen, China's vice minister of commerce, has repeatedly refused to discuss curbing the “Made in China 2025” industrial plan (https://www.nytimes.com/2017/11/07/business/made-in-china-technology-trade.html). The Trump administration contends that the program violates international trade rules that prohibit countries from using subsidies to help exporters and discourage imports. Mr. Wang and other officials deny that the program is in violation, but have provided few details on how it might comply.

Including this most recent action, the United States would be placing tariffs on a total of $153 billion of Chinese products. The threat of $100 billion in tariffs came on top of the tariffs on $3 billion in Chinese steel and aluminum that he imposed last month and the tariffs on a further $50 billion in Chinese goods that he has threatened to impose in recent days.

The total is now so large that China would have trouble finding enough American goods to penalize if it sought to impose a proportional retaliation. China bought only $130.4 billion worth of American goods last year, while the United States bought $505.6 billion worth of Chinese goods.

The National Retail Federation blasted the move as a dangerous game of chicken that would put the United States on the losing end of a trading relationship that has benefited American companies and consumers.

“This is what a trade war looks like, and what we have warned against from the start. We are on a dangerous downward spiral, and American families will be on the losing end,” Matthew R. Shay, the president and chief executive of the retail group, said in a statement. “We urge the administration to change course and stop playing a game of chicken with the nation's economy.”

The Chinese have tools other than tariffs at their disposal, including limiting the operations of American banks and other service providers in China. The government could also urge the Chinese public not to buy American-brand cars like Chevrolets and Fords, even though those are built almost entirely from Chinese-made parts and assembled in factories in China.

The biggest question would be whether China would start retaliating not commercially but through geopolitical actions. While Trump administration trade officials appear to have been operating with considerable autonomy from those responsible for issues like North Korea and Taiwan, policymaking is much more unified in China.

That means China could try to raise the temperature in the dispute by installing more military equipment on the artificial islands that it has recently built across the South China Sea (https://www.nytimes.com/2018/02/08/world/asia/south-china-seas-photos.html), almost to the shores of Indonesia, Malaysia and the Philippines.

China could also step up pressure on Taiwan. Beijing leaders are already deeply upset about recent congressional approval of the Taiwan Travel Act (https://www.nytimes.com/2018/03/21/world/asia/taiwan-china-alex-wong.html), which urged Mr. Trump to send administration officials to the self-governing island. Beijing regards Taiwan as a breakaway province, and has threatened to use force to reunite it.

Chinese experts have made clear that they perceive the ever-larger rounds of American tariffs as part of a broad American challenge that goes beyond dollars and cents. “It is more than just a trade issue: It involves geopolitical reasons,” Wu Xinbo, the chief of the Center for American Studies at Fudan University in Shanghai, said in an interview this week. “Trump has mentioned before, if China doesn't agree on economy and trade, the U.S. will reconsider China issues — that includes the South China Sea and Taiwan.”

President Xi Jinping of China is scheduled to give a major speech on Tuesday at the Bo'ao Forum on China's Hainan island, which may give more clues to China's response. The speech has been billed by other Chinese officials as a moment when Mr. Xi would lay out a blueprint for China's economic overhaul and liberalization, a potential peace offering to the Trump administration, said Scott Kennedy, a China expert at the Center for Strategic and International Studies.

“President Trump's move may throw a small monkey wrench into Xi's plans,” Mr. Kennedy said. “He may now need to couple such a proposal with the warning that China will continue to defend itself against foreign pressure.”

__________________________________________________________________________

• Ana Swanson reported from Washington D.C., and Keith Bradsher from Shanghai.

• Ana Swanson writes about trade and international economics for The New York Times. She previously covered trade, the Federal Reserve and the economy for The Washington Post.

• Keith Bradsher is the Pulitzer Prize-winning Shanghai bureau chief for The New York Times, having reopened the Shanghai bureau on November 14th, 2016. He has previously served as the Hong Kong bureau chief and the Detroit bureau chief for The Times. Before those postings, he was a Washington correspondent for The Times covering the Federal Reserve and international trade, and a New York-based business reporter covering transportation and telecommunications for The Times. Born in 1964, Mr. Bradsher received a degree in economics from the University of North Carolina at Chapel Hill, where he was a Morehead Scholar. He received a master's degree in public policy with a concentration in economics from the Woodrow Wilson School at Princeton University. Prior to joining The New York Times, Mr. Bradsher wrote for the Los Angeles Times from 1987 until 1989.

__________________________________________________________________________

Related to this topic:

• How the China-U.S. Trade Conflict Unfolded, Blow by Blow (https://www.nytimes.com/interactive/2018/04/05/business/china-us-trade-conflict.html)

https://www.nytimes.com/2018/04/05/business/trump-trade-war-china.html (https://www.nytimes.com/2018/04/05/business/trump-trade-war-china.html)

from the print edition of the Los Angeles Times....

There’s no ‘pot of gold’ at the end of a trade war

By DANIEL GRISWOLD | Friday, April 06, 2018

(http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-APphoto_China_US__2_1_FP3HOOAG.jpg) (http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-APphoto_China_US__2_1_FP3HOOAG.jpg)
China may put tariffs on $12 billion of American soybeans, more than half of the U.S. export of this product. — Photograph: Associated Press.

AMID our escalating trade war with China this week, President Trump's top economic advisor, Larry Kudlow, tried to assure investors that, despite roiling stock markets, a “pot of gold” lies at the end of the dispute. But the brinkmanship on both sides is more likely to cost Americans a pot of gold in disrupted trade and lost economic opportunity.

The spat between the world's two largest trading nations started last month with U.S. tariffs on steel and aluminum; China responded with tariffs on $3 billion worth of U.S. exports. This week's round two — over Chinese appropriation of U.S. intellectual property — marks an exponential escalation, with each side first threatening tariffs on $50 billion of the other's exports. On Thursday, Trump told the U.S. Trade Representative to look for $100 billion more.

The risks for Americans are clear and present. Although the people of China certainly will pay, so too will millions of American farmers, ranchers, manufacturing workers and consumer households. The most immediate casualties will be U.S. exporters. China bought $130 billion worth of U.S. goods in 2017, making it the third-largest market for our exports, behind only Canada and Mexico.

Nobody appreciates that reality more than American farmers. China is poised to slap tariffs on $12 billion of U.S. soybean exports, representing more than half of total U.S. exports of the crop. That will come on top of retaliatory duties China already has imposed on fruits, nuts and wine — actions that hit California producers especially hard.

U.S. industry will also suffer. Already in the crosshairs of Chinese retaliation are U.S. exports of $6 billion in motor vehicles and $16 billion worth of civilian aircraft. In a double whammy to U.S. industry, our own government is threatening to impose 25% tariffs on a range of industrial goods and machinery imported from China. Those imports enable U.S. companies to remain competitive and keep assembly of final products here in the United States. Combined with a 30% jump in domestic steel prices brought on by the administration's earlier steel tariffs, U.S. manufacturing companies are facing a cost squeeze that threatens to disrupt supply chains and employment.

Despite promises from the Trump administration, these tariffs will not “fix” the trade deficit. If the Chinese earn fewer dollars selling into the U.S. market, they will have fewer dollars to buy U.S. exports; both imports and exports will then fall. The Chinese also will have fewer dollars to buy U.S. Treasury bonds, which will lead to higher long-term borrowing costs for Uncle Sam and the rest of us.

A trade showdown won't necessarily fix the underlying complaint about intellectual property either. There is no precedent in U.S. history for using this level of tariff threats to successfully wrest concessions from a major commercial partner. Three decades ago, the U.S. got tough with Japan over similar issues but never came close to threatening the kind of sweeping duties the Trump administration is talking about today. Japan was also a different kind of negotiating partner, a democracy and a more accommodating ally. An authoritarian and nationalistic China is less likely to back down.

A more promising and less risky strategy would be to press the U.S. case in the World Trade Organization, the inter-governmental body formed to resolve trade disputes. The United States has brought a number of WTO cases against China, prevailing in almost all of them, and the Chinese government changed its policies as a result. Japan, the EU and other Western economic powers that share our complaints against China and could join the U.S. in pressing its case. Instead, it's China that has just approached the WTO with its complaint about our steel and aluminum tariffs.

Another more constructive strategy for the United States would be to re-join the Trans-Pacific Partnership. This trade agreement with 11 other Pacific Rim nations contains strong intellectual-property protections that provide a stark alternative to China's lax approach. More broadly, the Trump administration could deescalate its hostile trade rhetoric against our allies such as Canada, Mexico and the EU, making it easier for these countries to unite in demanding Chinese reforms.

Like Japan in the 1990s, China is in transition to a more advanced economic state in which developing and protecting intellectual property will be crucial. If China wants to continue to attract foreign direct investment, it would be in its own interest to reform its domestic laws to protect the intellectual property of all companies, domestic and foreign-owned.

A full-blown escalation of tariffs is not in the interest of either the United States or China. Contrary to the much-referenced tweet by Trump, trade wars are not good nor are they easily won, as we may soon learn at great cost.

__________________________________________________________________________

• Daniel Griswold is co-director of the Program on the American Economy and Globalization at the Mercatus Center and George Mason University.

http://enewspaper.latimes.com/infinity/article_share.aspx?guid=6b8dae99-2ab8-47fa-aab4-3b15dc1c5ea1 (http://enewspaper.latimes.com/infinity/article_share.aspx?guid=6b8dae99-2ab8-47fa-aab4-3b15dc1c5ea1)

from the Los Angeles Times....

Beijing responds forcefully to Trump's escalating threats,
raising risks of all-out trade war

By DON LEE, JIM PUZZANGHERA and JAMES F. PELTZ | 3:30PM PDT — Friday, April 06, 2018

(http://www.latimes.com/resizer/4kt_DTXPEMNopoKQZlfAdoRfcw4=/1400x0/arc-anglerfish-arc2-prod-tronc.s3.amazonaws.com/public/CGFDPHRTQFHG7E5UMVGPOBW5PA.jpg) (http://www.latimes.com/resizer/4kt_DTXPEMNopoKQZlfAdoRfcw4=/1400x0/arc-anglerfish-arc2-prod-tronc.s3.amazonaws.com/public/CGFDPHRTQFHG7E5UMVGPOBW5PA.jpg)
Chinese Ministry of Commerce spokesman Gao Feng said China would fight the U.S. “at any cost” after President Trump proposed
additional tariffs on $100 billion of Chinese goods. — Photograph: Andy Wong/Associated Press.

WITH President Trump upping the ante in his trade fight and Beijing showing no signs of backing down, the two nations entered a new phase of escalated tensions that already have rocked financial markets and set off deepening worries of a trade war that could undermine global growth.

In what has become a high-stakes game of economic poker, China on Friday responded defiantly to Trump's threat the previous night to slap tariffs on another $100 billion in imported Chinese goods on top of $50 billion in products announced earlier. China's Commerce Ministry quickly vowed to fight the new tariffs “at any cost” with a full slate of unspecified counter-measures.

It was the sharpest and latest in a series of tit-for-tat actions that, so far, have been mostly threats and warnings of retaliation. And officials on both sides left open the possibility of negotiations that could avoid tariffs and other protectionist measures from being erected.

But Treasury Secretary Steven T. Mnuchin on Friday acknowledged the potential of a trade war, and Trump's top economic advisor, Larry Kudlow, said that “Trump is not just using tariffs as a negotiating card” and is prepared to use them.

“I don't like to use tariffs, but sometimes you have to use tariffs to bring countries to their senses,” Kudlow said, even as he sought, unsuccessfully, to calm markets and individuals by emphasizing that the U.S. is still months away from enacting the tariffs against China and that there were “all kinds of back-channel discussions going on” between the two nations.

Trump said on Friday that investors might feel “a little pain” because of his trade actions against China, and the stock market quickly proved him right.

The Dow Jones industrial average plunged 572.46 points, or 2.3%, the Dow's worst percentage drop in two weeks and, at its low Friday, the blue-chip average had plummeted 767 points, or 3.1%.

It ended a seesaw week on Wall Street in which prices gyrated widely as investors grappled with how much the trade dispute could escalate and thus hinder economic growth, corporate earnings and consumer spending.

Trump administration officials insisted that the American economy remained on strong footing, but job growth moderated in March and a trade conflict will almost certainly prove costly for both the U.S. and China, as well as the world economy.

The year had begun with major economies hopeful about what analysts saw as a rare period of synchronized global growth, but there have been recent declines in world manufacturing confidence, noted economists at Barclays Bank.

“Ongoing trade-war uncertainty leads us to recommend shifting away from risk assets,” the economists said.

Trade tensions have been building for weeks, slowly at first with Trump imposing tariffs on Chinese solar panels and then on roughly $4 billion of Chinese steel and aluminum, the latter penalties justified in the name of U.S. national security.

Earlier this week, the Trump administration issued a list of about $50 billion in Chinese products (https://www.latimes.com/business/la-fi-us-china-trade-fight-20180403-story.html) such as semiconductors and machine tools that would be hit with 25% penalties for alleged intellectual property theft and unfair technology transfer policies.

Beijing reacted swiftly by announcing its own list of American-made goods, including cars, aircraft and soybeans, that would be subject to import taxes of a similar amount.

Trump, apparently angered by Beijing's dollar-for-dollar threat of retaliation, said “China has chosen to harm our farmers and manufacturers.”

In a statement, he added, “China's illicit trade practices — ignored for years by Washington — have destroyed thousands of American factories and millions of American jobs.”

Trump's economic team piled on the criticisms throughout Friday.

“The problem here is China, not Trump,” said Kudlow, complaining of what he called decades of “illegal practices” by China that violate World Trade Organization rules. “They're a first-world country now and they have to act like a first-world country and they have to play by the rules,” he said.

U.S. Trade Representative Robert Lighthizer said the president's proposal to increase China tariffs was “an appropriate response,” although he made clear that any additional tariffs, like the earlier ones announced, would not take effect immediately. The tariffs would first be subject to a 60-day public comment and hearing period.

Even so, the intensifying rhetoric and threats from both sides have left many exasperated.

“Hopefully the president is just blowing off steam again, but if he's even half-serious, this is nuts,” said Senator Ben Sasse (Republican-Nebraska). “He's threatening to light American agriculture on fire. Let's absolutely take on Chinese bad behavior, but with a plan that punishes them instead of us. This is the dumbest possible way to do this.”

House Ways and Means Committee Chairman Kevin Brady (Republican-Texas) called for both sides to resolve their differences in talks. “The deliberation period announced by the president gives the U.S. and China a long-overdue opportunity to resolve this serious trade dispute,'' he said in a statement. "It is in both of our countries' interest — and frankly, the world's — to find a new path forward on unfair trade practices.”

Businesses and investors remained hopeful of negotiations but were nonetheless bracing for a potentially long standoff.

“As both China and the U.S. try to gain concessions from each other in the ongoing trade talks, the back-and-forth between the two countries on tariff threats is not likely to end soon,” said the Fung Group, a Hong Kong-based firm involved in trading, logistics and retailing.

Including Trump's latest threat, China could end up being hit with tariffs on $150 billion of goods, or about 30% of all Chinese exports to the U.S. China will be hard-pressed to match tariffs on that level of goods because it's more than 100% of what China currently imports from the U.S. in merchandise.

But that apparent advantage for the Trump administration could end up being a Pyrrhic victory, especially for U.S. companies that have production or sales in China.

For all of the difficulties and obstacles operating in China, many are there because of the country's large and growing market, and a trade war would do serious damage to their business, particularly if Beijing pulls out its full arsenal by tightening regulations, increasing inspections, and just making life very difficult for them.

Some of the biggest losers on Friday were giant multi-national companies with considerable sales to China. Caterpillar Incorporated fell 3.3%, Boeing Company dropped 3.1% and General Electric Company lost 2.8%.

But the selloff was across the board, with particularly big losses in the aerospace and defense, financial, healthcare and retail industries. The NYSE/FANG+ index, which tracks the market's largest technology stocks, fell 2.4%.

Trump earlier had noted “the market's gone up 40%, 42% — so we might lose a little bit of it — but we're going to have a much stronger country when we're finished.”

He apparently was referring to how the Dow Jones industrials had soared 45% from election day, November 8, 2016, until it hit a record high of 26,616.71 on January 26.

But the Dow now has fallen 10% from that peak, the point at which Wall Street calls a pullback a “correction”.

__________________________________________________________________________

• Don Lee and Jim Puzzanghera reported from Washington; James Peltz reported from Los Angeles.

• Don Lee covers the U.S. and global economy out of Washington, D.C. for the Los Angeles Times. Since joining the L.A. Times in 1992, he has served as the Shanghai bureau chief and in various editing and reporting roles in California. He is a native of Seoul, Korea, and graduated from the University of Chicago.

• Jim Puzzanghera writes about business and economic issues from the Los Angeles Times' Washington, D.C., bureau. He joined the L.A. Times in 2006 and won the paper's Editor's Award in 2009 for coverage of the financial crisis. He has worked in the nation's capital since 1998 and is a two-time National Press Club award winner for Washington coverage. A Northwestern University graduate, he previously worked for the San Jose Mercury News, Newsday and the St. Petersburg Times.

• James F. Peltz has covered nearly every aspect of national business news — including corporate America, Wall Street and global economic matters — for more than 25 years in Los Angeles and New York for the Los Angeles Times. He also spent nine years on the L.A. Times' Sports staff, where he mainly wrote about auto racing and major league baseball. Peltz graduated from UCLA and earned a master's degree in journalism from the University of Colorado.

http://www.latimes.com/business/la-fi-trump-china-tariffs-20180406-story.html (http://www.latimes.com/business/la-fi-trump-china-tariffs-20180406-story.html)

from The New York Times....

EDITORIAL: Putting Trump's Trade Bombast to the Test

The president's rhetoric suggests he's moving America toward a trade war with China.
But what will he actually do?

By THE EDITORIAL BOARD | 7:55PM EDT — Friday, April 06, 2018

(https://static01.nyt.com/images/2018/04/07/opinion/07sat1/07sat1-jumbo.jpg) (https://static01.nyt.com/images/2018/04/07/opinion/07sat1/07sat1-superJumbo.jpg)
Illustration: Michael George Haddad.

PRESIDENT TRUMP's recent threat to escalate his trade skirmish with China into a full-scale trade war is a foolish gambit with little historical precedent. It is also hard to take seriously, given how quickly Mr. Trump changes his mind and how rarely and clumsily he tends to follow through on tough talk.

Mr. Trump said on Thursday that he wants to slap tariffs on an additional $100 billion in Chinese imports (https://www.nytimes.com/2018/04/05/business/trump-trade-war-china.html) in response to Beijing's plan to retaliate against an earlier American proposal that was aimed at $50 billion in Chinese goods. The president also said he was seeking ways to protect American farmers hurt by Chinese retaliation — a move that could result in fresh trade fights with other countries as they seek to defend their farmers from subsidized American grain.

If you're confused or shocked by these announcements, you are not alone. Most experts say that a trade war between the world's two largest economies would hurt American businesses, farmers and workers whose profits and livelihoods depend in part on commerce with China. That's probably why the Standard & Poor’s 500-stock index fell more than 2 percent on Friday.

Historians say there is little precedent for Mr. Trump's direct and forceful targeting of China. The last time a president used trade policy to hurt specific nations was when Thomas Jefferson and Congress restricted trade with Britain and France in the early 1800s (https://www.britannica.com/topic/Embargo-Act), said Douglas Irwin, an economics professor at Dartmouth College who recently published a history of American trade policy (http://www.press.uchicago.edu/ucp/books/book/chicago/C/bo24475328.html). Those trade battles ended up leading to the War of 1812. “We haven't seen anything like this in centuries,” he said.

Even the infamous Smoot-Hawley tariffs (https://www.britannica.com/topic/Smoot-Hawley-Tariff-Act) that Congress enacted in 1930 were put in place to protect struggling domestic industries and farmers, not to penalize specific countries. Of course, those tariffs did not quite work as intended, because other countries moved to shield their own economies by raising tariffs, too. Experts now believe those trade policies probably exacerbated the Great Depression.

Mr. Trump's bombast is so odd that it has scrambled the usual politics of trade. Many Republican lawmakers, including those who support him on most issues, have come out strongly against him on trade. For example, Pat Roberts, a senator from Kansas, said the impact of the president's threats against China was “disconcerting” (http://www.kansascity.com/news/politics-government/article207962044.html), and Senator Charles Grassley of Iowa said American farmers and ranchers “would bear the brunt of retaliation” (https://www.grassley.senate.gov/news/news-releases/grassley-statement-chinese-tariffs) by China. At the same time, Mr. Trump has won praise from some Democrats, like Senator Sherrod Brown (https://www.washingtonpost.com/business/economy/ohio-workers-love-trumps-tariffs-and-thats-making-trouble-for-the-gop/2018/04/04/f46aa9f4-375e-11e8-9c0a-85d477d9a226_story.html) of Ohio, who are opposed to many other Trump policies.

The big question now is what Mr. Trump will actually do. Some officials — like Larry Kudlow (https://www.washingtonpost.com/business/economy/trump-seeks-additional-tariffs-on-100-billion-of-chinese-goods-in-escalation-of-trade-confrontation/2018/04/06/6b8c3472-3952-11e8-9c0a-85d477d9a226_story.html), the former cable-TV pundit who recently became the top economic adviser in the White House — are trying to tamp down talk of a trade war, and say the administration is using the threat of tariffs to get China to the negotiating table. To Mr. Kudlow's way of thinking, the Trump strategy is similar to how President Ronald Reagan got Japan to voluntarily limit exports to the United States in the 1980s by threatening to impose steep tariffs.

There is a strong case to be made that the United States needs to do all it can to get Chinese officials to change economic policies that have hurt American businesses and workers. For example, officials in Beijing have forced foreign businesses to transfer technology to local joint-venture partners as a condition of doing business in China. China for many years also artificially depressed the value of its currency (https://www.nytimes.com/2016/01/09/opinion/chinas-obsolete-economic-strategy.html), the renminbi, against the dollar to make its clothes, electronics and other products more affordable to American consumers.

But it is hard to see this administration striking an effective and comprehensive deal with China. That's because Mr. Trump and his officials seem incapable of putting in the time and hard work required to hammer out such agreements with other countries or political adversaries. They have also displayed little of the finesse and diplomacy needed to strike international deals.

Consider, for example, the trade deal the administration struck with South Korea (https://www.nytimes.com/2018/03/27/us/politics/trump-south-korea-trade-deal.html) last month. Experts say that it will do little to increase American exports to that country and will only modestly reduce imports to the United States. A day after formally announcing that agreement, Mr. Trump said he might delay it (https://www.nytimes.com/2018/03/29/us/politics/trump-infrastructure-trade-deal-south-korea.html) in an effort to pressure North Korea to reach a deal on its nuclear weapons. That about-face would no doubt make other countries reluctant to reach an agreement with this president — they could never be sure if a deal was a deal.

Or take the North American Free Trade Agreement, which the Trump administration has been renegotiating for months. American officials have apparently walked back from some of their most aggressive demands in recent talks, The New York Times recently reported (https://www.nytimes.com/2018/04/05/us/politics/nafta-negotiations-trump-canada-mexico.html). Those changes might make it easier to get agreements with Canada and Mexico. But they could leave many domestic groups disappointed with Mr. Trump — as were many of the workers at Carrier whose jobs he claims to have saved early in his presidency but who were eventually laid off (https://www.vox.com/first-person/2018/2/6/16976176/carrier-president-trump-layoffs) anyway. Some Democratic lawmakers (https://levin.house.gov/house-democrats-pushing-lighthizer-strengthen-nafta-labor-demands), American labor unions (https://aflcio.org/2017/10/5/nafta-negotiations-still-need-improvement) and other groups that theoretically support Mr. Trump's tougher trade policies are worried that their priorities, like a provision requiring Mexico to improve labor rights for factory workers, will not be included in a new trade agreement.

Mr. Trump has dramatically raised the stakes on trade with his brash pronouncements about tariffs. But there's little cause to hope he and his team can deliver the big economic gains that they argue can come only from such a combative approach.

https://www.nytimes.com/2018/04/06/opinion/trump-trade-china.html (https://www.nytimes.com/2018/04/06/opinion/trump-trade-china.html)

from The New York Times....

More Jobs, Faster Growth and Now, the Threat of a Trade War

Trade War Fears Dull Fed Chief's Focus on Health of Economy: In his inaugural speech,
the new Fed chairman tried to focus on the strength of the economy
even as a spiraling tariff battle with China spooked investors.

By BEN CASSELMAN and JIM TANKERSLEY | 8:16PM EDT — Friday, April 06, 2018

(https://static01.nyt.com/images/2018/04/07/business/07econ-1-print/07econ-1-jumbo.jpg) (https://static01.nyt.com/images/2018/04/07/business/07econ-1-print/07econ-1-superJumbo.jpg)
Jerome H. Powell, the new Federal Reserve chairman, on Friday visited a Chicago incubator for industrial start-ups, highlighting
the role of manufacturing in the recovery. — Photograph: Lyndon French/The New York Times.

THE rapidly escalating trade conflict with China has up-ended the prevailing economic dynamic of falling unemployment and faster growth, leaving policymakers and investors scrambling to figure out the way forward.

The threat of a trade war loomed over Jerome H. Powell's inaugural speech (https://www.nytimes.com/2018/04/06/business/economy/powell-federal-reserve-economy.html) as Federal Reserve chairman on Friday in Chicago, even as he tried to focus attention on the fundamental strength of the American economy. Financial markets fell Friday morning after President Trump's latest salvo against China, then tumbled further after Mr. Powell indicated that the Fed saw no imminent need to adjust its outlook. The Standard & Poor's 500-stock index ended the day down 2.2 percent (https://www.nytimes.com/2018/04/06/business/us-china-trade-markets.html), closing a turbulent week.

And there was uncertainty in Washington, where lawmakers, lobbyists and even White House officials struggled to discern how much of Mr. Trump's move was policy and how much was bluster.

The president acknowledged that the trade friction could take a toll. “I'm not saying there won’t be a little pain,” he said in a radio interview on Friday. “But we're going to have a much stronger country when we're finished.”

The concern over trade was evident at Mr. Powell's appearance before the Economic Club of Chicago. The Fed chief did not mention tariffs in his speech (https://www.federalreserve.gov/newsevents/speech/powell20180406a.htm), but in a question-and-answer session afterward, they were the first topic raised.

The Fed chief, who took his post (https://www.nytimes.com/2018/02/04/business/economy/powell-steps-becomes-fed-chief-as-economy-starts-to-show-strain.html) in February, said it was “too early to say” what impact the dueling trade measures would have. “We don't know the extent to which the tariffs will actually come into effect and, if so, how big will that effect be and what will the timing of it be,” Mr. Powell said. But he made it clear that the Fed would watch closely for any sign that the trade dispute was knocking the recovery off course.

The trade tensions complicate what was already a tricky task for the Fed. Hundreds of billions of dollars in tax cuts and spending increases risk fueling inflation, as do wage pressures from a robust labor market. The government's monthly jobs report (https://www.nytimes.com/2018/04/06/business/economy/jobs-report.html) on Friday, while more subdued than in recent months, still pointed to a healthy employment picture.

Yet policymakers are wary of acting too aggressively to slow the economy at a time when wage growth has been tepid. The Fed's response has been gradual interest-rate increases.

A trade war could act as a drag on economic growth, forcing the Fed to be even more cautious. But tariffs could also raise consumer prices by limiting cheap imports from China and other countries. That could increase the risk that the Fed will lift rates too quickly, choking off the recovery.

“There's an immediate, knee-jerk reaction to tighten policy more,” said Ellen Zentner, chief United States economist for Morgan Stanley.

The latest escalation between the United States and China came on Thursday evening, when Mr. Trump said he was considering tariffs (https://www.nytimes.com/2018/04/05/business/trump-trade-war-china.html) on an additional $100 billion of Chinese imports. That came on top of the tariffs on steel and aluminum imposed last month and those on $50 billion in Chinese goods that he proposed in recent days. China has responded with its own new tariffs.

It is not clear whether Mr. Trump will make good on his latest threats. Larry Kudlow, Mr. Trump's new top economic adviser, has sought to portray the tariffs as an opening bid (https://www.nytimes.com/2018/04/04/business/the-united-states-is-starting-a-trade-war-with-china-now-what.html) in a negotiating process with China, and he told reporters on Friday that “there are all kinds of back-channel discussions going on.”

But Mr. Trump's Treasury secretary, Steven Mnuchin, indicated that tensions had reached a more combustible level. “There is the potential of a trade war,” Mr. Mnuchin said during Friday on CNBC (https://www.nytimes.com/2018/04/06/us/politics/trump-trade-policies.html). “There is a level of risk that we could get into a trade war.”

The trade upheaval threatens to undermine an American economy that is at its strongest point since the financial crisis struck a decade ago. Employers have added jobs for 90 consecutive months, by far the longest streak on record; the unemployment rate, at 4.1 percent, is the lowest since 2000.

“The labor market has been strong, and my colleagues and I on the Federal Open Market Committee expect it to remain strong,” Mr. Powell said on Friday, referring to the Fed's policy group.

(https://static01.nyt.com/images/2018/04/07/business/07econ-2/07econ-2-jumbo.jpg) (https://static01.nyt.com/images/2018/04/07/business/07econ-2/07econ-2-superJumbo.jpg)
Imported soybeans being unloaded in Nantong, China. In response to President Trump's trade salvos, China proposed new tariffs
on American soybeans, which could hurt farmers already struggling with low prices for their crops.
— Photograph: Agence France-Presse/Getty Images.

Wage growth, weak for much of the recovery, ticked up in March, and Mr. Powell said he expected the gains to continue in the months ahead. And while workers would, without a doubt, like to see their pay rise more quickly, the gradual pace is comforting for some investors, who have been watching for any hints that the economy is overheating.

In his speech, Mr. Powell said the Fed saw “other signs of economic strength,” citing “steady income gains, rising household wealth and elevated consumer confidence,” which he said would continue to support consumer spending.

Other economists agreed, saying that the recently passed tax and spending measures give the economy added momentum. A full-blown trade war might be enough to short-circuit the recovery, they said, but isolated tariffs — even large ones — most likely are not.

Certain categories are more vulnerable. Among the retaliatory moves announced by China are new tariffs on soybeans, which could hurt American farmers already struggling with low prices for their crops.

The nation's factories, a sector that Mr. Trump has championed, have become a bright spot in the recovery — a development Mr. Powell underlined on his Chicago visit by touring an incubator for industrial start-ups. But Mr. Trump's tariffs could force manufacturers (https://www.nytimes.com/2018/04/04/business/economy/trade-impact.html) to pay more for materials, and China's countermeasures could hurt their overseas sales.

Just the prospect of tariffs — even before they begin to take a direct bite — could hurt the economy if it makes corporate executives reluctant to invest.

Becky Frankiewicz, president of ManpowerGroup, a staffing firm, said she was already hearing from clients that they are more hesitant to commit to major projects, at least until they see whether this week's skirmishes develop into an all-out trade war.

“We're not seeing the impact directly of tariffs yet, but we would say there's pretty broad conservatism as a result,” she said.

Mr. Powell said Fed policymakers, too, were conscious of concerns from corporate executives.

“We did hear from a number of business leaders around the country that changes in trade policy had become a bit of a risk to the medium-term outlook,” Mr. Powell said in the question-and-answer session.

Continued turmoil in financial markets could begin to hurt spending, especially among higher earners, who are more likely to own stocks. Ms. Zentner said surveys suggested that some high-income consumers had already become more pessimistic as markets have become more volatile.

“It's starting to affect those groups, whose spending is more tied to the stock market,” Ms. Zentner said. “If they simply pause their spending or become more prudent in their spending because of market volatility, it drags down consumer spending in the aggregate.”

The effect of all this on the Fed's thinking won't be clear until the next policy meeting on May 1 and 2. Fed officials raised interest rates by a quarter of a percentage point at their most recent meeting (https://www.nytimes.com/2018/03/21/business/fed-interest-rate.html), in March, to a range of 1.5 percent to 1.75 percent. Officials indicated that they considered the economy and labor market healthy, and that they expected to raise rates twice more this year and three times in 2019.

Mr. Powell, like his predecessor, Janet L. Yellen, cast that gradual series of increases as a carefully planned strategy to ensure that the Fed will not need to raise rates abruptly in the event of a steep rise in inflation. But he also cautioned that policymakers could change course if necessary.

“Our views about appropriate monetary policy in the months and years ahead will be informed by incoming economic data and the evolving outlook,” Mr. Powell said. “If the outlook changes, so will monetary policy. Our over-arching objective will remain the same: fostering a strong economy for all Americans — one that provides plentiful jobs and low and stable inflation.”

__________________________________________________________________________

• Ben Casselman writes about economics and other business topics for The New York Times, with a particular focus on stories involving data. He previously served as chief economics writer for the data-journalism web site FiveThirtyEight, and before that as a reporter for The Wall Street Journal. Mr. Casselman won a Loeb Award in 2011 for his coverage of the Deepwater Horizon disaster in the Gulf of Mexico, and was part of a team that was a finalist for the Pulitzer Prize for national reporting. A graduate of Columbia University, Mr. Casselman lives in New York with his wife.

• Jim Tankersley covers economic policy for The Washington Post. Before joining The Post, he wrote for National Journal, covering the breakdown in American job creation, the decline in economic mobility and the failure of policy makers to adapt to an increasingly complex set of global economic challenges. He has also worked at the Tribune Washington Bureau, the Toledo Blade, the Rocky Mountain News and The Oregonian. Jim and a colleague at the Toledo Blade won the 2007 Livingston Award for Young Journalists for their “Business as Usual” series of stories revealing the true roots of Ohio's economic decline. He was also part of the “Coingate” team at the Toledo Blade that was a finalist for the Pulitzer Prize.

https://www.nytimes.com/2018/04/06/business/economy/economy-trade-war-china-trump-tariffs-fed.html (https://www.nytimes.com/2018/04/06/business/economy/economy-trade-war-china-trump-tariffs-fed.html)

from The New York Times....

U.S. and China Play Chicken on Trade, and Neither Swerves

How far will trade threats go? It may just be a start — victory could be difficult to verify, much less
achieve, as the U.S. protests Beijing's effort to re-tool Chinese industries for the 21st century.

By KEITH BRADSHER | 8:37PM EDT — Friday, April 06, 2018

(https://static01.nyt.com/images/2018/04/07/business/07endgame-1-print/merlin_136445055_911bd1b7-f26c-45f8-8203-bb4c7266fa86-jumbo.jpg) (https://static01.nyt.com/images/2018/04/07/business/07endgame-1-print/merlin_136445055_911bd1b7-f26c-45f8-8203-bb4c7266fa86-superJumbo.jpg)
China wants to create a commercial aircraft maker to rival Boeing or Airbus. — Photograph: Carlos Lemos/Reuters.

SHANGHAI — At the heart of the intensifying trade dispute between the United States and China is a fundamental question: Which country is more willing to endure short-term pain for the long-term gain of playing a leading role in high-tech industries.

China has embarked on an aggressive and expensive plan to re-tool its economy for the future as it moves to dominate in robotics, aerospace, artificial intelligence and more. President Trump has said China's approach relies on unfair and predatory practices, and on stolen American technology. And even as Chinese leaders say they want to avoid a trade war, they are staunchly defending their plans and showing little sign of backing down.

Mr. Trump's threat to sharply escalate the administration's tariffs on Chinese imports — a threat he reiterated on Friday — shows that neither side has yet gone far enough to persuade the other to compromise. Bigger and broader tariffs may be necessary to get China's attention.

“The administration, if it's serious, better be prepared for much more,” said Derek Scissors, resident scholar at the American Enterprise Institute.

China's $300 billion plan for government assistance (https://www.nytimes.com/2017/03/07/business/china-trade-manufacturing-europe.html), Made in China 2025, calls for helping cutting-edge industries by providing low-interest loans from state-controlled banks, guaranteeing large market shares in China and offering extensive research subsidies. The goal is to help Chinese firms acquire Western competitors, develop advanced technology and construct immense factories with considerable economies of scale.

It is an agenda that China would probably go to great lengths to protect. “We will not start a war — however, if someone starts a war, we will definitely fight back,” Gao Feng, the commerce ministry spokesman, said at a news conference in Beijing on Friday. “No options will be ruled out.”

For the United States, victory in such a war would be difficult to verify, much less achieve.

China could say it plans to ease back on government support. But that could be difficult to quantify because of the country's opaque political system and the state's control of information.

China could back off from rules that favor local competitors and require American companies to share technology if they want access to the Chinese market. For example, foreign automakers face pressure to transfer electric-car technology to their local partners, and foreign technology companies are increasingly required to submit to security reviews. Foreign businesses have long complained that many of the rules they must follow are unwritten.

(https://static01.nyt.com/images/2018/04/07/business/07endgame-2/merlin_133992852_cc1c42d6-f891-4964-974c-f6b244dd3839-master768.jpg) (https://static01.nyt.com/images/2018/04/07/business/07endgame-2/merlin_133992852_cc1c42d6-f891-4964-974c-f6b244dd3839-superJumbo.jpg)
China wants to dominate cutting-edge industries like electric cars. — Photograph: Gary Cameron/Reuters.

China's government-financed campaign is already paying off in some ways. Drive into downtown Shanghai from Pudong International Airport and you pass a seemingly endless series of huge hangars and vast, glass-walled design centers, all part of the country's effort to create a commercial aircraft manufacturing giant (https://www.nytimes.com/2017/05/05/business/china-airplane-boeing-airbus.html) to rival Boeing or Airbus. Travel to factory districts in Shanghai and on the outskirts of many other Chinese cities and you see enormous, newly built factories ready to churn out electric cars, the batteries they use and other components.

Proving that the Chinese government unfairly supports the effort could be difficult, however.

The United States could press its argument with the World Trade Organization, which oversees global trading rules and prohibits big loans from government-controlled banks at artificially low interest rates. But the W.T.O. requires many contracts and government documents to prove cases, evidence that can be hard to get in a tightly controlled country like China.

Even when the W.T.O. rules against China, persuading the country to comply can be challenging. One such ruling, involving China's restrictions on foreign electronic payment systems, was issued nearly six years ago. China is still mulling how it will comply — despite numerous complaints from the Obama administration and more recent nudges from the Trump administration.

So the United States has turned to tariffs. That means it is using a 1980s tool to address an industrial policy issue that is already shaping the 21st century.

Mr. Trump's top trade official, Robert Lighthizer, was a deputy United States trade representative under President Ronald Reagan. The tariffs that Mr. Lighthizer threatened against Japan in those days are among the same ones he is wielding now. But the two periods differ in two big ways.

One is that Japan depended on the United States in the '80s for military protection from the Soviet Union. China, by contrast, is an increasingly assertive global rival, sending naval vessels to the Baltic Sea and building a naval base in East Africa.

The second major difference between then and now is that the European Union deeply resented the tariffs of the 1980s, and Mr. Trump's use of them could make it difficult to persuade European officials to present a united front. In response to American tariffs, Beijing could simply shift business from American companies like Boeing and Ford to European rivals like Airbus and Daimler.

Chinese officials dispute the American accusations about their unfair trade practices. They say Mr. Trump's tariffs violate W.T.O. rules, and they dispute claims that China forces American companies to hand over technology. As for Made in China 2025, Chinese officials say the plan is only guidance, not a government directive — and that foreign companies are free to participate, too.

(https://static01.nyt.com/images/2018/04/07/business/07endgame-3-print/merlin_135575316_d4094066-f355-4df8-b01a-8b0581a32504-master768.jpg) (https://static01.nyt.com/images/2018/04/07/business/07endgame-3-print/merlin_135575316_d4094066-f355-4df8-b01a-8b0581a32504-superJumbo.jpg)
China is already a major force in solar panels. — Photograph: China Network/Reuters.

In China's current industrial policy, the Trump administration sees an extension of how the country has already come to dominate one major industry of the future: solar power.

Mr. Trump himself is no fan of solar panels. He has spoken enthusiastically about coal, not renewable energy, throughout his campaign and his presidency. But the solar power industry is one of the biggest success stories so far in China's efforts involving advanced industries.

The United States played a central role in developing solar panels and manufacturing them until a decade ago. Around then, the Chinese government decided to finance a lavish expansion of the sector. State-controlled banks lent tens of billions of dollars at low interest rates despite the high-profile bankruptcies of solar manufacturers.

Chinese firms now produce three-quarters of the world's solar panels. Most American and European companies have closed factories, and many have become insolvent. China's success in producing solar panels has given Beijing a blueprint for seizing the lead in a long list of other high-tech industries.

Many foreign companies are caught between China's industrial ambitions and Washington's efforts to stop them, including major aerospace companies and car-makers. The conflict may spread: Made in China 2025 could create major competitors to General Electric and Intel, and to companies outside the United States like Siemens and Samsung.

Tariffs could hurt such companies if the United States and China follow through on their plans. They also risk losing their competitiveness if Beijing succeeds in subsidizing the creation of large Chinese rivals in their industries.

Boeing, for example, could be hit by American tariffs on civilian aircraft parts it buys from Avic, a state-controlled Chinese military and aviation company — required purchases if the company, which is based in Chicago, wants to sell planes in China. China, in turn, is pushing a consortium that includes Avic to become a Boeing rival. Boeing, like other multi-national companies, has refrained from endorsing or criticizing the tariffs.

“Although our members are unhappy with retaliatory tariffs being used,” said Kenneth Jarrett, the president of the American Chamber of Commerce in Shanghai, “there is a belief that greater pressure has to be brought to bear on China.”

__________________________________________________________________________

• Ailin Tang contributed research for this article.

• Keith Bradsher is the Pulitzer Prize-winning Shanghai bureau chief for The New York Times, having reopened the Shanghai bureau on November 14th, 2016. He has previously served as the Hong Kong bureau chief and the Detroit bureau chief for The Times. Before those postings, he was a Washington correspondent for The Times covering the Federal Reserve and international trade, and a New York-based business reporter covering transportation and telecommunications for The Times. Born in 1964, Mr. Bradsher received a degree in economics from the University of North Carolina at Chapel Hill, where he was a Morehead Scholar. He received a master's degree in public policy with a concentration in economics from the Woodrow Wilson School at Princeton University. Prior to joining The New York Times, Mr. Bradsher wrote for the Los Angeles Times from 1987 until 1989.

__________________________________________________________________________

Related to this topic:

• China's Plan to Build Its Own High-Tech Industries Worries Western Businesses (https://www.nytimes.com/2017/03/07/business/china-trade-manufacturing-europe.html)

• Goldman Sachs's China Deal Prompts Questions About Country's U.S. Investment (https://www.nytimes.com/2017/11/15/business/goldman-sachs-china-trade-deal.html)

• China's Technology Ambitions Could Upset the Global Trade Order (https://www.nytimes.com/2017/11/07/business/made-in-china-technology-trade.html)

https://www.nytimes.com/2018/04/06/business/us-china-trade-endgame.html (https://www.nytimes.com/2018/04/06/business/us-china-trade-endgame.html)

from The New York Times....

Europe Caught in the Middle as Trump Threatens China

The United States is Europe's biggest trading partner, but China is closing fast.
If a trade war breaks out, neutrality may not be an option.

By JACK EWING | 12:05AM EDT — Monday, April 09, 2018

(https://static01.nyt.com/images/2018/04/06/business/00europetrade-1/00europetrade-1-jumbo.jpg) (https://static01.nyt.com/images/2018/04/06/business/00europetrade-1/00europetrade-1-superJumbo.jpg)
Some European companies, like the German carmaker BMW, manufacture in the United States and export to China. Their sales would suffer
if China slaps tariffs on American goods. — Photograph: Christof Stache/Agence France-Presse/Getty Images.

FRANKFURT — One is a good customer, a military ally, and an old friend, although lately its behavior has been erratic.

The other is also a good customer and despite a few spats and some lingering mistrust, it's getting to be a more lucrative and dependable business partner all the time.

Which side would you choose?

That more or less sums up the dilemma confronting Europe as it watches the escalating conflict between its two biggest trading partners, the United States and China.

The United States is Europe's biggest market for exports like cars and other goods, not to mention a NATO ally. But China is big, too — and getting ever bigger.

The Trump administration has also threatened the institutions that govern global relationships, calling NATO obsolete and stoking trade tensions. So China no longer automatically seems like the less reliable partner.

European leaders were largely silent after President Trump threatened to impose another $100 billion in tariffs on Chinese goods. But watching from a safe distance as China and the United States argue is not an option for Europe. Its economy is too deeply entwined with both.

“What can they do in terms of staying out of the crossfire?” said Adam Slater, lead economist at Oxford Economics in Britain. “Not a lot.”

Although Mr. Trump's threats are aimed at China, Europe is certain to suffer collateral damage if the president follows through. A spiraling war of tariffs and counter-tariffs would interfere with the global flow of raw materials and components for manufactured goods, disrupting the European economy. And some European companies, like the German carmaker BMW, manufacture in the United States and export to China. Such companies would see their sales suffer if China were to slap tariffs on American goods.

The mere threat of a trade war has already unsettled financial markets and made it more difficult for companies to raise money, Benoît Coeuré, a member of the executive board of the European Central Bank, said on Friday. “None of this supports growth and employment,” Mr. Coeuré said at a conference in Cernobbio, Italy.

(https://static01.nyt.com/images/2018/04/06/business/00europetrade-2/00europetrade-2-jumbo.jpg) (https://static01.nyt.com/images/2018/04/06/business/00europetrade-2/00europetrade-2-superJumbo.jpg)
The Piraeus Container Terminal in Athens is operated by the Chinese state-owned shipping company Cosco. In recent years, Chinese investors
have snapped up European assets including Greek ports, German machinery companies and a 10 percent stake in the automaker Daimler.
— Photograph: Angelos Tzortzinis/The New York Times .

The disruption to world trade comes at an unfortunate time for Europe. Recent economic indicators suggest that the Continent's recovery, after a decade of crisis, is losing momentum. Industrial production in Germany (https://www.destatis.de/EN/PressServices/Press/pr/2018/04/PE18_125_421.html) shrank 1.6 percent in February, according to official data published this week.

But European leaders' biggest fear may be that Mr. Trump's belligerent approach to trade will destroy the post-war system for resolving conflicts (https://www.nytimes.com/2018/03/26/business/nato-european-union.html), which involved getting all the parties together in one room. Mr. Trump has already succeeded in forcing countries to beg for individual exemptions (https://www.nytimes.com/2018/03/09/business/trump-tariffs-exemptions.html) to steel and aluminum tariffs, bypassing the World Trade Organization, the usual forum for trade disputes.

“He has created an environment to divide countries,” said André Sapir, a senior fellow at Bruegel, a research organization in Brussels. “Maybe we will remember that 2017 was the last year of the functioning of the multilateral system.”

It's possible Europe might enjoy a few short-term benefits as China and the United States duke it out. If, for example, China were to raise tariffs on Boeing airliners, its European rival Airbus could step into the breach. But positive effects of that sort are not likely to outweigh the risks.

European companies have invested far more in the United States over the years than they have in China. But increasingly, China is where the action is. Germany's total trade with China, exports and imports together, is already bigger than it is with the United States. And China is the biggest single market for companies like Volkswagen, Europe's largest carmaker.

China is also where more German companies are putting their money.

In a poll published on Thursday, 39 percent of German companies questioned said they planned to invest in China this year, up from 37 percent in 2017. The number who said they planned to invest in North America dropped to 35 percent, from 37 percent, according to a survey by the Association of German Chambers of Commerce and Industry (https://www.dihk.de/en).

Even so, Europe remains wary of China's intentions. Though European leaders use tamer rhetoric, they share some of Mr. Trump's concerns about unfair competition from Chinese companies that receive government subsidies. They worry that Chinese companies are stealing European technology, and accumulating too much economic power.

In recent years, Chinese investors have snapped up European assets including Greek ports, German machinery companies and a 10 percent stake in the automaker Daimler. The Chinese government's “Made in China 2025” campaign, a plan to dominate cutting-edge industry, is a threat to German companies who supply precision machinery that the Chinese companies are not yet able to manufacture themselves.

Leaders in Brussels, Berlin and Paris have called for tighter scrutiny of Chinese acquisitions (https://www.nytimes.com/2018/03/15/business/china-europe-canada-australia-deals.html) in Europe, though it is unclear how tough they will be.

(https://static01.nyt.com/images/2018/04/06/business/00europetrade-3/merlin_135839535_221d2d0d-a959-4d98-883b-c40825b847db-jumbo.jpg) (https://static01.nyt.com/images/2018/04/06/business/00europetrade-3/merlin_135839535_221d2d0d-a959-4d98-883b-c40825b847db-superJumbo.jpg)
A blast furnace in Salzgitter, Germany. Europe's most immediate preoccupation is to resolve its own trade disputes with Mr. Trump.
The European commissioner for trade is negotiating with the U.S. commerce secretary about winning a permanent exemption
from tariffs on steel and aluminum imports. — Photograph: David Hecker/European Pressphoto Agency/via Shutterstock.

At the same time, Europe and the United States have been through a lot together, most notably the Cold War. Both are multi-party democracies with free market economies, unlike China's one-party autocracy. And European and American historical and cultural ties go back centuries.

Still, a trade war could push Europe closer to China.

Europe's most immediate preoccupation is to resolve its own trade disputes with Mr. Trump. Cecilia Malmstrom, the European commissioner for trade, is negotiating with Wilbur Ross, the United States commerce secretary, about winning a permanent exemption from tariffs on steel and aluminum imports. A temporary exemption to the tariffs expires on May 1.

Ms. Malmstrom and other European leaders have also made plain their unhappiness with what they see as Mr. Trump's crusade to undermine the World Trade Organization as the arbiter of trade conflicts. They may see China as a potential ally in efforts to preserve the W.T.O., of which China is also a member.

“The E.U. believes that measures should always be taken within the World Trade Organization framework which provides numerous tools to effectively deal with trade differences,” a spokesperson for the European Commission said in a statement.

For the moment, there is little Europe can do but hope that Mr. Trump's bluster is just a tactic to win concessions from China, and that no trade war will break out. There are few other good options.

Mr. Sapir of Bruegel argues that, longer term, Europe should push for reforms of the trade body to respond to American criticism that the organization is too slow moving, and has failed to curb unfair competition by China. Mr. Trump is unlikely to take much interest in fixing the global trade regime rather than ignoring it, Mr. Sapir said, but it's still worth a try.

“That is the only structural solution,” Mr. Sapir said. “Otherwise we will always be caught in between.”

__________________________________________________________________________

• Jack Ewing writes about business, banking, economics and monetary policy from Frankfurt, and sometimes helps out on terrorism coverage and other breaking news. Mr. Ewing joined The International Herald Tribune, now the international edition of The New York Times, in 2010. Previously, he worked for a decade at BusinessWeek magazine in Frankfurt, where he was European regional editor. He first came to Europe in 1993 as a German Marshall Fund journalism fellow in Brussels, and wound up staying permanently. Mr. Ewing won a New York Times publisher's award in 2011 for coverage of the European debt crisis. He is the author of “Faster, Higher, Farther: The Volkswagen Scandal” (https://www.nytimes.com/2017/06/05/books/review/volkswagen-scandal-faster-higher-farther-jack-ewing.html), published in 2017 by W.W. Norton.

__________________________________________________________________________

Related to this topic:

• Trump Aims New Threat at China as Mnuchin Warns of Trade War (https://www.nytimes.com/2018/04/06/us/politics/trump-trade-policies.html)

• U.S. and China Play Chicken on Trade, and Neither Swerves (http://Trump Aims New Threat at China as Mnuchin Warns of Trade War)

• U.S. Exempts Some Allies From Tariffs, but May Opt for Quotas (https://www.nytimes.com/2018/03/22/business/us-eu-tariffs-steel-aluminum.html)

• Wary of China, Europe and Others Push Back on Foreign Takeovers (https://www.nytimes.com/2018/03/15/business/china-europe-canada-australia-deals.html)

https://www.nytimes.com/2018/04/09/business/europe-trump-trade-china.html (https://www.nytimes.com/2018/04/09/business/europe-trump-trade-china.html)

from the print edition of the Los Angeles Times....

Chinese tech initiative now a focus of trade war

U.S. views the Made in China 2025 plan as a central threat.

By JESSICA MEYERS | Wednesday, April 25, 2018

(http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-APphoto_China_US__2_1_C03JTKQS.jpg) (http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-APphoto_China_US__2_1_C03JTKQS.jpg)
Workers prepare for the World Robot Conference in Beijing last year. “Made in China 2025” aims to transform the country from a labor-intensive economy
into one focused on products like robots and electric cars. — Photograph: Fu Ting/Associated Press.

BEIJING — China unveiled its plan to dominate the world's most crucial technologies with little international fanfare, another vague, guiding principle in the labyrinth of Communist Party bureaucracy.

Three years later, it's at the core of a trade dispute with Washington that threatens to upend the global economy.

“Made in China 2025” is a blueprint for transforming the country from a labor-intensive economy that makes toys and clothes into one that engineers advanced products like robots and electric cars. The Trump administration views it as an attempt to steal U.S. technology and control cutting-edge industries.

Officials aimed to temper the initiative this month when they announced potential tariffs on $50 billion in goods. But Chinese leaders consider the plan key to the country's development and refuse to alter its course.

“China is trying to achieve a clear goal and America wants to stop it,” said Andrew Polk, cofounder of Trivium/China, a Beijing research firm. “And that's where the competition is.”

Here's what Made in China 2025 is all about and what it means for the trade war:

What's the objective?

The plan funnels billions into 10 industries, including biopharmaceuticals, aerospace and telecom devices. It calls for 70% of related materials and parts to be made domestically within a decade. A separate document details China's strategy to lead in artificial intelligence by 2030.

Officials modeled Made in China 2025 after a German initiative called Industrie 4.0, which envisions greater automation in manufacturing and “intelligent factories” that operate with wireless sensors. They didn't have much choice. The world's biggest population is aging and rising wages are sending low-tech factories to other countries.

“The labor supply is decreasing,” said Ashley Qian Wan, China economist for Bloomberg Economics in Beijing. “And that's going to be a big problem for China.”

(http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-GettyImages-85052_2_1_C03JTM9H.jpg) (http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-GettyImages-85052_2_1_C03JTM9H.jpg)
China developed its first bullet train last year, the Fuxing, which can reach a top speed of 248 mph. Engineers have also built the first Chinese jetliner.
— Photograph: Visual China Group.

Why does China care about this so much?

When President Kennedy vowed in 1961 to send a man to the moon, more than 30 million people in China had just starved to death. People's Republic founder Mao Tse-tung closed universities for a decade whereas researchers in Silicon Valley invented the internet. China sees itself as simply trying to catch up.

The country developed its first bullet train last year, a vehicle with a maximum speed of 248 mph named Fuxing, or rejuvenation. Engineers also built the country's first homegrown jetliner, an initial step toward filling Beijing's crowded airport with planes from China rather than America's Boeing or Europe's Airbus.

Officials portray the initiative as transparent and open to foreign companies. They dispel notions that it will monopolize domestic markets. America's dismissal of the plan reinforces a party narrative that the U.S. seeks to undermine China's resurgence.

“We have good reasons to question the legality and legitimacy of many actions taken by the U.S. on the grounds of national security, like its plan to impose high tariffs on many industries of Made in China 2025,” Chinese Foreign Ministry spokeswoman Hua Chunying told reporters this month. “Clearly, they are targeting something else.”

Why is the U.S. concerned about it?

The Trump administration frets about the way China aims to achieve its 2025 ambitions. American businesses have long complained about the sacrifices they make to operate in the world's largest market, including requirements to partner with domestic companies and hand over trade secrets.

Officials fear these techniques will make it impossible for U.S. companies to compete in the world's most critical fields. They also worry massive Chinese government subsidies will lead to a global glut of products that push down prices and hurt U.S. businesses.

“There are things China listed and said, ‘We're going to take technology, spend several hundred billion dollars, and dominate the world’,” U.S. Trade Representative Robert Lighthizer told senators at a March hearing. “And these are things that if China dominates the world, it's bad for America.”

(http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-AFP-Getty_FILES-C_2_1_C03JTKB5.jpg) (http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-AFP-Getty_FILES-C_2_1_C03JTKB5.jpg)
A bank employee counts 100-yuan notes in Lianyungang, in eastern China's Jiangsu province. — Photograph: Agence France-Presse/Getty Images.

A U.S. report on China's intellectual property theft — which led to the most recent potential tariffs — mentioned the plan more than 100 times. Officials are exploring ways to restrict Chinese investment in key industries. The U.S. recently banned ZTE, China's second-largest maker of telecom equipment, from buying U.S. technology.

“Consensus is growing in Washington that the U.S. is in a race with China for technical leadership,” Arthur Kroeber, managing director of Beijing research firm Gavekal Dragonomics, said he recently told clients. And some, he added, think that “economic cold war is the answer.”

Is the Trump administration right?

President Xi Jinping recently told a room full of global investors that China would further open its economy. Officials last week said they would phase out rules that require automakers like General Motors to find a local partner before opening factories in China. They plan to end foreign ownership requirements on electric vehicle makers this year.

This wouldn't mark the first time authorities vowed to shed their protectionist shield. The European Union Chamber of Commerce in China complained last year that foreign businesses were suffering from “promise fatigue”.

The problem is China's high-tech ambitions include “plans to use instruments such as subsidized credit and market access restrictions,” said David Dollar, a senior fellow at the Brookings Institution and former U.S. Treasury official in China. “It makes sense for the U.S. to oppose this practice.”

But Chinese officials see an irony in efforts that try to maintain America's chokehold on innovation. Hua, the Foreign Ministry spokeswoman, likened the U.S. to a “bully — only it can have high tech and others cannot.”

Neither side looks willing to bend. Recent talks to de-escalate the trade dispute reportedly collapsed over the 2025 plan.

“China views the overall system as inherently unfair because it was created by the current dominant power,” Trivium/China's Polk said. “America should stop complaining and start designing its own industrial policy to counter China.”

__________________________________________________________________________

• Kemeng Fan, Gaochao Zhang and Nicole Liu in the L.A. Times' Beijing bureau contributed to this report.

• Jessica Meyers is a freelance journalist based in Beijing. She is Asia special correspondent for the Los Angeles Times, the Boston Globe, Politico, the Dallas Morning News and other news media organisations.

http://enewspaper.latimes.com/infinity/article_share.aspx?guid=f4657cb8-1584-44e4-b3a6-af3170c0c0f9 (http://enewspaper.latimes.com/infinity/article_share.aspx?guid=f4657cb8-1584-44e4-b3a6-af3170c0c0f9)

from The New York Times....

China Is Set to Take a Hard Line on Trump's Trade Demands

Beijing sees its economy as robust enough to defy U.S. tariff threats, potentially
leaving Washington with no choice but to escalate or back down.

By KEITH BRADSHER | 3:05PM EDT — Monday, April 30, 2018

(https://static01.nyt.com/images/2018/05/01/world/01china-trade-print/merlin_137484363_d84234d6-c7ad-4e07-85c1-435470e1d0a5-jumbo.jpg) (https://static01.nyt.com/images/2018/05/01/world/01china-trade-print/merlin_137484363_d84234d6-c7ad-4e07-85c1-435470e1d0a5-superJumbo.jpg)
A container port in China’s eastern province of Shandong. The Trump administration wants Beijing to curb its $300 billion plan to bankroll
China's push into advanced technologies. — Photograph: Reuters.

BEIJING — Staking an assertive negotiating stance, China says it will refuse to discuss President Trump's two toughest trade demands when American officials arrive in Beijing this week, potentially derailing the high-level talks.

The Chinese government is publicly calling for flexibility on both sides. But senior Beijing officials do not plan to discuss the two biggest requests that the Trump administration has made over the past several months, according to people involved in Chinese policymaking. Those include a mandatory $100 billion cut in America's $375 billion annual trade deficit with China and curbs on Beijing's $300 billion plan to bankroll the country's industrial upgrade into advanced technologies like artificial intelligence, semiconductors, electric cars and commercial aircraft.

The reason: Beijing feels its economy has become big enough and resilient enough to stand up to the United States.

A half-dozen senior Chinese officials and two dozen influential advisers laid out the Chinese government's position in detail during a three-day seminar that ended here late on Monday morning. The officials and most of the advisers at the seminar gave an overview of China's economic policies, including an in-depth review of the country's trade policy, to make sure China's stance would be known overseas. All of the officials and most of the advisers at the seminar insisted on anonymity because of diplomatic sensitivities.

It is not clear what will happen when the two sides sit down this week or whether either will find a reason to waver. Still, the Chinese and American positions are so far apart that China's leaders are skeptical the two sides can find common ground by the end of this week. They are already raising the possibility that Chinese officials may fly to Washington a month from now for further talks.

“I don't expect a comprehensive deal whatsoever,” said Ruan Zongze, the executive vice president of the China Institute of International Studies, which is the policy research arm of China's Foreign Ministry. “I think there is a lot of game playing here.”

Beijing is frustrated with Mr. Trump's threats to impose tariffs on $150 billion in Chinese goods and dismayed by suggestions in the West that China has a weak bargaining position. Chinese officials think the country's one-party political system and President Xi Jinping's enduring grip on power — particularly after the repeal of presidential term limits in March — mean that China can outlast the United States and Mr. Trump in any trade quarrel.

The Chinese government believes Mr. Trump's background as a businessman means that at some point he will agree to a deal. Seminar participants also reaffirmed previous Chinese trade policy offers to further open the country's financial and automotive sectors, though not in ways that would impact China's industrial modernization program, called Made in China 2025. They also suggested that China would be willing to tighten its intellectual property rules so as to foster innovation within China as well as protect foreign technologies from counterfeiting and other illegal copying.

China is insisting that the parameters of any negotiations be limited, and that the tariff threat be removed before a final deal can be struck.

Chinese officials have reached out to Treasury Secretary Steven Mnuchin, who has reacted positively to China's overtures in the auto and financial sectors. Mr. Mnuchin, a former Goldman Sachs executive who will be on the Trump administration’s team in Beijing later this week, has sought to calm investors worried that the rhetoric between Washington and Beijing could break out into a full-blown trade war.

China's position is that the bilateral trade imbalance arises from differences in savings rates. Households in China save roughly two-fifths of their income. Americans, on average, save almost nothing. So money from China tends to flow to the United States, buying factories, technology companies, real estate and more, and Americans in turn spend much of that money to buy goods from China. Many economists in the United States, including some at the Treasury, share that view.

By contrast, many trade lawyers, lawmakers on both sides of the aisle and Mr. Trump contend that the trade deficit stems to a large extent from unfair practices, including cheap loans by state-controlled banks to exporters.

(https://static01.nyt.com/images/2018/05/01/business/01china-trade-2/merlin_134688192_e6588e49-c39a-4e0d-84b0-7f6579baefc4-jumbo.jpg) (https://static01.nyt.com/images/2018/05/01/business/01china-trade-2/merlin_134688192_e6588e49-c39a-4e0d-84b0-7f6579baefc4-superJumbo.jpg)
A worker making carbon fiber on a production line in Lianyungang, in China's Jiangsu province. The material is used in aerospace and other
applications. The Chinese government is frustrated with Mr. Trump's threats to impose tariffs on $150 billion in Chinese goods.
— Photograph: Agence France-Presse/Getty Images.

China is ready to discuss shrinking the $375 billion annual trade deficit. But it wants to do so by buying more high-tech American goods. Washington has long blocked such deals because of concerns that they may have military value. China is also willing to buy more oil, natural gas, coal and other goods from the United States, and to help finance the extra pipelines and other infrastructure that would be needed to move them to China.

A senior Chinese government official said that Beijing is unwilling to negotiate with the United States on any curbs on Made in China 2025, which includes large-scale government assistance to favored industries in advanced-technology manufacturing. China perceives the American demands as an attempt to stop China's economic development and technological progress, the senior Chinese official said.

Germany and other countries also have industrial policies, and the United States has not objected to them, he added. American and European officials have argued that those policies elsewhere are much narrower and less ambitious.

Other advisers and officials said that the United States had misunderstood the Made in China 2025 industrial policy. They expressed hope that it might be possible to resolve differences by explaining the program better and making very small tweaks to it — a stance that still may not appease the Trump administration.

The Chinese government is not simply throwing money, land and other resources to favored industries like robotics, artificial intelligence, semiconductors and aircraft manufacturing, they said. China is engaged instead, they contended, in a carefully thought-out program that measures potential profits for each dollar of investment. So China's program bears some resemblance, they said, to private sector investment programs in the West.

One subject was repeatedly and conspicuously avoided by all officials throughout the seminar, even when advisers occasionally speculated about it: whether China might someday try to link trade disputes to national security issues.

China has been deeply involved in international pressure on North Korea to give up its nuclear weapons and ballistic missiles, an issue of high importance to the Trump administration. Beijing also wants to someday assert control of Taiwan, a self-governing democracy that Beijing regards as a renegade territory.

Tsinghua University's new Academic Center for Chinese Economic Practice and Thinking organized the seminar, which was held at Tsinghua and two other venues in western Beijing. President Xi graduated from Tsinghua, which is in Beijing and is China's top university, and he has filled much of the senior ranks of his government with Tsinghua professors and graduates.

In some respects, the hard stance struck by Chinese officials reflects a hardening of public attitudes in China.

In mid-April, the United States barred American companies from selling their wares to a Chinese telecom equipment maker, ZTE (https://www.nytimes.com/2018/04/16/technology/chinese-tech-company-blocked-from-buying-american-components.html). The move is seen as potentially crippling to the Chinese company, which needs American chips and software to power the smartphones and equipment it sells around the world.

Washington officials cited ZTE's repeated violations of sanctions against Iran and North Korea, but many in China saw it as a reminder by the United States that sizable sectors of the Chinese economy still rely on American-made goods. Much of the Made in China 2025 policy is aimed at reducing that dependence.

The ZTE case “has changed a lot of Chinese people's opinion,” said Mr. Ruan, of the China Institute of International Studies. “In the past, people saw us as interdependent.”

__________________________________________________________________________

• Chris Buckley contributed reporting to this story.

• Keith Bradsher is the Pulitzer Prize-winning Shanghai bureau chief for The New York Times, having reopened the Shanghai bureau on November 14th, 2016. He has previously served as the Hong Kong bureau chief and the Detroit bureau chief for The Times. Before those postings, he was a Washington correspondent for The Times covering the Federal Reserve and international trade, and a New York-based business reporter covering transportation and telecommunications for The Times. Born in 1964, Mr. Bradsher received a degree in economics from the University of North Carolina at Chapel Hill, where he was a Morehead Scholar. He received a master's degree in public policy with a concentration in economics from the Woodrow Wilson School at Princeton University. Prior to joining The New York Times, Mr. Bradsher wrote for the Los Angeles Times from 1987 until 1989.

__________________________________________________________________________

Related to this topic:

• White House Considers Restricting Chinese Researchers Over Espionage Fears (https://www.nytimes.com/2018/04/30/us/politics/trump-china-researchers-espionage.html)

• U.S. Allies Brace for Trade War as Tariff Negotiations Stall (https://www.nytimes.com/2018/04/29/us/politics/us-allies-trade-war-tariff-negotiations.html)

• The U.S.-China Trade Conflict: How We Got to This Point (https://www.nytimes.com/interactive/2018/04/05/business/china-us-trade-conflict.html)

https://www.nytimes.com/2018/04/30/business/china-trump-trade-talks.html (https://www.nytimes.com/2018/04/30/business/china-trump-trade-talks.html)

from The New York Times....

U.S.-China Trade Talks End With Strong Demands, but Few Signs of a Deal

American officials called for shrinking the trade gap with China and curbing
Beijing's plan to use government support to upgrade its economy.

By KEITH BRADSHER | 7:46PM EDT — Friday, May 04, 2018

(https://static01.nyt.com/images/2018/05/05/world/05chinatrade-1/merlin_137660184_2b77fa2a-5e08-4637-b75e-2152bc9a40f4-superJumbo.jpg) (https://static01.nyt.com/images/2018/05/05/world/05chinatrade-1/merlin_137660184_2b77fa2a-5e08-4637-b75e-2152bc9a40f4-superJumbo.jpg)
The United States delegation in Beijing for trade talks on Friday included Treasury Secretary Steven Mnuchin, center left, and Commerce Secretary Wilbur Ross, center right.
— Photograph: Nicolas Asfouri/Agence France-Presse/Getty Images.

BEIJING — Senior Chinese and American officials concluded two days of negotiations on Friday with no deal and no date set for further talks, as the United States stepped up its demands for Chinese concessions to avert a potential trade war.

The American negotiating team, which included Treasury Secretary Steven Mnuchin and the United States trade representative, Robert E. Lighthizer, headed for the airport after the talks and did not release a statement. But a list of demands that the group took into the meeting called for reducing the United States' trade gap with China by $200 billion over the next two years and a halt on Chinese subsidies for advanced manufacturing sectors.

The demands, which spread on Chinese social media and were confirmed by a person close to the negotiations, suggested that both sides hardened their positions this week despite the two days of talks. Senior Chinese officials and their advisers were also sending a deliberate message to the West that the days of Beijing being conciliatory were over, and that China was staking out its own position in the negotiations.

The person close to the negotiations insisted on anonymity because of diplomatic sensitivities.

The extensive list of United States trade demands was unexpectedly sweeping, and showed that the Trump administration has no intention of backing down despite Beijing's assertive stance in the last few days. “The list reads like the terms for a surrender rather than a basis for negotiation,” said Eswar Prasad, an economics professor at Cornell University.

Here are the highlights of the demands:

China must …

Cut its trade surplus by $100 billion in the 12 months starting in June, and by another $100 billion in the following 12 months.

Halt all subsidies to advanced manufacturing industries in its so-called Made In China 2025 program. The program covers 10 sectors, including aircraft manufacturing, electric cars, robotics, computer microchips and artificial intelligence.

Accept that the United States may restrict imports from the industries under Made in China 2025.

Take “immediate, verifiable steps” to halt cyber-espionage into commercial networks in the United States.

Strengthen intellectual property protections.

Accept United States restrictions on Chinese investments in sensitive technologies without retaliating.

Cut its tariffs, which currently average 10 percent, to the same level as in the United States, where they average 3.5 percent for all “non-critical sectors.”

Open up its services and agricultural sectors to full American competition.

The United States also stipulated that the two sides should meet every quarter to review progress.

Chinese officials put the talks in a positive light. “The two sides agreed that a sound and stable China-U.S. trade relationship is crucial for both, and they are committed to resolving relevant economic and trade issues through dialogue and consultation,” Xinhua, the official news agency, said soon after the talks ended.

But the negotiations also highlighted key differences — and the American delegation's tight-lipped departure from Diaoyutai, the park-like enclosure of guesthouses where the talks were held, suggested that the two sides had made little headway in solving them.

Before the trade talks began, people involved in China's policy-making said, Beijing was willing to act on some concessions previously laid out by President Xi Jinping. Among the most notable was a willingness to make it slightly easier for foreign automakers and financial services companies to compete in China.

But China has its own demands. Beijing wants the United States to relax restrictions on exports of high-tech commercial products that may have military applications. During the trade talks here this week, Chinese officials also took issue with the penalties that American officials imposed last month on ZTE, a Chinese telecommunications company, for repeatedly violating United States sanctions on Iran.

The Commerce Department banned all shipments of American wares to ZTE, including chips and other equipment that are essential to many of the company's products. The move appears to have strengthened China's resolve to continue its drive for self-sufficiency and to curb imports in various high-tech fields.

China's push to upgrade its technology accounts for many of its disagreements with the United States. The American document reiterated Trump administration calls for a broad halt of Chinese subsidies to manufacturers in advanced technology industries. And Chinese officials have defended the Made in China 2025 program as essential to upgrading the economy and have said they would not agree to any limits on the Made in China program.

Beijing has said it would be willing to reduce some trade barriers, but only if the United States also lowered trade barriers. Chinese officials particularly object to American limits on the export of high-tech goods that have both civilian and military applications, contending that these restrictions prevent sizable potential exports.

They also objected to United States demands for a specific cut in the bilateral surplus. Li Gang, the vice president of the Commerce Ministry's research and training institute, said in a separate interview last month that a $100 billion cut in the surplus was “impossible.” China's surplus has been widening lately as the United States economy grows fairly strongly and takes in more imports.

The Commerce Department announced on Thursday in Washington that the trade imbalance with China had widened slightly in March compared with the same month a year ago, although it narrowed slightly compared with February, possibly for seasonal reasons.

The lack of a deal this week, as well as the failure to schedule further talks right away, does not rule out the possibility that Chinese negotiators will visit the United States next month for further talks. One possibility that American officials have considered is whether China might send Vice President Wang Qishan, who is close to Mr. Xi, on a follow-up trip.

So far, the Chinese side has been led by Liu He, a Politburo member who is also the vice premier for finance, trade and technology.

Trade experts have been saying for weeks that Chinese officials would like to resolve the dispute with the United States so that they can go back to focusing on issues closer to home.

“That's the immediate problem, because it's a headache for them that's distracting from a very pressing domestic agenda,” said Christopher K. Johnson, a former C.I.A. officer who analyzed China and now holds the Freeman Chair in China Studies at the Center for Strategic and International Studies.

The Beijing talks were unlikely to result in a comprehensive deal, but experts said they could still be a first step toward reaching some sort of accord.

“There's no way our team is going to risk signing up to something without getting back here and making sure that Trump is happy with it first,” Mr. Johnson said. “Maybe there's also some optics where Trump wants to be seen standing with Wang Qishan and striking the deal.”

“I think we're still several jumps down the track from that.”

__________________________________________________________________________

from The Washington Post…

Factory workers aren't getting what Trump promised

If only Congress had the will to carry out its constitutional responsibility.

By CATHERINE RAMPELL | 7:50PM EDT — Monday, June 25, 2018

(https://www.washingtonpost.com/resizer/rc-2bOIRiPMbqP4r1lReYqDLNMc=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/X72JYETYXQI6RAF6NUZODAVDXQ.jpg) (https://www.washingtonpost.com/resizer/rc-2bOIRiPMbqP4r1lReYqDLNMc=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/X72JYETYXQI6RAF6NUZODAVDXQ.jpg)
Harley-Davidson announced on Monday that it will move more of its production overseas because of European tariffs levied in response to U.S. tariffs.
— Photograph: Drew Angerer/Getty Images.

FACTORY WORKERS and FARMERS are slowly learning that President Trump's fanatical protectionism — plus Congress's economic absenteeism — has left them painfully unprotected.

That's not what Trump promised them, of course.

A little more than a year ago, Trump invited executives and union representatives from Harley-Davidson to the White House. There he vowed that (https://www.whitehouse.gov/briefings-statements/remarks-president-trump-meeting-harley-davidson-executives-union-representatives) the motorcycle manufacturer would flourish under his economic stewardship.

“Thank you, Harley-Davidson, for building things in America,” he said. “And I think you're going to even expand — I know your business is now doing very well and there's a lot of spirit right now in the country that you weren't having so much in the last number of months that you have right now.”

This week, Harley-Davidson became (https://www.washingtonpost.com/news/business/wp/2018/06/25/harley-davidson-moves-work-offshore-to-limit-blow-from-trumps-trade-war) among the highest-profile casualties of Trump's escalating trade wars.

Trump's steel and aluminum tariffs had already raised the company's input costs (https://www.bloomberg.com/news/articles/2018-03-06/harley-braces-for-more-trump-trade-harm-after-his-pledge-to-help), because those metals are among the primary raw materials (http://investor.harley-davidson.com/node/17156/html) it purchases. Worse, the European Union last week “punched back” against those metal tariffs with retaliatory counter-tariffs of its own, including an additional 25 percent tax on Harley-Davidson motorcycles shipped from the United States.

On Monday, the company announced (http://investor.harley-davidson.com/node/17401/html) that it had no choice but to shift more of its production out of the United States.

Harley-Davidson, whose U.S. factories are in Wisconsin, Missouri and Pennsylvania (https://www.harley-davidson.com/us/en/about-us/careers/locations.html), is hardly the only firm buckling under the weight of Trump's brilliant trade deal-making. Don't take it from out-of-touch East Coast elites like me; check out all the coverage from local papers and other news organizations around the heartland, documenting the damage.

In Missouri, the nation's last remaining major nail producer (https://www.missourinet.com/2018/06/22/southeast-missouri-nail-company-gets-hammered-by-trumps-tariffs) has lost half its business in the past two weeks, laid off dozens of workers and may be out of business around Labor Day. All thanks to Trump's steel tariffs, which have sharply raised its input costs.

In Florida, orange growers fear a drop-off in demand (https://www.firstcoastnews.com/video/news/florida-orange-juice-likely-impacted-by-chinas-plan-for-tariffs/77-8163509) due to retaliatory tariffs on OJ shipped to China and the European Union.

In Iowa, soybean, corn and pork producers fret about the hundreds of millions of dollars in sales they stand to lose (https://www.desmoinesregister.com/story/money/agriculture/2018/06/15/china-tariffs-soybeans-could-cost-iowa-farmers-up-624-million/705121002/) from retaliatory duties on their exports to China, Mexico and the E.U.

Hoosiers worry about the fate of those same sectors (https://www.indystar.com/story/news/politics/2018/03/26/heres-how-trade-war-china-could-affect-hoosiers/454598002), plus the chemical, transportation equipment and machinery industries that are being targeted for Chinese tariffs. And Indiana automotive-part and orthopedic-joint manufacturers will now face higher input costs (http://www.pharostribune.com/news/local_news/article_d203b46d-5c98-5a41-ba28-ab45ae3cea0e.html) thanks to Trump's steel tariffs.

In Kentucky, bourbon distillers are losing business with distributors (https://www.courier-journal.com/story/news/politics/2018/06/21/matt-bevin-trump-tariffs-wont-hurt-kentucky-bourbon-experts-disagree/720802002), who are frightened off by retaliatory tariffs across many of our trading partners.

Similar stories apply to Wisconsin cheesemakers (https://host.madison.com/ct/news/local/govt-and-politics/election-matters/scott-walker-weighs-in-on-tariffs-stays-mum-on-immigration/article_dbb0c59c-8711-5859-9ab2-5c71e5f1897f.html) and MRI manufacturers (https://www.wsj.com/articles/caught-in-trumps-trade-fight-ge-factories-in-wisconsin-south-carolina-1529848513). And Ohio auto (http://www.dispatch.com/news/20180308/trumps-tariffs-may-save-ohio-steel-jobs-but-hurt-other-industries) and auto-parts (https://www.news5cleveland.com/news/local-news/cleveland-metro/steel-tariffs-starting-to-take-toll-on-manufacturers-in-northeast-ohio) manufacturers, brewers (https://www.daytondailynews.com/news/sizing-the-winners-and-losers-trump-plan-for-steel-tariffs/MG1mYjLTMP43BddZa5oS8N) and appliance makers (https://www.washingtonpost.com/opinions/trumps-tariffs-are-already-backfiring/2018/06/14/896b6c5a-700d-11e8-afd5-778aca903bbe_story.html).

It is no coincidence that so many Trump-voting areas will suffer. That's because of two unfortunate developments.

First is our businessman-in-chief's baffling lack of sophistication about supply chains. He still does not seem to understand that placing tariffs on intermediate goods such as steel and aluminum will hurt the downstream manufacturers that purchase those materials and that employ an order of magnitude more Trump Country workers than the U.S. steel and aluminum industries do.

Second is the much more strategic retaliation (https://www.washingtonpost.com/opinions/trump-is-waging-a-trade-war-in-the-dumbest-way-possible/2018/06/07/88a2d302-6a96-11e8-bf8c-f9ed2e672adf_story.html) by our furious trading partners, which are deliberately targeting industries located in politically sensitive areas.

Trump's approval ratings among Republicans remain strong. But as these tariffs and counter-tariffs steamroll across Trump Country, supporters may eventually get tired of all this “winning”.

The question is: When will Congress?

It is Congress, after all, that the Constitution actually empowers to “regulate Commerce with foreign Nations” (https://www.usconstitution.net/xconst_A1Sec8.html). Yet over the past eight decades, the legislative branch has delegated more and more of its trade-regulating authority to the executive branch.

This turn of events, which began just a few years after Congress had sparked a worldwide trade war with its disastrous Smoot-Hawley Tariff Act, at first seemed like a good idea. It looked like the best way to streamline and depoliticize trade negotiations in service of a more liberalized international market — which Congress knew benefitted the increasingly hegemonic United States.

The problem, of course, is that periodically presidents have abused this power. And none have done so more than Trump, who ludicrously argues that tariffs on Canadian steel and German cars are necessary on national security grounds.

Congress certainly has the ability to claw back some of the trade powers it gave away to the White House. It has, in fact, on occasion. But with rare exceptions (https://www.washingtonpost.com/news/powerpost/paloma/the-finance-202/2018/06/25/the-finance-202-sen-flake-s-pledge-to-block-trump-judges-could-force-showdown-on-trade/5b2fc9c31b326b3967989c21), Republican legislators are too fearful of an angry Trump tweet today to prevent the wholly foreseeable economic misfortunes that will befall their own constituents tomorrow.

__________________________________________________________________________

• Catherine Rampell (https://www.washingtonpost.com/people/catherine-rampell) is an opinion columnist at The Washington Post. She frequently covers economics, public policy, politics and culture, with a special emphasis on data-driven journalism. She is also a political and economic commentator with CNN. Before joining The Post, she wrote about economics and theater for The New York Times. Rampell has received the Weidenbaum Center Award for Evidence-Based Journalism and is a Gerald Loeb Award finalist. She grew up in southern Florida and graduated Phi Beta Kappa from Princeton University.

__________________________________________________________________________

Related to this topic:

• VIDEO: Trump meets with executives from Harley-Davidson in Washington (https://www.washingtonpost.com/video/national/trump-meets-with-executives-from-harley-davidson-in-washington/2017/02/02/9acdf676-e98f-11e6-903d-9b11ed7d8d2a_video.html)

• VIDEO: Trump on tariffs: If countries retaliate, ‘they're making a mistake’ (https://www.washingtonpost.com/video/politics/trump-on-tariffs-if-other-countries-retaliate-theyre-making-a-mistake/2018/06/09/7afa9eae-6bf1-11e8-a335-c4503d041eaf_video.html)

• The first layoffs from Trump's tariffs are here (https://www.washingtonpost.com/news/wonk/wp/2018/06/25/the-first-layoffs-from-trumps-tariffs-are-here)

• Trump says he's ‘surprised’ Harley-Davidson is moving work overseas after tariffs take effect (https://www.washingtonpost.com/news/business/wp/2018/06/25/harley-davidson-moves-work-offshore-to-limit-blow-from-trumps-trade-war)

• Robert J. Samuelson: We're going to lose this trade war (https://www.washingtonpost.com/opinions/were-going-to-lose-this-trade-war/2018/06/24/ff8dfb70-763c-11e8-b4b7-308400242c2e_story.html)

• Catherine Rampell: Trump is waging a trade war in the dumbest way possible (https://www.washingtonpost.com/opinions/trump-is-waging-a-trade-war-in-the-dumbest-way-possible/2018/06/07/88a2d302-6a96-11e8-bf8c-f9ed2e672adf_story.html)

• The Washington Post's View: Trump’s proposed ‘chicken tax’ on auto imports is a very bad idea (https://www.washingtonpost.com/opinions/trumps-proposed-chicken-tax-on-auto-imports-is-a-very-bad-idea/2018/05/27/1cb10e44-6031-11e8-a4a4-c070ef53f315_story.html)

• Max Boot: Imposing tariffs is stupid policy (https://www.washingtonpost.com/opinions/imposing-tariffs-is-stupid-policy/2018/03/05/b5512ea0-2093-11e8-86f6-54bfff693d2b_story.html)

https://www.washingtonpost.com/opinions/factory-workers-arent-getting-what-trump-promised/2018/06/25/725d7c92-78b4-11e8-aeee-4d04c8ac6158_story.html (https://www.washingtonpost.com/opinions/factory-workers-arent-getting-what-trump-promised/2018/06/25/725d7c92-78b4-11e8-aeee-4d04c8ac6158_story.html)

from The Washington Post…

To Trump, Harley's tariff decision is a personal — and unexpected — betrayal

President Trump lashed out at Harley-Davidson on Tuesday over the company’s
decision to move some production outside the United States.

By DAVID J. LYNCH and PHILIP RUCKER | 7:34PM EDT — Tuesday, June 26, 2018

(https://www.washingtonpost.com/rf/image_1166w/2010-2019/WashingtonPost/2018/06/26/National-Economy/Images/983787052.jpg) (https://www.washingtonpost.com/rw/2010-2019/WashingtonPost/2018/06/26/National-Economy/Images/983787052.jpg)
A man drives away on his Harley-Davidson motorcycle after picking it up from a service garage on Monday in Queens. — Photograph: Drew Angerer/Getty Images.

PRESIDENT TRUMP lashed out at Harley-Davidson on Tuesday over the company's decision to move some production outside the United States, calling it “the beginning of the end” for the iconic motorcycle maker and threatening to respond with punishing taxes.

In a fusillade (https://twitter.com/realDonaldTrump/status/1011568906992017408) of tweets (https://twitter.com/realDonaldTrump/status/1011571026034089984) beginning shortly after 7 a.m., the president accused the company of using European tariffs as an excuse for manufacturing changes it already had planned; erroneously said Harley had shifted operations from a Kansas City, Missouri, plant to Thailand; and demanded that its famous bikes “never be built in another country-never!” (https://twitter.com/realDonaldTrump/status/1011584315040419840)

White House aides say the president feels betrayed by the American manufacturer's decision to move some production offshore to avoid becoming embroiled in Trump's trade war with Europe.

His aggrieved tweetstorm — echoed in subsequent comments at the White House — made it clear that he took Harley's action personally. But the outburst also reflected a president grappling with the effect of policies he expected to produce a more favorable outcome, say trade experts.

Trump's tariffs on steel and aluminum will cost Harley up to $20 million this year, with European Union retaliation adding perhaps an additional $45 million, the company said.

Trump's sudden feud with Harley — an American manufacturer he feted at the White House just last year — pitted a company driven by financial calculation against a businessman president who takes a deeply idiosyncratic and emotional view of global commerce.

In one Tuesday tweet (https://twitter.com/realDonaldTrump/status/1011574256117993472), Trump suggested that Harley was motivated by a hidden agenda, writing: “Harley must know that they won't be able to sell back into the U.S. without paying a big tax!” Harley has announced no such plans.

“It reveals his misunderstanding or lack of knowledge about the way global supply chains work and the way production works,” said Philip Levy, a White House economist in the George W. Bush administration. “There's no evidence that the president's very unorthodox approach to trade negotiations is achieving any results — other than more protectionism.”

While the president complained on Tuesday (https://twitter.com/realDonaldTrump/status/1011577303023980544) about Europe's trade barriers, he has not pursued negotiations toward a new treaty that might have eliminated those facing Harley. The E.U. and Japan, meanwhile, have concluded a trade partnership that will give Harley's Japanese rivals better access to the European market.

Trump also withdrew the United States from a Pacific trade accord that would have cut tariffs in key Asian markets, a move Harley said forced it to open the plant in Thailand to serve fast-growing markets nearby.

The president's ire at the Milwaukee-based company, famous for heavy motorcycles known as “hogs,” had its origins in Trump's belief that he and his heartland supporters share a unique bond with the company.

“I don't think he's a bike guy. The wind in the hair is not going to work. But that is a demographic of the country that he relates to, guys who ride Harleys,” Barry Bennett, a former Trump campaign adviser, said of the president.

(https://www.washingtonpost.com/rf/image_777w/2010-2019/Wires/Images/2018-06-26/AP/Harley_Davidson_Tariffs_43842.jpg-a190f.jpg) (https://www.washingtonpost.com/rw/2010-2019/Wires/Images/2018-06-26/AP/Harley_Davidson_Tariffs_43842.jpg-a190f.jpg)

Trump was aboard Marine One late on Monday afternoon, flying over the Potomac River toward Joint Base Andrews in Maryland, when he pecked out a tweet (https://twitter.com/realDonaldTrump/status/1011360410648416258) accusing Harley of becoming “the first to wave a White Flag” in his blossoming trade war with Europe.

The president then boarded Air Force One to South Carolina, where he held an especially raucous campaign rally. Joining him for the flight was Peter Navarro, director of the White House Office of Trade and Manufacturing Policy and arguably the administration's most outspoken advocate of its “America First” trade stance.

The plane circled over West Columbia, South Carolina, for 57 minutes waiting out a thunderstorm, giving the president, Navarro and the other aides on board ample time to absorb the news coverage about Harley. Onstage, Trump gave a shout out to “the great Peter Navarro,” adding playfully that he “does like tariffs.”

In his freewheeling speech, Trump said nothing about Harley but described the United States as being ripped off by its trading partners.

Tearing into Germany, he said, “They send Mercedes, they send BMWs, they send everything; we tax them practically nothing.”

The president did not mention that BMW is one of South Carolina's largest employers, manufacturing its popular X-series SUV there.

Trump last year welcomed Harley executives and workers to the White House, celebrating the company for making its products in the United States. The company still makes most of its motorcycles at plants in Pennsylvania and Wisconsin.

Trump feels betrayed by Harley's decision, believing that the company leveraged his political brand to sell more bikes following a 2017 White House event that featured the president mixing it up with executives and workers, according to one person familiar with the president's thinking who spoke on the condition of anonymity to reveal private discussions.

“Harley-Davidson is using that as an excuse,” Trump said of the European tariffs. “I don't like that, because I've been very good to Harley-Davidson, and they used it as an excuse. And I think that the people that ride Harleys are not happy with Harley-Davidson, and I wouldn't be, either.”

With motorcycle sales slumping in the United States, Harley has been eager to expand its overseas business. The company has plants in India, Brazil and Australia, where production for its European customers will eventually move.

The new plant in Thailand, expected to begin production later this year, will serve customers in Asia. The plant in Kansas City that Trump wrongly said would see its work shifted there actually is being closed as part of a reshuffling that will move production to York, Pennsylvania. The move involves a net loss of about 350 jobs.

“We see tremendous opportunity, particularly in Southeast Asia. And the investment in the plant in Thailand to get around the egregious tariffs and duties is a part of accessing a very important market,” chief executive Matthew Levatich told investors in an April conference call.

(https://img.washingtonpost.com/rf/image_777w/2010-2019/WashingtonPost/2016/08/18/National-Economy/Images/Harley_Davidson_Device-b6425.jpg) (https://img.washingtonpost.com/rw/2010-2019/WashingtonPost/2016/08/18/National-Economy/Images/Harley_Davidson_Device-b6425.jpg)

European retaliation for Trump's metals could add up to $45 million to Harley's costs this year, which works out to an extra $2,200 for the average motorcycle and explains why the company is shifting production of bikes bound for Europe to a foreign facility.

Harley's net income has slid for three consecutive years; last year's $594 million in profits were down nearly 30 percent from 2014.

Aides said Trump tried to communicate a broader message — or threat — with his Tuesday tweets: Companies should grow their businesses in America.

“The president's overarching message is: Bet on America; we're a strong economy; we have the best workers; we have the best regulatory tax,” a senior White House official said. “He's telling Harley-Davidson and the rest of the world, if you make decisions to go elsewhere, it's going to be a problem for their business.”

Trump's angry insistence that Harley's products should be made in the United States is at odds with his own record as a businessman. His branded products — clothing, vodka, home goods and hotel amenities — were manufactured in at least 12 countries outside the United States, including China, Mexico and Indonesia, according to a 2016 Washington Post analysis of publicly available data (https://www.washingtonpost.com/news/fact-checker/wp/2016/08/26/how-many-trump-products-were-made-overseas-heres-the-complete-list).

Likewise, Ivanka Trump, the president's daughter and unpaid White House adviser, sourced her company's products exclusively from low-wage factories (https://www.washingtonpost.com/graphics/2017/politics/ivanka-trump-overseas) in countries such as Bangladesh, Indonesia and China, The Post found.

Trump's stated goal of increasing opportunities for American factory workers is at odds with his zero-sum view of how corporations should operate, said Matthew Slaughter, dean of Dartmouth College's Tuck School of Business. Multinationals that expand abroad, such as Harley, typically add jobs to their U.S. operations, he said.

“I believe he is earnestly committed to helping workers at Harley-Davidson and elsewhere,” said Slaughter, a White House economist in the George W. Bush administration. “Yet the policy proposals reflect a fundamental misunderstanding about how many jobs in America are connected to the world.”

__________________________________________________________________________

• David J. Lynch (https://www.washingtonpost.com/people/david-j-lynch) joined The Washington Post in November 2017 from the Financial Times, where he covered white-collar crime. He was previously the cybersecurity editor at Politico and a senior writer with Bloomberg News, focusing on the intersection of politics and economics. Earlier, he followed the global economy for USA Today, where he was the founding bureau chief in both London and Beijing. He covered the wars in Kosovo and Iraq, the latter as an embedded reporter with the U.S. Marines, and was the paper's first recipient of a Nieman fellowship at Harvard University. He has reported from more than 60 countries.

• Philip Rucker (https://www.washingtonpost.com/people/philip-rucker) is the White House Bureau Chief for The Washington Post. He previously has covered Congress, the Obama White House, and the 2012 and 2016 presidential campaigns. Rucker also is a Political Analyst for NBC News and MSNBC. He joined The Post in 2005 as a local news reporter.

__________________________________________________________________________

Related to this topic:

• VIDEO: Trump's Harley-Davidson controversy, explained (http://Harley-Davidson to shift portion of production overseas)

• Trump threatens Harley-Davidson with taxes ‘like never before’ and predicts its eventual collapse (https://www.washingtonpost.com/news/business/wp/2018/06/26/trump-threatens-harley-davidson-with-taxes-like-never-before-and-eventual-collapse)

https://www.washingtonpost.com/business/economy/to-trump-harleys-tariff-decision-is-a-personal--and-unexpected--betrayal/2018/06/26/a662c718-796d-11e8-aeee-4d04c8ac6158_story.html (https://www.washingtonpost.com/business/economy/to-trump-harleys-tariff-decision-is-a-personal--and-unexpected--betrayal/2018/06/26/a662c718-796d-11e8-aeee-4d04c8ac6158_story.html)

from The Washington Post…

Harley-Davidson: The oddity of the ‘America First’ president
bashing a classic American brand

Trump aims his ire at an American staple that has weathered the Model T, the Depression and trade wars.

By KYLE SWENSON | 5:17AM PDT — Wednesday, June 27, 2018

(https://www.washingtonpost.com/resizer/RpU2wOeDSgn6vUG8ouKy9DAaoxw=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/JOP5547VSE6YBIMKYUMJ4A2EJU.jpg) (https://www.washingtonpost.com/resizer/RpU2wOeDSgn6vUG8ouKy9DAaoxw=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/JOP5547VSE6YBIMKYUMJ4A2EJU.jpg)
A biker rides his Harley-Davidson motorcycle at a parade in June 2018. — Photograph: Fabian Bimmer/Reuters.

GO HUNTING for the Harley-Davidson origin story, and you'll end up in the black smoke and workshop tinkering of the early 1900s. But the true jumping-off point for understanding the modern American motorcycle manufacturer is May 6, 1987 — the day the Gipper blessed the brand.

Wearing a light-colored suit as he bounced up a platform at the company's plant in York, Pennsylvania, President Ronald Reagan stood before a factory floor jammed with assembly-line workers, the Los Angeles Times reported (http://articles.latimes.com/1987-05-07/business/fi-4577_1_harley-davidson-motorcycles) at the time. He was there to deliver a limited-government victory speech.

Five years earlier, Harley-Davidson was in a corporate tailspin because of intense competition from Japanese manufacturers dominating the U.S. market. In 1983, the Reagan administration imposed five years of limited tariffs on Japanese bikes. The assist helped Harley-Davidson's management re-tool the company. In 1987, the company was ready to again take on the Japanese competition alone. The company was the only U.S. motorcycle brand left standing.

“American workers don't need to hide from anyone,” Reagan told the crowd, the L.A. Times reported. But the president, a free-trade hawk, walked an interesting line in his speech. While praising the “breathing room” the tariffs allowed the company to get back on its feet, he argued against further protections.

“Our trade laws should work to foster growth and trade, not shut it off,” Reagan said. “And that is what is at the heart of our fair-trade policy: opening foreign markets, not closing ours. The idea of going to mandatory retaliation and shutting down on presidential discretion in enforcing our trade laws is moving toward a policy that invites, even encourages, trade wars.”

The workers — many still fearing what international competition would do to their jobs later — were silent, according to the L.A. Times.

Now the famous U.S. brand is again the target of presidential focus — this time with a much different intensity. On Tuesday, President Trump criticized Harley-Davidson after the company's decision to shift some production overseas because of the administration's aggressive trade policy. As The Washington Post has reported (https://www.washingtonpost.com/business/economy/to-trump-harleys-tariff-decision-is-a-personal--and-unexpected--betrayal/2018/06/26/a662c718-796d-11e8-aeee-4d04c8ac6158_story.html), Trump's steel and aluminum tariffs will cost Harley-Davidson $20 million, the company says. Retaliatory tariffs could cost an additional $45 million.

In tweets, the president lashed out at Harley-Davidson, saying the company — a brand he has embraced in the past — was using the tariffs as an excuse to take away U.S. jobs. The bikes, Trump stated, should “never be built in another country-never!”

“If they move, watch, it will be the beginning of the end — they surrendered, they quit!” Trump wrote. “The Aura will be gone and they will be taxed like never before!”

Trump's ire at a quintessentially American brand is noteworthy. So much of the history of Harley-Davidson — a company started by the sons of immigrants in what we now call the Rust Belt — is wrapped up in the same concerns dominating the White House, including trade wars, broad-stroke nationalism, celebrity and image maintenance.

In the late 1800s, motorcycles were a gag.

As Darwin Holmstrom writes in his book “Harley-Davidson: The Complete History” (https://www.amazon.com/dp/0760350000), gasoline-powered bicycles were unwieldy at the century's start because of the size of the engines — more a “carnival freak” than an actual mode of transportation, according to Holmstrom. In 1895, an entrepreneur named Edward Joel Pennington showed off his curious “Motor Cycle” on a street in Milwaukee. Neighbors rushed to watch. Two 14-year-olds who lived nearby may have been in the crowd, Holmstrom speculates: William S. Harley and Arthur Davidson.

By the early 1900s, lighter-weight engines made motorcycles a more feasible product. Harley and Davidson worked on designs and built bikes, eventually selling their first models in 1903. According to the company (https://www.harley-davidson.com/us/en/museum/explore/hd-timeline.html), the two tinkered on their early designs in a 10-by-15-foot wooden shed behind the Davidson house. “Harley-Davidson Motor Company” was scrawled on the workshop's door.

Demand was high enough in 1906 for the friends to build a small factory in their Milwaukee neighborhood, Holmstrom writes. A year later, they officially incorporated the company bearing their names.

Harley-Davidson showed early on that the company could easily slip from one identity to another.

As Yahoo reported in March (https://finance.yahoo.com/news/harley-davidson-100-history-case-142903621.html), the motorcycles were originally designed as a primary mode of transportation for riders. Starting in 1908, however, Henry Ford's affordable Model T began dominating that market. Harley-Davidson pivoted, pitching its products not as your ride to work or for daily errands but as a leisure craft. According to Yahoo, the company worked to start riding clubs for owners. In the cash-heavy 1920s, motorcycles were another activity of the rich.

A second market helped Harley-Davidson outlive the Depression: the military. The company's cycles had been used early on by various armies. According to Yahoo, Harley-Davidson survived the bottomed-out 1930s in part because of military shipments to Japan. When World War II ripped the world apart, the company was busy producing bikes for the Allies.

The postwar years were when Harley-Davidson stepped fully into the identity that's now welded completely to the brand: the outlaw.

Motorcycle clubs — favored by World War II veterans eager for a jolt of adrenaline after combat — started up in the 1950s (http://ijms.nova.edu/November2005/IJMS_Artcl.Dulaney.html). Thanks to screen time in movies such as 1953's “The Wild One” (https://www.imdb.com/title/tt0047677) and 1969's “Easy Rider” (https://www.imdb.com/title/tt0064276), as well as reports of the leather-clad mayhem tied to groups such as the Hell's Angels, the myth of the Harley-mounted, anti-social misfit stuck in the social consciousness. Whether feared or revered, Harley-Davidson riders — bulling down the street with the V-twin engine's unmistakable roar — became American fixtures.

And yet the outlaw image would also set Harley-Davidson on a path to economic disaster. Honda's own motorcycles were portrayed in ads as a clean, nice alternative to the Harley-Davidson's social menace. In 1959, the Japanese manufacturer sold 1,700 bikes in the United States. By 1970, after Harley-Davidson had become the highway's bad boy, Honda was selling 500,000.

Other overseas competitors began piling into the stateside market. Harley-Davidson's then-president, John Davidson, a descendant of one of the company's founders, would eventually accuse companies such as Honda of “dumping” products in the United States.

“The Japanese established production schedules that were much higher than mid-Seventies demand for their products,” Davidson once said (https://www.motorcycleclassics.com/classic-american-motorcycles/harley-davidson-confederate). “They chose the U.S. to unload their excess production.”

The company's own mismanagement did not help its business at the time.

“‘We were being wiped out by the Japanese because they were better managers,” executive Vaughn Beals explained to Fortune (http://archive.fortune.com/magazines/fortune/fortune_archive/1989/09/25/72503/index.htm) in 1989. “It wasn't robotics, or culture, or morning calisthenics and company songs — it was professional managers who understood their business and paid attention to detail.”

But the company executed another skillful identity change in the 1970s that would eventually help refurbish its image in bold red, white and blue strokes.

Feeding off the patriotic energy soaking the country for the Bicentennial, the company released a “Liberty Edition” (https://www.motorcycleclassics.com/classic-american-motorcycles/harley-davidson-confederate) bike in 1976 featuring patriotic coloring, the Statue of Liberty, and “Born Free” inscribed on the frame, Yahoo reported.

The new line suggested that the brand's toughness and edginess were not anti-social values but inherent to American identity. That association had fully stuck by the time Reagan cheered the company's resurgence in 1987 after the tariffs were dismantled.

“As you've shown again, America is someplace special,” Reagan told the crowd of workers (http://www.presidency.ucsb.edu/ws/?pid=34239). “We're on the road to unprecedented prosperity in this country — and we'll get there on a Harley!”

Harley-Davidson's recent years have been difficult, leaving the company vulnerable to the global chaos Trump's trade policy may spark. As BikeBandit.com has reported (https://www.bikebandit.com/blog/large-motorcycles-are-dying-in-the-us-and-harley-davidson-is-dying-fastest), the motorcycle riders are getting grayer: In 2016, the median age for U.S. motorcyclists was 47. In 1990, it was 32. In January, the company's postings (https://jalopnik.com/harley-davidson-is-sad-and-getting-sadder-1822557878) showed worldwide retail had fallen 6.7 percent in 2016, with U.S. sales dropping 8.5 percent.

Yet the brand's iconography has been resilient to bad sales before. It's one of the few U.S. companies hooked so firmly to the national identity.

__________________________________________________________________________

• Kyle Swenson (https://www.washingtonpost.com/people/kyle-swenson) is a reporter with The Washington Post's Morning Mix (http://www.washingtonpost.com/news/morning-mix) team. Prior to joining The Post in 2017, he covered South Florida for the New Times Broward-Palm Beach. His reporting on the criminal justice system and features have won several national awards, including the Sigma Delta Chi award from the Society of Professional Journalists and the Salute to Excellence Award from the National Association of Black Journalists. In 2015 he was a finalist for the Livingston Award for Young Journalists. His first book, “Good Kids, Bad City: A Story of Race and Wrongful Conviction in America's Rust Belt” (https://www.amazon.com/dp/1250120233) will be published by Picador USA in September 2018.

https://www.washingtonpost.com/news/morning-mix/wp/2018/06/27/harley-davidson-can-the-quintessential-american-brand-ride-out-trumps-tweet-storms (https://www.washingtonpost.com/news/morning-mix/wp/2018/06/27/harley-davidson-can-the-quintessential-american-brand-ride-out-trumps-tweet-storms)

from The Washington Post…

Harley Davidson: What Trump-supporting owners say
about the president's fight with the company

Harley-Davidson owners are caught in fight between the brand they love
and the president they support in the wake of a brewing global trade war.

By DAN SIMMONS | 11:38AM EDT — Wednesday, June 27, 2018

(https://www.washingtonpost.com/resizer/Pyf-2KEtXkq8N_RNZ2DfI7ea0o8=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/JMLDRGTZRMI6RLCOIIPPOFSZEM.jpg) (https://www.washingtonpost.com/resizer/Pyf-2KEtXkq8N_RNZ2DfI7ea0o8=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/JMLDRGTZRMI6RLCOIIPPOFSZEM.jpg)
Bob Franz, 76, of Milwaukee, Stacey Sklidum, 49, of Dousman, Wisconsin, and Marc Skildum, 48 of Dousman, Wisconsin.
— Photograph: Dan Simmons/for The Washington Post.

MILWAUKEE — Marc Skildum is an avid supporter of President Trump who raises alpacas in nearby Dousman, Wisconsin, and rides Electra Glide Ultra Classics with his wife, Stacey. But he doesn't share the president's outrage that Harley-Davidson, headquartered here for 115 years, is moving work overseas to get around Trump's brewing global trade war.

“It's business,” said Skildum, 48, visiting the company's museum near downtown Milwaukee. “If they can expand overseas and save money, you do it. Trump himself would do it, I feel.”

After Harley announced on Monday it would shift work overseas to avoid the fallout from Trump's aluminum and steel tariffs and Europe's retaliatory tariffs, the president repeatedly criticized the company, threatening it with severe taxes and predicting the decision could represent the “beginning of the end” for the brand.

“Harley-Davidson should stay 100% in America, with the people that got you your success,” Trump said in his latest tweet on the subject on Wednesday. “I've done so much for you, and then this. Other companies are coming back where they belong! We won't forget, and neither will your customers or your now very HAPPY competitors!”

Yet a visit to a motorcycle repair shop and the museum here on Wednesday revealed that Harley customers might not be willing to choose between the president they support and the motorcycle company they love. The company said the retaliatory tariffs by the European Union would increase the cost of its motorcycles by an average of $2,200 in European markets if they were made in the United States.

Supporters of the president, who made up the majority of riders surveyed, continue to back him, though with caveats.

“He gets himself into all these squabbles that he shouldn't,” such as this one with Harley, said Jeff Polak, a 54-year-old from Milwaukee who rides a 2013 Harley FLTRU Road Glide. “I don't support that.”

But he doesn't blame the president's tariffs for Harley's decision to set up more manufacturing operations abroad.

“I think Harley has been planning this for years,” he said. The tariffs presented the company with an easy way to explain the move, he reasoned.

Harley has built both an enduring brand and a near-peerless reputation for high-quality American craftsmanship, a reputation that Trump himself once celebrated. In February 2017, shortly after his inauguration, Trump joined company executives on the front lawn of the White House, holding it up as an example of a U.S. company that would benefit and expand thanks to Republican policies on tax and trade.

The company's relationship with its home town has been largely unblemished, and a massive party will be held in Milwaukee over Labor Day weekend to celebrate its 115th anniversary. Groups from San Diego; Seattle; Portland, Maine; and Fort Lauderdale, Florida; will ride in on the company's motorcycles, converging in what the company calls “the motherland” of Milwaukee.

But some here have soured a bit and fought back against the company's mystique. Jim Mead, a retired Milwaukee man, quit high school for a job on the Harley-Davidson assembly line in 1968 but stopped riding the company's motorcycles a few years ago in favor of an Indian-brand bike. He doesn't buy the company's stated rationale for the overseas move.

“Using the tariffs as an excuse to move offshore is weak at best,” he said. “Anyone who knows anything about Harley-Davidson knows that they have been using non-American products in their bikes for years. They have had plans for this move long before Donald Trump started taking a hard line on the trade imbalance.”

An unwavering Trump supporter, Mead said his moves on trade make sense.

“The president is, in my opinion, doing exactly what he should do to correct the imbalance and bad deals on trade that haven't been addressed ever,” he said.

(https://www.washingtonpost.com/resizer/obCeii8vGak3j2ijAJVrT02kYwQ=/480x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/JD5YWRTZRMI6RLCOIIPPOFSZEM.jpg) (https://www.washingtonpost.com/resizer/obCeii8vGak3j2ijAJVrT02kYwQ=/480x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/JD5YWRTZRMI6RLCOIIPPOFSZEM.jpg)
Bob Franz, 76, of Milwaukee, Wisconsin says Harley-Davidson doesn't
have a choice about moving some of their production overseas.
— Photograph: Dan Simmons/for The Washington Post.

Bob Franz didn't vote for Trump, sitting out the election entirely, and doesn't support his tariffs. You'd be hard-pressed to find a more avid Harley supporter. In his younger days, he rarely met weather not suitable for riding a Harley. One day, it was 40 degrees below zero. He drove to work in his native Milwaukee on his three-wheeled motorcycle, wearing insulated layers beneath and above his black leather riding jacket. The bike's engine kept his legs toasty. It was comfortable, he said. Now 76, he still puts about 100 miles a week on his 2002 Road King, but takes winters off.

Like many in the city where Harley-Davidson got its start, Franz not only rides the company's motorcycles but also worked there, as a mechanic for a decade in the 1960s. The pending move to overseas manufacturing can't be avoided because of the tariffs, he said.

“I don't think they have any other choice,” Franz said. But it won't work in the long term, he said. He pointed to the company's sale in 1969 to American Machine and Foundry (AMF). AMF moved some manufacturing overseas, he said, which only created problems because factory hands weren't used to making Harleys. Quality suffered, the company's finances went south and a group of 12 investors that included Willie G. Davidson, grandson of company co-founder William A. Davidson, bought the company back in 1981.

“You start sending stuff overseas, and nothing works,” Franz said. “History repeats itself. I've seen it happen. In a couple of years it will all be back in Milwaukee.”

On that point, Stacey Skildum, a strong Trump supporter, agrees.

“Made in America,” she said, raising her hands in a celebratory pose. “Buy American. Support your country. Support your neighbor who needs a job.”

Trump's tariffs make that possible.

“They aren't designed to punish,” she said. “It's if you want the privilege [to bring goods to U.S. markets], you have to pay for it.”

__________________________________________________________________________

• Dan Simmons is a former senior editor with Milwaukee Magazine. He is now a Milwaukee-based freelancer and a frequent contributor to The Washington Post.

https://www.washingtonpost.com/business/economy/trump-himself-would-do-it-harley-owners-on-trumps-fight-with-company/2018/06/26/2f22c0f0-79a8-11e8-93cc-6d3beccdd7a3_story.html (https://www.washingtonpost.com/business/economy/trump-himself-would-do-it-harley-owners-on-trumps-fight-with-company/2018/06/26/2f22c0f0-79a8-11e8-93cc-6d3beccdd7a3_story.html)

from The Washington Post…

Don't blame Harley-Davidson for making a smart business decision

The president's pledge to negotiate strong trade agreements is smart,
but imposing tariffs against U.S. allies caused a self-inflicted wound.

By REID RIBBLE | 5:18PM EDT — Thursday, June 28, 2018

(https://www.washingtonpost.com/resizer/rrAQjSkrYJKAFMXQ5yYwffa7dq0=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/XW5XVUD3CII6RLXOJUCMRLDBLA.jpg) (https://www.washingtonpost.com/resizer/rrAQjSkrYJKAFMXQ5yYwffa7dq0=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/XW5XVUD3CII6RLXOJUCMRLDBLA.jpg)
The logo for Harley-Davidson on the floor of the New York Stock Exchange. — Photograph: Richard Drew/Associated Press.

I RIDE MOTORCYCLES. I'm partial to Harley-Davidson motorcycles because I'm from Wisconsin, home of the company's headquarters, but also because I have fond memories of riding my Harley with many friends, when I was a member of Congress, during the annual Rolling Thunder (https://www.rollingthunderrun.com) event in Washington to honor military veterans.

I understand Harley-Davidson's recent decision (https://www.washingtonpost.com/business/technology/harley-stung-by-tariffs-shifts-some-production-overseas/2018/06/25/4b94115e-7871-11e8-ac4e-421ef7165923_story.html) to move production of its motorcycles for sale in the European Union to plants outside the United States. It wasn't a surprise — that's what just about any company would do when faced with a 25 percent tariff imposed by the E.U. in response to President Trump's trade agenda. Companies must be nimble or they lose market share, and Europe is Harley-Davidson's second-largest market after the United States. The tariff would have added an average of more than $2,000 to the cost of a Harley in Europe, no doubt damaging the company's market share, which is difficult and expensive to regain. Critics, including the president (https://www.washingtonpost.com/news/business/wp/2018/06/26/trump-threatens-harley-davidson-with-taxes-like-never-before-and-eventual-collapse), nonetheless attacked Harley-Davidson for its decision.

Who is right in this debate? A president who says he wants to negotiate better trade deals for everyone, or a company with a business to run but no say in those negotiations? Both sides have a point.

Trump needs to understand that businesses seek the most efficient and cost-effective manner to deliver goods and services. If they sell their products in other countries, they will try to minimize additional taxes to keep prices competitive. That is a basic element of trade.

The United States does not have a formal trade agreement with the E.U. Nor does it have one with China (https://www.cnbc.com/2018/05/18/us-china-trade-deal-on-tariffs-takes-shape-under-trump-administration.html). Absent formalized trade agreements, trade deficits are significantly likelier to occur in countries with more-open markets, as in the United States. Reaching a trade agreement with the E.U., instead of getting into a tariff war, would address Trump's overriding concern about trade deficits — and would be good for companies such as Harley-Davidson. But it should be noted that, broadly speaking, there really is nothing wrong with trade deficits. They send a signal that consumers like both products and pricing. They're also evidence of superior purchasing power — testimony to America's affluence and size. Yet some smaller, less affluent countries, including Canada, purchase more goods and services from us than we do from them. (Contrary to the president's deficit complaints, the U.S. Trade Representative reported a trade surplus of $8.4 billion (https://ustr.gov/countries-regions/americas/canada) with Canada in 2017.)

Yes, trade agreements produce a mix of winners and some losers. In the aggregate, each side wants more wins than losses. That's how it works. The fact that some industries in the United States have had losses in past trade agreements has made many people, including the president, skeptical about the quality of those agreements.

But the United States overall has mostly been a big winner. As Bloomberg News noted in May (https://www.bloomberg.com/view/articles/2018-03-07/u-s-manufacturing-isn-t-beating-china-but-it-s-not-doomed), U.S. manufacturing output, in inflation-adjusted terms, "is more than twice what it was back in 1979, when manufacturing employment peaked." Sure, there are fewer manufacturing jobs today, but that's mostly caused by automation and American ingenuity, not losses to foreign competition. In today's hot U.S. economy, a shortage of workers, not unemployment, is the problem.

Trump campaigned on fixing bad trade agreements. He focused especially on the trade deficit with China. In the past and continuing to this day, China has cheated in the marketplace by dumping products such as paper, steel and solar panels (https://www.nytimes.com/2011/10/20/business/global/us-solar-manufacturers-to-ask-for-duties-on-imports.html) on the U.S. market to drive down prices and put competitors out of business. The president's efforts to persuade China (https://www.washingtonpost.com/business/economy/trump-escalates-china-trade-war-announces-plan-for-tariffs-on-200-billion-in-products/2018/06/18/ac683f80-7355-11e8-b4b7-308400242c2e_story.html) to change its practices are justifiable.

The Harley-Davidson matter is altogether different. It's a self-inflicted wound. Tariffs prompt retaliatory tariffs (https://www.washingtonpost.com/news/worldviews/wp/2018/06/26/trump-threatened-india-to-back-harley-davidson-now-the-company-could-move-work-there-to-avoid-his-tariffs), and they serve only to tax consumers. The company has been manufacturing motorcycles in the United States for more than a century, and riders around the world understandably want to ride these enjoyable machines. Should Harley-Davidson have waited to see what would result from trade negotiations, hoping tariffs would be abandoned? Not many businesses would. The one thing I know for sure is businesspeople want two things: certainty and low taxes. No one, including Trump, should demonize a company for taking steps to secure its own future.

__________________________________________________________________________

• Reid Ribble, a former U.S. congressman from Wisconsin (2011-2017), is the chief executive officer of the National Roofing Contractors Association.

__________________________________________________________________________

Related to this topic:

• VIDEO: Trump to Harley-Davidson: ‘Don't get cute’ (https://www.washingtonpost.com/video/politics/trump-to-harley-davidson-dont-get-cute/2018/06/28/14debdc6-7b05-11e8-ac4e-421ef7165923_video.html)

• ‘Don't get cute’: Trump is really sore about Harley-Davidson's perceived lack of loyalty to him (https://www.washingtonpost.com/news/the-fix/wp/2018/06/28/dont-get-cute-trump-is-really-sore-about-harley-davidsons-perceived-lack-of-loyalty-to-him)

• Fact Checker: President Trump announces a major U.S. Steel expansion that isn't happening (https://www.washingtonpost.com/news/fact-checker/wp/2018/06/28/president-trump-announces-a-major-u-s-steel-expansion-that-isnt-happening)

https://www.washingtonpost.com/opinions/dont-blame-harley-davidson-for-making-a-smart-business-decision/2018/06/28/2166d3b0-7ae9-11e8-80be-6d32e182a3bc_story.html (https://www.washingtonpost.com/opinions/dont-blame-harley-davidson-for-making-a-smart-business-decision/2018/06/28/2166d3b0-7ae9-11e8-80be-6d32e182a3bc_story.html)

from the print edition of the Los Angeles Times…

Canada imposes tariffs of its own

Ottawa responds to Trump’s taxes with duties on $12.6 billion of U.S. products.

By THE ASSOCIATED PRESS | Saturday, June 30, 2018

(http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-APphoto_Canada-US_2_1_543UEIO9.jpg) (http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-APphoto_Canada-US_2_1_543UEIO9.jpg)
Foreign Minister Chrystia Freeland visits steelworkers at a Stelco plant in Hamilton, Ontario. In response to U.S. tariffs on Canadian goods, she said,
“We will not escalate, and we will not back down.” — Photograph: Peter Power/Canadian Press.

TORONTO — Canada announced billions of dollars in retaliatory tariffs against the U.S. on Friday in a tit-for-tat response to the Trump administration's duties on Canadian steel and aluminum.

Prime Minister Justin Trudeau's government released the final list of items that will be targeted beginning July 1. Some items will be subject to taxes of 10% or 25%.

“We will not escalate, and we will not back down,” Canadian Foreign Minister Chrystia Freeland said.

The taxes on items including ketchup, lawn mowers and motor boats affect $12.6 billion worth of U.S. goods.

“This is a perfectly reciprocal action,” Freeland said. “It is a dollar-for-dollar response.”

She said her government had no other choice and called the tariffs regrettable.

Many of the U.S. products were chosen for their political rather than economic impact. For example, Canada imports just $3 million worth of yogurt from the U.S. annually, and most of it comes from one plant in Wisconsin, the home state of GOP House Speaker Paul D. Ryan. That product will now be hit with a 10% duty.

Another product on the list is whiskey, which comes from Tennessee and Kentucky, the latter of which is the home state of Republican Senate leader Mitch McConnell.

Freeland also said Canada was prepared if President Trump escalates the trade war. “It is absolutely imperative that common sense should prevail,” she said. “Having said that, our approach from Day One of the NAFTA negotiations has been to hope for the best but prepare for the worst.”

Trump has explained the steel and aluminum tariffs by saying imported metals threatened the United States' national security — a justification that countries rarely use because it can be so easily abused. He also is threatening to impose another national security-based tariff on imported cars, trucks and auto parts. That threat could be a negotiating ploy to restart talks on the North American Free Trade Agreement.

Freeland said there were no grounds for further U.S. tariffs in response to Canada’s actions.

Canadians are particularly worried about auto tariffs because the industry is crucial to their economy. Freeland said such tariffs would be “absurd” because the North American auto industry is highly integrated and parts made in Canada often go to cars made in the U.S. and then sold back to Canadians. “Any trade action is disruptive on both sides of the border,” she said.

Freeland said an “intensive phase” of NAFTA renegotiations will resume quickly after Sunday's election in Mexico.

“I don't think we'll see any reaction from the Trump administration. They are prepared for this,” said Dan Ujczo, a trade lawyer in Columbus, Ohio. “Candidly, the Canadian retaliation is a drop in the bucket compared to the retaliation that we're going to see from China and elsewhere.”

Ujczo doubts Trump will announce auto tariffs because that would be a “red line for the U.S. Congress” before the mid-term election. He said hearings for possible auto tariffs are in late July.

“I don't think Congress right now is expected to get engaged until after the mid-term election. They've given the president a long leash and will continue to do so. The auto tariffs would disrupt that. It would change the calculus,” he said.

The Canadian government also announced $1.5 billion in subsidies for Canada's steel and aluminum industries.

http://enewspaper.latimes.com/infinity/article_share.aspx?guid=5c7d4b3e-f355-4749-acc2-41c61beb1f5e (http://enewspaper.latimes.com/infinity/article_share.aspx?guid=5c7d4b3e-f355-4749-acc2-41c61beb1f5e)

from the print edition of the Los Angeles Times…

U.S. duties: double edged sword; carmakers push back on tariffs

In a global supply chain, tariffs can cause ‘damage on ourselves’, economist says.

By MATTHEW CAMPBELL | Saturday, June 30, 2018

(http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-AFP-Getty_US-POLI_2_1_IR3UEKTS.jpg) (http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-AFP-Getty_US-POLI_2_1_IR3UEKTS.jpg)
Foxconn Chairman Terry Gou, right, and President Trump in Wisconsin on Thursday. — Photograph: Brendan Smialowski Agence France-Presse/Getty Images.

IN IMPOSING SWEEPING TARIFFS, President Trump is betting he can give domestic companies a boost while beating back foreign competitors. The problem is figuring out which one is which.

About 40% of the cars and trucks that General Motors Company sells in the U.S. this year, for example, will be imported, according to researcher LMC Automotive. On Friday, the Detroit-based automaker warned the Trump administration that the imposition of tariffs could force it to cut jobs.

Decades of ever-freer trade and cross-border mergers have led to the domination of many industries by a handful of multinationals dependent on easy flows of raw materials, parts and labor. Non-American companies such as Daimler and Siemens now assemble many of their products inside the U.S., but often use a large number of imported components, blurring the line between domestic and international operations.

Those companies have invested hundreds of billions — if not trillions — of dollars on the assumption that the wheels of global commerce will continue to turn with increasing ease. But Trump appears determined to upend all that, even if he doesn't fully understand the ramifications. He's even threatening to withdraw from the 164-member World Trade Organization, the cornerstone of cross-border business, Axios reported on Friday, citing people familiar with the matter.

“This is a 1980s trade policy in a 21st century world,” said Diane Swonk, chief economist of Grant Thornton in Chicago. “We operate in a global supply chain now. It's not possible to punish other countries through trade without inflicting damage on ourselves.”

The president has argued that the tariffs are needed to create a “level playing field” between the U.S. and countries he says have benefited disproportionately from current trading arrangements.

In a speech 0n Thursday, he lamented having “been very much taken advantage of” as a country, saying: “We've lost our companies. We've lost our jobs. They build a product; they send it in.”

The White House is rapidly turning Trump's tough rhetoric into reality. Unless the president backtracks, the U.S. on July 6 will impose levies on $34 billion of Chinese imports, many of them parts used by domestic manufacturers of products such as power turbines and marine engines.

China will impose countervailing tariffs the same day, less than a week after Canada does the same in reaction to U.S. restrictions on steel and aluminum.

Trump's views on trade, like many of his political positions, were formed in a different era. Thirty years ago, on Oprah Winfrey's talk show, he complained about the U.S. letting “Japan come in and dump everything.” Japanese companies, he continued, “come over here, they sell their cars, their VCRs. They knock the hell out of our companies.”

Replace Japan with China and swap VCRs for iPhones, and the comments sound identical to ones he made on the 2016 campaign trail and repeatedly since.

But the picture has become considerably more complicated in the intervening decades. Germany's Siemens, for example, has 50,000 U.S. workers and generates revenue of about $23 billion there, including $5 billion from exports.

Or take Toyota Motor Corporation, the world's second-largest automaker and a symbol of Japanese industrial might. In the U.S., Toyota makes more than a million cars a year and has 10 plants. Those factories are the core of a U.S. operation that employs about 136,000 people, but they're also dependent on components sourced overseas for reasons of cost or availability.

“Whether it's possible for companies to source components entirely from within the U.S. will vary widely sector by sector,” David Dollar, a senior fellow at the Brookings Institution, said Friday. “In some cases, maybe they'll be able to find a substitute, but it will almost always cost more, so then that company's product is less competitive.”

About 70% of the parts in a U.S.-built Camry, the country's top-selling car, come from domestic suppliers. Toyota on June 27 said that Trump's threatened 25% tariff on automotive imports would add $1,800 to the price of each sedan.

On Friday, GM joined in the pushback, issuing a stern warning that it could shrink U.S. operations and cut jobs if tariffs are applied to imported vehicles and auto parts.

“The threat of steep tariffs on vehicle and auto component imports risks undermining GM's competitiveness against foreign auto producers by erecting broad brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower-wage countries and promote a trade environment in which we could be retaliated against in other markets,” GM said in comments submitted to the Commerce Department.

The carmakers' warnings of the dangers of tit-for-tat tariffs were just two of many. German lighting manufacturer Osram Licht's shares plunged 22% on Thursday after the company announced a weaker outlook because of trade tensions. Even hoteliers are starting to fret. Radisson Hospitality CEO John Kidd said the tariff dispute could depress business travel to China.

Trump has made wooing foreign companies to expand U.S. manufacturing a priority, deeming it evidence that he's making good on promises to restore economic vitality to struggling regions.

On Thursday, he traveled to Wisconsin to celebrate the groundbreaking of a $10-billion assembly plant for Foxconn Technology Group, the Taiwanese iPhone contractor's first major U.S. facility.

Trump hailed the construction of a plant he said would be “the 8th wonder of the world” as an endorsement of his policies. “We have a lot of things going in the United States,” he said. But not far is the headquarters of one of the first American casualties of Trump's trade war: Harley-Davidson Incorporated.

The legendary motorcycle maker says it's having to move more manufacturing overseas as a result of retaliatory EU tariffs, a decision that surprised Trump. “I've done so much for you, and then this,” the president tweeted.

Even Foxconn is concerned. Its chairman, Terry Gou, said last week that a U.S.-China trade war is the biggest challenge facing the company.

Trying to create a situation in which U.S. manufacturers could get by largely without foreign components would be futile, said Sarah Fowler, an economic analyst at consulting firm Oxford Analytica. “It's the degree of specialization, the number of factories you’d need and the number of competences to make all the different parts,” Fowler said. “The cost that implies is just not realistic.”

Trump's singular focus on reviving manufacturing is, in some ways, at a right angle to the true nature of the U.S. economy. Service industries employ more than 10 times as many Americans — about 125 million — as manufacturing does, according to the Bureau of Labor Statistics. The figure includes about 19 million jobs in healthcare and social assistance, almost 16 million in leisure and hospitality and 16 million in retail.

Services include most of America's corporate stars, including Alphabet Incorporated and Goldman Sachs Group Incorporated, and are unquestionably globally competitive: The country exported about $255 billion more in services than it imported last year. (The total shortfall in goods and services was $552 billion last year.)

Even by Trump's standards, the rules of global trade may be working just fine when it comes to the industries that employ most Americans.

__________________________________________________________________________

• Matthew Campbell is a senior reporter at Bloomberg.

http://enewspaper.latimes.com/infinity/article_share.aspx?guid=aaaefa21-f650-44e8-8056-b7c9dc93dfa3 (http://enewspaper.latimes.com/infinity/article_share.aspx?guid=aaaefa21-f650-44e8-8056-b7c9dc93dfa3)

from The New York Times…

Trump Starts a Trade War, but the Path to Success Remains Unclear

President Trump has said that trade wars are “easy to win,” but the question
is whether he has a plan to achieve the results he wants.

By ANA SWANSON and NEIL IRWIN | 7:05PM EDT — Saturday, July 06, 2018

(https://static01.nyt.com/images/2018/07/07/business/07-jump-dc-trumpwar-print-1/07dc-TRUMPWAR-1-jumbo.jpg) (https://static01.nyt.com/images/2018/07/07/business/07-jump-dc-trumpwar-print-1/07dc-TRUMPWAR-1-superJumbo.jpg)
President Trump has said that trade wars are “easy to win”. Now that he has started one with China, it remains to be seen what his strategy is.
— Photograph: Gabriella Demczuk/for The New York Times.

WASHINGTON D.C. — The United States and China hit each other with punishing tariffs (https://www.nytimes.com/2018/07/05/business/china-us-trade-war-trump-tariffs.html) on Friday as the two nations tipped into a long-feared trade war that is only expected to escalate.

President Trump has said that trade wars are “easy to win.” Now, as he opens a global skirmish with allies and adversaries alike, the question is whether he has a plan to achieve the results he wants or whether he is heading into a costly and futile clash without resolution.

The president appears to be betting that threatening trading partners like China, the European Union, Mexico and Canada with tariffs will eventually force them to bend to the United States.

His strategy is being buoyed by a strong economy that is giving Mr. Trump more latitude to impose tariffs that might otherwise pose too much risk. Job growth was strong in June, according to a new government report, as employers added 213,000 net new jobs and the unemployment rate rose as more people entered the labor market and began looking for work. Manufacturing job growth was particularly robust.

Those numbers are backward-looking, but there is little reason to think that the initial batch of tariffs will knock the entire economy off course. The $34 billion worth of Chinese goods subject to tariffs, and an equivalent retaliation by China, is tiny compared to the $20 trillion United States economy. Global stock markets largely shrugged off the trade war on Friday.

But the tariffs are still inflicting pain on some industries in particular, including farmers and small manufacturers who have long supported Mr. Trump. And with little sign of a negotiated resolution between the United States and China — or any other trading partner — the conflict threatens to escalate, eventually affecting hundreds of billions of dollars of additional products.

“Trump's soundest argument in his election campaign was that he would not waste American lives and treasure in pointless wars of choice,” Adam Posen, the president of the Peterson Institute for International Economics, wrote in March in an op-ed article (https://piie.com/commentary/op-eds/ill-advised-trade-war-could-turn-out-be-trumps-afghanistan). “His launching a trade war would prove, however, to be his economic Afghanistan — costly, open-ended, and fruitless.”

On Friday, the Trump administration took its most aggressive step yet as it imposed tariffs on $34 billion worth of Chinese goods, including medical devices and airplane parts, and threatened billions of dollars more in the coming months. The Chinese immediately responded with tariffs on an equal volume of American soybeans, pork, automobiles and other products.

Mexico, Canada and the European Union have similarly retaliated against Mr. Trump's steel and aluminum tariffs and have threatened to push back if the president moves ahead with his threat to place a 20 percent tariff on imported cars and car parts.

The president and his advisers insist that history is on their side and that Mr. Trump's approach will yield better results than years of diplomatic niceties, including bilateral talks with the Chinese, that have produced bad deals for the United States.

“We have the worst trade deals in the world. We lose money with everybody,” Mr. Trump said last week. “Every country is calling every day, saying, let's make a deal, let's make a deal. It's going to all work out.”

His approach has garnered support from certain corners of American industry, particularly sectors that have seen significant job losses connected to China's rise.

“These aren't the first shots of a new ‘trade war’,” Scott Paul, the president of the Alliance for American Manufacturing, which represents steelworkers and manufacturers, said on Thursday in a Twitter post (https://twitter.com/ScottPaulAAM/status/1014983424451534848). “China's been conducting a highly effective war on American workers,” he said, adding that the “difference now is that we are systematically pushing back.”

(https://static01.nyt.com/images/2018/07/07/business/07dc-TRUMPWAR-2/merlin_140750253_dfaf0117-0cc7-495e-bb02-ac7e51faa1e3-master768.jpg) (https://static01.nyt.com/images/2018/07/07/business/07dc-TRUMPWAR-2/merlin_140750253_dfaf0117-0cc7-495e-bb02-ac7e51faa1e3-superJumbo.jpg)
Workers moving aluminum at a factory in China. — Photograph: Agence France-Presse/Getty Images.

But many of Mr. Trump's supporters say they are unsure, exactly, how the trade war will work out, given the escalating threats emanating from the White House and the lack of a clear strategy toward resolving the president's differences with the United States' trading partners.

Mr. Trump's steel and aluminum tariffs had barely gone into effect before he upped the ante and threatened auto tariffs on those same allies, pushing trade relations with Europe and Canada to their rockiest point in decades. With China, the president's advisers have vacillated between asking Beijing to purchase more American products to lower the United States' trade deficit and pushing for more substantive economic reforms. And talks to revise the North American Free Trade Agreement with Canada and Mexico remain stalled over deep differences with the United States.

If the conflict with China is not resolved soon, Mr. Trump has threatened to place tariffs on nearly everything China exports to the United States, in addition to tightening Chinese investments in the United States and limiting visas for Chinese citizens. While many supporters describe the president's bold statements as a negotiating tactic, talks between the Chinese and the United States have faltered for now, with no additional discussions in sight.

“There is no apparent plan,” said Daniel Price, a managing director of Rock Creek Global Advisors, an advisory firm, and a former trade official in the George W. Bush administration. “The administration has given no indication what the off-ramp is or what their objectives are.”

“Trump is treating trade policy as though it were a real estate deal, where the goal is to beat your opponent, step on his throat and humiliate him,” said Daniel Ikenson, the director of trade policy studies at the Cato Institute.

Even if it works and nations like China blink, Mr. Ikenson said, “the cost to that will be trust in the U.S., and it will encourage other governments to behave this way when their backs are against the wall.”

Many farmers and manufacturers remain staunch supporters of Mr. Trump. But their faith is starting to waver as tariffs take effect and they feel the impact of reduced market access and higher costs.

“I would just like the administration to be clear, at least with us, on the goal,” said Jay Hollowell, the mayor of Helena-West Helena, Arkansas, an area that produces soybeans, which are now being heavily taxed by China. “Is it to lower trade deficits with other countries like China, or is it to protect American industries?”

“People's livelihoods are on the line here,” Mr. Hollowell added.

For now, the current trade measures affect a small portion of the economy and come at a time of economic strength, giving Mr. Trump more latitude to take the type of aggressive measures that, in weaker economic times, would provide a drag on the economy much more quickly.

Businesses have been warning for months that tariffs will cause them to scale back on hiring and investment, and pass higher prices on to consumers. But those effects are not evident in the data, so far.

Oxford Economics, for example, calculated that the tariffs with China would shave only 0.1 percent off both American and Chinese gross domestic product in the next two years, though that would rise to 0.3 percent if the Trump administration follows through on threats to expand the tariffs to $200 billion worth of goods.

(https://static01.nyt.com/images/2018/07/07/business/07-jump-dc-trumpwar-print-2/merlin_140833380_af164445-4fa8-44f5-a6dd-446b2b5fbd60-master768.jpg) (https://static01.nyt.com/images/2018/07/07/business/07-jump-dc-trumpwar-print-2/merlin_140833380_af164445-4fa8-44f5-a6dd-446b2b5fbd60-superJumbo.jpg)
Chinese investors monitoring stock prices on Friday. — Photograph: Mark Schiefelbein/Associated Press.

But tariffs could still cause plenty of trouble in specific sectors and industries, even if the levies do not provide a significant drag on overall economic growth.

For example, soybean futures prices have fallen 15 percent since May 25 in anticipation of the Chinese retaliatory tariffs. With a stiff tax on soybean imports, American farmers will face lower demand from overseas and a hit to their incomes. Those farmers, in turn, would spend less on equipment and materials, which could eventually trickle through to the broader economy.

John Heisdorffer, a soybean grower from Keota, Iowa, and the president of the American Soybean Association, said he and others in the industry had spent years trying to develop markets in China that were now being closed with the stroke of a pen. “My son, who farms with me, is going to spend the rest of his lifetime trying to get that back, and that scares the hell out of me,” Mr. Heisdorffer said.

The United States trade representative said on Friday that it would allow American companies to apply for exclusions to the tariffs if the product they need to import is not available outside China, or if the tariffs on it would cause “severe economic harm.”

Some of the products involved in earlier phases of the Trump administration's trade battles offer evidence of how American consumers may eventually be affected.

In January, the president announced new tariffs on imported washing machines. Since then, the price of laundry equipment is up 10 percent, according to the Bureau of Labor Statistics.

And the administration has either entered or threatened to enter trade wars on multiple fronts at the same time, compounding the risks. A tariff on automobile imports that is in the works, for example, could expand the dollar value of goods the United States places tariffs on by tenfold and set off a new wave of retaliation that endangers companies that export to Europe, Japan, South Korea and elsewhere.

Leaders of the Federal Reserve appear concerned that this overlay of risk in the economy could dampen investment spending, according to minutes of a June policy meeting released on Thursday. Fed officials “noted that uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects on business sentiment and investment spending.”

The economy appears strong enough to withstand the relatively moderate tariffs that have already been put in place. The question is what will happen if things continue to escalate to eventually encompass hundreds of billions or even trillions of dollars worth of goods.

“If we get up to a trillion dollars in the cross hairs, then that means we're talking about 25 percent of trade in goods,” Mr. Ikenson said. “People will begin to notice that.”

__________________________________________________________________________

• Ana Swanson (https://www.nytimes.com/by/ana-swanson) writes about trade and international economics for The New York Times. She previously covered trade, the Federal Reserve and the economy for The Washington Post.

• Neil Irwin (https://www.nytimes.com/by/neil-irwin) is a senior economics correspondent for The New York Times, where he writes for The Upshot (https://www.nytimes.com/section/upshot), a N.Y. Times site for analysis of politics, economics and more. He is the author of “The Alchemists: Three Central Bankers and a World on Fire” (https://www.amazon.com/dp/1594204624), about the efforts of the world’s central banks to combat the global financial crisis, published by the Penguin Press in 2013. Mr. Irwin was previously a columnist at The Washington Post and an economics editor of its Wonkblog (https://www.washingtonpost.com/news/wonk) site. As a beat reporter covering economics and the Federal Reserve, he led The Post's coverage of the financial crisis and the government's response to it. Mr. Irwin has an M.B.A. from Columbia University, where he was a Knight-Bagehot Fellow in Economics and Business Journalism, and his undergraduate studies were at St. Mary's College of Maryland. He has often appeared on television analyzing economics topics, including on “PBS NewsHour” and CNBC.

• A version of this article appears in The New York Times on July 7, 2018, on Page A1 of the New York print edition with the headline: “Trade War Rises, and Trump Plan Remains a Puzzle”.

__________________________________________________________________________

Related to this topic:

• Trump's Trade War With China Is Officially Underway (https://www.nytimes.com/2018/07/05/business/china-us-trade-war-trump-tariffs.html)

https://www.nytimes.com/2018/07/06/us/politics/trump-trade-war-unclear-outcome.html (https://www.nytimes.com/2018/07/06/us/politics/trump-trade-war-unclear-outcome.html)

from the print edition of the Los Angeles Times…

New tariffs take effect in trade battle: Soybeans embody chaos
of U.S.-China trade fight

The U.S. and China show no indication of talks as levies are slapped on exports from both sides.

By DON LEE | Saturday, July 07, 2018

SHANGHAI — The tariffs that the United States and China slapped on each other's exports on Friday intensified a trade battle that has a strong risk of roiling financial markets, chilling consumer confidence and seriously harming the global economy.

After President Trump followed through on his threat to apply 25% levies on $34 billion of Chinese products, mostly machinery and industrial parts, Beijing accused the United States of “launching the largest trade war in economic history.” It fired back with dollar-for-dollar tariffs mainly on American farm products and other foods.

There was no indication of new talks between the two sides.

Soybeans topped the list of newly taxed items — and they illustrate how deeply U.S. and Chinese producers and consumers have come to depend on each other.

Some ships from the Pacific Northwest bound for China with tons of soybeans have already been rerouted to Europe or Southeast Asia, analysts here said. Chinese officials, meanwhile, have been pulling out all the stops to encourage domestic farmers to plant more soybeans, so far with mixed results.

“China needs soybeans, and the U.S. needs the Chinese market,” said Jiang Boheng, an analyst with Luzheng Futures Company in eastern China's Shandong province. “It's a lose-lose situation.”

On the whole, the tariffs and retaliatory tariffs amount to penalties totaling $17 billion, a tiny amount given the size of the two economies, which have a combined gross domestic product of roughly $30 trillion.

Nonetheless, the duties will hurt sales and disrupt supply chains for some industries and businesses. More worrisome, the latest actions and the increasingly heated rhetoric from both sides have raised alarms of a drawn-out fight that could take a toll on both economies and spill over to the rest of the world.

Any fallout thus far appears to be muted as American economic growth surged in the second quarter. Job creation hasn't dimmed. On Friday the government said the nation added a solid 213,000 jobs in June.

China's economy is expected to expand at a still-rapid pace of about 6.8% this year, even as investments and production have decelerated and the government has clamped down on excessive lending.

The U.S. and China are the two largest economies in the world and have periodically had trade clashes, but Trump and hard-liners in his administration are insisting that Beijing pay for years of what they see as unfairly taking advantage of America's open markets and know-how.

China's tariffs are targeting agricultural and food products, including grains, tobacco and whiskey, products largely from states that backed Trump and home to influential GOP lawmakers. The U.S. duties are aimed at hitting China's supply chain and intermediate parts supporting the country's high-tech manufacturing.

U.S. businesses and congressional Republicans have increasingly urged Trump to back away from applying broad-based tariffs, calling instead for negotiations and enlisting the help of other trading partners to put pressure on Beijing.

Trump, however, has alienated America's closest allies such as Canada and the European Union by assessing tariffs on steel and threatening to tax imported cars. The president has made punitive duties, or the threat of them, his instrument of choice to tackle America's trade deficits and force Beijing to open markets and abandon policies such as requiring foreign firms to form joint ventures and essentially hand over technology secrets to do business in China.

On Thursday, Trump threatened to slap duties on all $500 billion of goods imported from China. Chinese officials have repeatedly vowed that they will stand firm and take comprehensive measures to protect the interests of China and its people. And Chinese President Xi Jinping and others have sought to woo European and other countries to back Beijing's push against what it sees as Trump's unilateral protectionism.

“I think the Chinese are digging in for what they see as a protracted battle with the U.S.,” said David Loevinger, an analyst for TCW Emerging Markets Group in Los Angeles and formerly a senior Treasury Department official for China affairs.

Loevinger, who was in China the last two weeks gauging the thinking and mood of businesses and government officials, said it was clear that the trade fight had awakened the Chinese to the country's “dependency on the U.S. as a supplier, market and banker that leaves them too vulnerable.”

The result, he and others said, is that China has begun to accelerate efforts to build up domestic capabilities and to diversify where China buys its products.

“It would be a mistake for American companies to think they're the unique providers of goods and services,” said Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai.

Although China has been rebalancing its economy and today is much less dependent on trade, the country still counts on the U.S. and other foreign countries for critical components and technologies.

That was evident in the case of telecommunications giant ZTE, which was paralyzed after the Trump administration initially prohibited American firms from selling parts to ZTE for violating certain U.S. sanctions. Trump later eased the restrictions after ZTE agreed to pay a large fine and overhaul its management with oversight by an American team.

Trump is betting that he has the upper hand in a trade fight with China because the United States buys or imports nearly four times as much in products from China as it exports to the Asian country.

But the reality is more complex: Over the last three decades, the two economies have become interconnected, with many American firms dependent on China's supply chains and large domestic market.

Soybeans provide a prime example. U.S. farmers shipped about $14 billion worth of soybeans to China last year, accounting for more than half of their global exports. American soybeans, in turn, made up about 30% of China's total soybean consumption.

As valuable as China's market is for the U.S., American soybeans have helped fill China's vital need for the grain, used for animal feed and for oil and human consumption. A Chinese saying goes, “Take a day without meat, but not a day without beans.”

But starting on Friday, U.S. soybeans entering China face an extra 25% tariff on top of the 3% duty assessed on all imported soybeans. The threat of tariffs already has cost American farmers as soybean prices have fallen and Chinese orders have virtually stopped in recent weeks.

Instead China has been buying more from Brazil and Argentina, among other sources. And on July 1, Beijing dropped the 3% duty for soybean imports from Bangladesh, India, Laos, South Korea and Sri Lanka, to encourage those countries to export more to China.

At the same time, government officials in China's northeast Heilongjiang province, the heart of China's soybean production, have doubled subsidies to farmers for replacing corn with soybean, to make up for the anticipated shortfall as American supplies shrink.

Corn has been much more profitable, while soybeans have been a break-even or money-losing crop in recent years. And for some farmers, the government's push for more soybean planting wasn't exactly welcomed.

“We couldn't make money from that. We even couldn't sell out the previous soybeans,” said He Yongdong, 35, of Kedong County, his voice tinged with resentment. “I'm still keeping the soybeans harvested in 2017. I've not got back the money I invested in last May.”

Yet others like Chang Gengguo, who works with Longshu Farmers Cooperative in Wangkui County, sounded like a foot soldier responding to a battle call from government.

He said that even before provincial government officials came to his village to sell them on the new subsidy policy, he had made up his mind to grow more soybeans. And at the end of the sowing season, Chang said, he added 25% to the 400 acres of soybeans he had originally planned to grow. The extra subsidy, he said, was nice but beside the point.

“Even though we couldn't make money from soybeans, we still want to do that. It's for the interests of the country,” he said.

But even with increased domestic production, more purchases from other countries and a shift to alternatives like rapeseed, farm industry experts say China still can't do without more soybeans from the U.S.

On Friday, Chinese agricultural company stocks rose sharply as investors saw potential benefits to domestic farms from import limitations, said Monica Tu, a soybean market specialist at Shanghai JC Intelligence Company. But that may prove short-lived, she said.

“We are concerned about supplies for next year.”

__________________________________________________________________________

• Don Lee covers the U.S. and global economy out of Washington, D.C. Since joining the Los Angeles Times in 1992, he has served as the Shanghai bureau chief and in various editing and reporting roles in California. He is a native of Seoul, Korea, and graduated from the University of Chicago.

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from the print edition of the Los Angeles Times…

Victims of trade war back Trump: Town supports Trump, if not his tariffs

More workers in this Missouri town could lose their jobs due to tariffs, but they don't blame their president.

By JENNY JARVIE | Saturday, July 07, 2018

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President Donald J. Trump's steel tariffs have raised the price of nails made in Poplar Bluff, Missouri, leading to the loss of 60 jobs from the factory in June.
— Photograph: Bill Greenblatt/Agence France-Presse/Getty Images.

POPLAR BLUFF, MISSOURI — Jimmie Coffer, a machine programmer at the nation's largest nail-making plant, voted for Donald Trump partly because he was confident he would bring manufacturing jobs back to America.

So the 39-year-old factory worker was shocked last month when 60 of his co-workers were laid off after the Trump administration imposed a 25% tariff on the steel his company imports from Mexico. Now, as his bosses cut back hours and warn that they may have to let 200 more workers go in the coming weeks, he worries he may lose his job as a result of the president's policies.

But Coffer is still gung-ho about Trump.

“I support him 100%,” he said last week. “In fact, I'd like to shake his hand. He's doing a great job.”

Across Poplar Bluff, a struggling town of about 17,000 in a remote pocket of southeast Missouri, many residents are reluctant to criticize Trump as they grapple with the prospect that their community could be one of the trade war's first casualties.

“Most workers are behind Trump, no matter what,” said Diane Brogdon, 54, a machine operator who has worked for the nail manufacturer for 12 years.

Trump won 79% of the vote here in Butler County and, while many were surprised to discover the tariffs are hurting their town, they still believe he's on the right track and firmly support his goal of pouring life back into dilapidated manufacturing communities — even if they end up losers.

“It's just one big mess,” said Brogdon, who fears she may struggle to keep the large brick home she bought just a few months ago. “He's looking at the big picture, and I understand that. But he's got to stop and look at the small towns around here that are really going to get hurt.”

For Mid Continent Steel and Wire, which does business as Mid Continent Nail Corporation, the crisis began on June 1, when the Trump administration imposed tariffs on steel and aluminum imports from Canada, Mexico and the European Union as part of its strategy of boosting American manufacturers.

Founded in 1987 by two local brothers and taken over in 2012 by a Mexican company, Mid Continent imports 70% of its steel from Mexico. When the tariffs forced the company to raise prices 19% to cover higher costs, orders plummeted. Within two weeks, the company had idled one of its production plants and laid off dozens of contract workers.

“You would think as long as houses are being built and pallets are being made we would be secure,” said Sean Hughey, 51, a machine shop supervisor who has worked for the company for eight years. “All of sudden, it just came to a crashing halt.”

Hughey still backs Trump, even as he worries that if the company shuts down, he will not be able to make his $800 monthly mortgage or come up with $700 a month for payments on his Dodge pickup, Chrysler sedan and Harley-Davidson Street Fighter.

“I feel like maybe the tariff policy might have been just a tad misguided, you know?” he said. “Maybe they didn't think it through.”

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Mid Continent Nail Corporation, now Mexican-owned, is the second-largest employer in Poplar Bluff, Missouri.
— Photograph: Bill Greenblatt/Agence France-Presse/Getty Images.

Last week, officials at Mid Continent took pains to praise the president as they ran a full-page ad in the local newspaper, telling Trump in an open letter that 500 jobs here are in jeopardy and urging him to save the company.

“More than any president in our time, you have shown compassion for U.S. manufacturing workers,” the letter began. “It is in your power to keep our plants running and save our jobs.”

The company has requested exclusions from the tariff, but the Commerce Department has a backlog of over 20,000 requests. So far, it has issued 42 exclusions.

As Mid Continent pleads for relief, local officials have been conspicuously silent about the fate of hundreds of assembly line workers. The mayor, city manager and City Council members did not respond to phone calls or emails about the potential closure of the town's second-largest employer.

“You won't get a lot of people speaking around here,” warned Steve Halter, president of the local Chamber of Commerce, as he declined to comment.

As a steady stream of workers stopped at the Munch-N-Pump gas station near the nail plant last week for sodas, cigarettes and sausage-and-cheese biscuits, they said supervisors had told them not to talk to the media.

Yet there is fear that hundreds of workers could be laid off, a potentially staggering blow to a town where a quarter of the population lives in poverty and the median household income is just $31,675.

“It's really going to hit the community hard,” said RayAnna Krogstad, a 28-year-old supermarket clerk, as she grabbed a Mountain Dew. “There are already job issues as it is, and a bunch of people flooding the market…. Some of them might be homeless by October.”

Others accused the company of exaggerating the risks to workers and blamed the firm for importing steel from Mexico.

“Mass layoffs? I don't believe it's going to happen,” said Randy Wade, 42, a supervisor for a local vending company, rolling his eyes as he filled a cup with Coca-Cola at the soda fountain.

“If they're going to do business in Mexico, they kind of deserve it,” he added. “They need to deal with Americans.”

Some were reluctant to publicly question Trump's policies, afraid they'd be harassed on social media. Others were suspicious that the media — and their Democratic U.S. senator, Claire McCaskill — had descended on the town only to score points at the president's expense.

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Senator Claire McCaskill (Democrat-Missouri), right, criticized Trump's tariffs when she toured the plant last week.
— Photograph: Bill Greenblatt/Agence France-Presse/Getty Images.

McCaskill, who is facing a tough re-election bid this year, was scathing about the Trump administration's handling of tariffs when she toured the nail plant last week.

“It's chaotic, and there's some incompetence involved,” she told company officials. “They're chasing your customers into China's arms…. It just doesn't make any sense whatsoever.”

Some companies across the country have celebrated the tariffs — U.S. Steel has announced plans to reopen two blast furnaces in Illinois, adding approximately 800 jobs — but trade experts say that overall, the measures are likely to bring more job losses than gains.

The Tax Foundation, an independent non-profit tax policy group, estimates about 48,500 jobs will be lost as a result of the tariffs imposed on imports of steel, aluminum, washing machines, solar panels and $50 billion worth of Chinese goods. If Trump presses ahead with further tariffs, and other nations retaliate, it predicts 342,000 jobs could be lost.

Already, other businesses in Missouri are feeling the ripple effects of Mid Continent's slowdown. A local packaging company that provides boxes for the nail plant announced last week that it had laid off four temporary employees.

Conspiracy theories and rumors also have spread. Some locals theorize the company's Mexican owners have long planned to relocate south of the border and are using the tariffs as an excuse to finally leave. (Company officials do not rule out relocating to Mexico, where they could buy steel and export finished nails back to the U.S. without tariffs, but say they are committed to remaining in Poplar Bluff.)

“This has nothing to do with tariffs — or Trump,” Mark Orton, owner of Bluff Barber Shop, said as he dabbed shaving foam on a customer's face. “It's smoke and mirrors. This Mexican company is just trying to blame Trump.”

His client, a red-headed factory worker who declined to give his name, blamed politicians and newspapers for “banging on” Trump.

“They can't say anything nice about him,” he said. “If Trump ran into a burning building to pull out children, they'd say he's hurting firefighters.”

Brogdon, asked whether she would rethink her support for Trump if she lost her job at the nail plant, said probably not. The tariffs ultimately would be good for the nation — even if they left her unemployed.

“Overall, he's done good,” she said. “I'm not going to be selfish just because of me.”

__________________________________________________________________________

• Jenny Jarvie is a freelance writer and reporter living in Atlanta, Georgia. She has worked as a staff reporter, then more recently as a special correspondent for the Los Angeles Times and the Sunday Telegraph in London. She was born in London in 1975, has a masters in English Literature and Philosophy from the University of Glasgow and is a past winner of the Catherine Pakenham Award for the most promising young female writer in Britain.

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from The New York Times…

How Rare Earths (What?) Could Be Crucial in a U.S.-China Trade War

Chinese companies dominate important parts of the global supply chain. The Australian C.E.O.
of one alternative source of key minerals says her firm can't fill the gap.

By ALEXANDRA STEVENSON | 6:43PM EDT — Wednesday, July 11, 2018

(https://static01.nyt.com/images/2018/07/11/business/00rareearths1/merlin_141107832_dc1089e8-daa6-4758-a413-216873f7e4a1-jumbo.jpg) (https://static01.nyt.com/images/2018/07/11/business/00rareearths1/merlin_141107832_dc1089e8-daa6-4758-a413-216873f7e4a1-superJumbo.jpg)
Testing chemical solutions at Lynas Corporation. The company provides materials known as rare earths, which are used to make personal electronics
like smartphones and televisions, and electric and hybrid cars. — Photograph: Rahman Roslan/for The New York Times.

KUANTAN, MALAYSIA — Amanda Lacaze grabbed her iPhone and rattled off the names of the special minerals needed to make it. The screen was polished with lanthanum and cerium. The inside has a magnet made with neodymium and praseodymium.

Those minerals almost certainly came from China. Ms. Lacaze's job is to give the world an alternative source, in case a global trade war spirals out of control and China cuts off supply.

Right now, she can't. Her company, Lynas Corporation, can provide only a fraction of the minerals — known as rare earths — that China produces. And even that source isn't a sure thing: The work is so volatile, complex and expensive that Lynas once came close to collapsing.

“There were times where we were sitting there and I'm saying, ‘Can we really afford to put coffee into the staff rooms?’” Ms. Lacaze said.

The Trump administration amped up its trade fight with China on Tuesday when it threatened to impose tariffs on an additional $200 billion in Chinese goods, ranging from frozen catfish fillets to copper wires to piston engines. China has threatened to match them dollar for dollar.

But it has other ways to retaliate beyond tariffs. It could refuse to buy American products, like planes from Boeing. It could intensify regulation of American companies doing business on the mainland. It could threaten to offload a piece of its huge portfolio of Treasuries, which could rattle the bond market.

And in one of its more strategic weapons, Beijing could use its dominance to cut off key parts of the global supply chain. China is the major supplier of a number of mundane but crucial materials and components needed to keep the world's factories humming. They include obscure materials like arsenic metals, used to make semiconductors; cadmium, found in rechargeable batteries; and tungsten, found in light bulbs and heating elements.

They also include rare earths. A trade war risks putting those minerals in the middle of the conflict, potentially giving China a way to get back at the United States by cutting off supplies to American companies. Already rare earths have become embroiled in the conflict — they were among the long list released on Tuesday of Chinese-made goods that the Trump administration wants to tax.

China has used its control of rare earths to try to get its way before. In 2010, it stopped exports to Japan (https://www.nytimes.com/2010/09/23/business/global/23rare.html) for two months over a territorial dispute. Speculators hoarded rare earth minerals, sending prices soaring.

“There is a hole in the western supply chain,” said Ryan Castilloux, the founder of Adamas Intelligence, a research firm.

It is hard to go a day without using rare earths. They are found in personal electronics like smartphones, televisions and hair dryers, and electric and hybrid cars.

(https://static01.nyt.com/images/2018/07/12/business/12rareearths-1-print/merlin_141108138_2aced7e2-3e42-4ab4-bb43-761ed6f67a4d-jumbo.jpg) (https://static01.nyt.com/images/2018/07/12/business/12rareearths-1-print/merlin_141108138_2aced7e2-3e42-4ab4-bb43-761ed6f67a4d-superJumbo.jpg)
Amanda Lacaze, Lynas's chief executive, left, Kirsten Smith, senior process manager, and Kam Leung, vice president of production,
at the company's plant in Kuantan, Malaysia. — Photograph: Rahman Roslan/for The New York Times.

(https://static01.nyt.com/images/2018/07/12/business/12rareearths-2-print/merlin_141107829_86d91bda-4878-4681-8a94-58474150c8b9-jumbo.jpg) (https://static01.nyt.com/images/2018/07/12/business/12rareearths-2-print/merlin_141107829_86d91bda-4878-4681-8a94-58474150c8b9-superJumbo.jpg)
Rare earths after being baked at 1,000 degrees Celsius. They aren't truly rare — they are made up of 17 elements found together in the ground
all over the world — but turning them into useful materials is costly and complicated. — Photograph: Rahman Roslan/for The New York Times.

They aren't actually rare — they are made up of 17 elements found together in the ground all over the world. But turning individual minerals into useful material is complicated, messy and costly, as Lynas well knows.

Rare earth refining is done on a large scale in only two places on earth: China, and Lynas's plant here in Kuantan, Malaysia, a sprawling industrial area on the coast of the South China Sea. The company mines rare earths out of a collapsed volcano in Australia and ships them to Kuantan to be refined.

Building that plant nearly sank Lynas. When Ms. Lacaze was named chief executive in June 2014, the company was struggling with $450 million in debt. Design flaws had delayed full production. It faced criticism from environmentalists (https://www.nytimes.com/2011/06/30/business/global/30rare.html).

With the business hemorrhaging cash, Ms. Lacaze slashed costs. She negotiated with impatient lenders, including hedge funds and a Japanese government agency that had backed Lynas because it was unsettled by China's hold over the industry. She reduced rent and overhead by closing the company's Australian headquarters and moved the company, her husband and herself to Lynas's facility in Kuantan.

On a recent visit, Lynas technicians mixed rare earth concentrate, which looks to the untrained eye like unremarkable dirt, into chemical tanks that extract elements like lanthanum and cerium. Through a series of steps that take place in more than a dozen buildings, the resulting pinkish powder was funneled through oversize sieves into boxes on a conveyor belt and baked at 1,000 degrees Celsius.

“It's just like a giant pizza oven,” Ms. Lacaze said.

Next door to the oven, more than 150 bags of neodymium and praseodymium and cerium sat on a warehouse floor to be shipped to customers around the world. These bags are precious goods — each one filled with neodymium and praseodymium is worth around $50,000.

“Just don't hit the bag!” Ms. Lacaze said she likes to tell the forklift operators. “It's like hitting a BMW.”

Ms. Lacaze, 58, was an experienced turnaround specialist who had worked in telecommunications and consumer products in Australia before coming to Lynas. In a drawl that hints at her Brisbane roots, she said she knew well the “glass cliff” (https://www.nytimes.com/2016/10/05/world/europe/glass-cliff-uk-women-politics.html) phenomenon, in which organizations in crisis are more likely than successful businesses to offer leadership positions to women.

“Women more often get to do jobs like mine, where you clean up other people's mistakes,” said Ms. Lacaze, wearing her signature pink work boots. She is one of fewer than a dozen women running the 200 biggest companies in Australia, where Lynas is publicly listed.

She has looked to elevate women at Lynas, often out of necessity as well as virtue. Unable to expand payroll during the the slump, Ms. Lacaze turned to current employees — often women — who worked in support roles like human resources and finance and shifted them to the factory floor to be operators, technicians and shift supervisors.

(https://static01.nyt.com/images/2018/07/12/business/12rareearths-3-print/merlin_141107826_4f4a344e-00d3-4a30-ab74-e907bc26d611-jumbo.jpg) (https://static01.nyt.com/images/2018/07/12/business/12rareearths-3-print/merlin_141107826_4f4a344e-00d3-4a30-ab74-e907bc26d611-superJumbo.jpg)
Rare earths are refined on a large scale in only two places: at Lynas's plant in Malaysia and in China. China's grip on the market puts
the supply chain at risk in a trade war. — Photograph: Rahman Roslan/for The New York Times.

(https://static01.nyt.com/images/2018/07/11/business/00rareearths5/merlin_141107835_1f43bd5c-ab63-4f43-bc56-cebe1d7d8ac7-jumbo.jpg) (https://static01.nyt.com/images/2018/07/11/business/00rareearths5/merlin_141107835_1f43bd5c-ab63-4f43-bc56-cebe1d7d8ac7-superJumbo.jpg)
When Ms. Lacaze took over Lynas in 2014, it was saddled with $450 million in debt. It's now profitable.
— Photograph: Rahman Roslan/for The New York Times.

China is her most immediate challenge. Lynas is now profitable, but Ms. Lacaze sees a potential trade war between China and the United States as more of a threat than an opportunity. Beijing could keep rare earths off the market, depriving many American and European manufacturers of the minerals they need.

Lynas couldn't compensate for it all. It accounted for only about 12 percent of world output of rare earths last year, according to Adamas, the research firm. Chinese companies accounted for more than four-fifths.

“If there is a full-blown trade war, I can't believe that the Chinese wouldn't use rare earths as part of that,” Ms. Lacaze says. If China wanted to restrict the supply of rare earths by sticking tariffs on rare earth products or stopping exports outright, “they could do it, literally overnight.”

Under that scenario, companies would look for alternatives to rare earths. Tesla Motors, for example, briefly turned to engines that don't use rare earths after the 2010 price surge. That could hurt Lynas's business.

The Association of China Rare Earth Industry, an industry group controlled by the Chinese government, did not respond to a request for comment.

Even if it doesn't disrupt the supply, China will likely keep its grip over the market for rare earths for a long time to come. It also dominates research and development of these minerals, giving it a leg up on the future, Ms. Lacaze said.

“I think there's about 100 Ph.D.s in rare earths working in applications inside China and working in technology development,” she said. “To my knowledge, do you know how many Ph.D.s there are outside of China?” With the fingers of her right hand, she made a zero.

For other countries, that means depending on China for a long time to come, she said.

“It doesn't scare me,” Ms. Lacaze said, “but it should scare policymakers.”

__________________________________________________________________________

• Cao Li contributed research to this article.

• Alexandra Stevenson is a business correspondent for The New York Times based in Hong Kong covering Chinese corporate giants, the changing landscape for multinational companies and China's growing economic and financial influence in Asia. Before moving to Hong Kong, she covered the world of high finance and its darker corners, charting the influence of billionaire financiers in the markets and on the political stage for The N.Y. Times in New York. She was a reporter for the Financial Times in New Delhi and London prior to joining The New York Times in 2013. Originally from Canada, she has also lived in Thailand, Singapore, and China, where she got her start as a reporter.

• A version of this article appears in The New York Times on July 12, 2018 of the New York print edition with the headline: “Rare Earths May Tilt a Trade War. Rare Whats?”.

__________________________________________________________________________

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• INTERACTIVE: How Trump's Trade War Went From 18 Products to 10,000 (https://www.nytimes.com/interactive/2018/07/11/business/trade-war.html)

• New Round of U.S.-China Trade War Rattles Global Markets (https://www.nytimes.com/2018/07/11/business/china-trump-trade-markets.html)

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https://www.nytimes.com/2018/07/11/business/china-trade-war-rare-earths-lynas.html (https://www.nytimes.com/2018/07/11/business/china-trade-war-rare-earths-lynas.html)

from The Washington Post…

Why China could withstand the trade war far longer than Trump thinks

The president's expectation that financial hardship will prompt Beijing to cave is misplaced, analysts said.

By DAVID J. LYNCH | 8:40PM EDT — Thursday, September 13, 2018

(https://www.washingtonpost.com/rf/image_1111w/2010-2019/WashingtonPost/2018/06/26/Foreign/Images/China_Financial_Market_53300.jpg-54e04.jpg) (https://www.washingtonpost.com/rw/2010-2019/WashingtonPost/2018/06/26/Foreign/Images/China_Financial_Market_53300.jpg-54e04.jpg)
A man monitors stock prices at a brokerage house in Beijing. The Shanghai Composite Index, China's main stocks gauge, is down 23 percent this year,
making it the world's worst-performing major exchange. — Photograph: Andy Wong/Associated Press.

PRESIDENT TRUMP insisted on Thursday that he was “under no pressure to make a deal with China,” signaling a readiness to escalate his trade war with Beijing.

“They are under pressure to make a deal with us,” Trump tweeted in reference to China. “Our markets are surging, theirs are collapsing.”

The president's statement sought to downplay any hope that the United States would extend a hand toward reconciling the trade conflict, amid word that Treasury Secretary Steven Mnuchin had invited Chinese officials to return to talks.

Trump's view that the Chinese are suffering while the U.S. thrives helps explain his confidence that Beijing ultimately will buckle. But the president's expectation that financial hardship will prompt Chinese President Xi Jinping to cave in a fresh round of diplomatic talks is misplaced, analysts said.

“There's a lot of overly wishful thinking on the American side,” said Jeff Moon, a former U.S. trade negotiator. “Every economy has problems. We have trillion-dollar deficits. That doesn't mean either economy is in fundamental danger. It's a massive miscalculation.”

The Shanghai Composite Index, China's main stocks gauge, is down 23 percent this year, making it the world's worst-performing major exchange.

But unlike in the United States, the ups and downs of the Chinese stock market affect relatively few people, meaning sell-offs are unlikely to translate into pressure on Chinese leaders.

Less than 10 percent of China's adult population owns shares, according to Fraser Howie, the Singapore-based author of three books on the Chinese financial system. In the United States, the comparable figure is more than half, according to Gallup.

In addition, Chinese share prices move with little regard for what is happening in the real economy. In 2008, for example, stocks fell by more than 65 percent even as the economy grew by nearly 10 percent.

“It's wrong to think the market fully equals winning the trade war,” Howie said.

Likewise, any wobble in the Chinese economy thus far has been modest. Though China has slowed from the double-digit growth rates it recorded earlier this decade, its economy grew by an annual rate of 6.7 percent in the second quarter.

“To the extent that Trump is looking at that and thinking he has China by the neck, he's wrong,” said economist Andrew Polk, a partner at Trivium, a Beijing-based advisory firm. “China's economy has its own issues. It's slowing down, but it's not about to blow up. Trump has less leverage than he thinks.”

Chinese Foreign Ministry spokesman Geng Shuang said at a news conference on Thursday that officials had received the White House's invitation for talks and the two sides are working out the details.

“China has always held that an escalation of the trade conflict is not in anyone's interests,” Geng said.

On Friday morning in Beijing, the front page of the state-backed China Daily read: “US offer for trade talks welcomed.”

The president has imposed tariffs on $50 billion worth of Chinese imports, mostly industrial goods, and says he will soon slap levies on an additional $200 billion. American consumers will feel the sting of that move as prices rise for Chinese-made refrigerators, air conditioners, furniture and clothing.

Trump says the tariffs are aimed at compelling China to abandon a host of unfair trade practices, including forcing U.S. companies to surrender their trade secrets in return for access to the Chinese market.

The Chinese government has retaliated with equivalent tariffs, targeting American agricultural products in politically important states ahead of the November congressional elections as well as American multinationals with factories in China.

On Thursday, the largest U.S. business groups in China pleaded with Trump to cease fire. Nearly two-thirds of more than 430 U.S. companies in China say the duties Trump imposed this summer have damaged their businesses, according to a survey by the American Chamber of Commerce in Beijing and Shanghai.

Nearly half of the respondents — in retail, food and manufacturing — reported that their production costs have climbed, while 42 percent said sales were down. Just 6 percent, meanwhile, said they would consider moving factories to U.S. soil, an administration goal.

“The U.S. administration runs the risk of a downward spiral of attack and counter-attack, benefiting no one,” said William Zarit, the president of the American Chamber of Commerce in Beijing.

Most of the tariffs that have been imposed have hit U.S. companies, not the Chinese, according to economist Mary Lovely of Syracuse University. She found, for example, that 87 percent of the computer and electronics parts subject to Trump's levies were produced by American companies.

Trade-war uncertainty has contributed to a cloud over Chinese investing. But this year's losses in the casino-like Chinese stock market also are nothing new — the market fell by almost half over a six-month period that ended in early 2016.

Apart from trade worries, there are a number of domestic considerations that have hurt Chinese stocks.

China's market is closely tied to the amount of money available for investing. This year, Chinese officials have tightened credit in a bid to wean the economy from its dependence upon debt-fueled growth. That's meant allowing more Chinese companies to default on their corporate debt, a change from previous years when state-owned banks would have kept them afloat.

The collapse of several peer-to-peer online lending networks also spooked Chinese investors.

The market has been hurt by concerns about Chinese companies' use of their stock as collateral for loans, which leaves share prices vulnerable if they get into financial trouble and are forced to sell. Chinese financial institutions had nearly $220 billion in such loans at the end of July, down about 8 percent from the recent peak in January, according to Bloomberg.

“China's markets have dropped by close to 25 percent,” Trump said at the White House last week. “Their markets have gone down. I don't like to see that. But I can tell you that the United States has picked up about $10 trillion in worth. And China would like to be in our position. They would like to be in our position.”

But the president's repeated crowing about China's financial woes is contributing to a nationalist backlash that may prolong the dispute, with the Chinese concluding that Trump is seeking more than just a level playing field for trade.

“The way we're going about it makes it harder for Chinese leaders to make concessions,” said David Loevinger, a former financial officer at the U.S. Embassy in Beijing. “The U.S. has a one-pronged strategy — keep raising the pain threshold until the other side cries uncle.”

Some of the president's top advisers see the financial market slump as a reflection of broader economic problems in China. “What are these stock markets telling you?” Lawrence Kudlow, director of the National Economic Council, said on CNBC last week. “China is moving lower in their economy. The U.S. is moving higher. We're the hottest place in the world.”

It is true that the U.S. economy is hitting on all cylinders. The 3.9 percent unemployment rate is approaching half-century lows, while the expansion that began in June 2009 shows no sign of losing steam. Optimism among small-business owners recently hit a 45-year record.

“The Economy is soooo good, perhaps the best in our country's history (remember, it's the economy stupid!),” Trump boasted earlier this week on Twitter (https://twitter.com/realDonaldTrump/status/1039150829754888193).

China's gradual slowing comes as the government is attempting to engineer a shift from growth based on heavy investment in infrastructure and exports to an economy powered by domestic consumption, according to William Overholt, a senior fellow at Harvard University's Asia Center.

Uncertainty arising from Trump trade policies will lead to a global slowdown in growth next year, according to BNP Paribas. The bank's latest forecast, released this week, calls for China's economy to grow at an annual rate of 6.1 percent next year versus 1.8 percent for the United States.

Many analysts point to drops in retail sales and investments as an indication that China's economy is downshifting. But Nicholas Lardy, a China expert at the Peterson Institute for International Economics, said he doubts the economy is genuinely slowing. The Chinese government is changing the way it collects and reports key economic data, including retail sales and investments, making it difficult to draw conclusions.

But China imported almost 19 percent more goods in August than it did in the same month last year.

“The underlying demand in the economy is fairly strong,” Lardy said.

The administration’s confidence that China is being hurt also overstates the country’s dependence upon trade, he said.

Since the 2008 financial crisis, China has reduced its dependence upon trade by one-third, according to Lardy.

__________________________________________________________________________

• Danielle Paquette in Beijing contributed to this report.

• David J. Lynch (https://www.washingtonpost.com/people/david-j-lynch) joined The Washington Post in November 2017 from the Financial Times, where he covered white-collar crime. He was previously the cybersecurity editor at Politico and a senior writer with Bloomberg News, focusing on the intersection of politics and economics. Earlier, he followed the global economy for USA Today, where he was the founding bureau chief in both London and Beijing. He covered the wars in Kosovo and Iraq, the latter as an embedded reporter with the U.S. Marines, and was the paper's first recipient of a Nieman fellowship at Harvard University. He has reported from more than 60 countries.

__________________________________________________________________________

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https://www.washingtonpost.com/business/economy/why-china-could-withstand-the-trade-war-far-longer-than-trump-thinks/2018/09/13/a0d9fca2-b77b-11e8-a7b5-adaaa5b2a57f_story.html (https://www.washingtonpost.com/business/economy/why-china-could-withstand-the-trade-war-far-longer-than-trump-thinks/2018/09/13/a0d9fca2-b77b-11e8-a7b5-adaaa5b2a57f_story.html)

from The Washington Post…

Trump's nasty fight with China's middle class could extend the trade war

Growing anger at what is seen as Trump’s bullying could make compromise over trade harder.

By DANIELLE PAWUETTE | 6:18AM EDT — Monday, September 17, 2018

(https://www.washingtonpost.com/rf/image_1111w/2010-2019/WashingtonPost/2018/09/17/Foreign/Images/China_Propaganda_Czar_49212.jpg-215b5.jpg) (https://www.washingtonpost.com/rw/2010-2019/WashingtonPost/2018/09/17/Foreign/Images/China_Propaganda_Czar_49212.jpg-215b5.jpg)
A man looks at his smartphone as he stands near video display screens showing an image of Chinese President Xi Jinping along a street in Beijing.
— Photograph: Mark Schiefelbein/Associated Press.

BEIJING — A dock worker from the eastern port city of Ningbo said he wants China to stand unflinchingly against President Trump's demands.

A salesman in Beijing hopes his country will keep punching back in the commercial ring — even if it hurts his wallet.

And a coffee shop owner in the Chinese capital said Trump's tariffs have inspired her to retaliate at the store: She's swapping U.S. products for Chinese brands.

As the trade war between the world's two largest economies unfolds on the international stage, analysts say Trump's brash approach to try to win concessions from Beijing has provoked a public fury that could ultimately thwart his efforts.

Chinese President Xi Jinping's iron grip on power depends on healthy support from the nation's exploding middle class, and now that middle class, angered with Trump's escalating threats, expects China's leader to respond with strength. This could make finding a compromise to end the escalation even more difficult.

The American president tossed more fuel on this fire on Monday when he said that he intends to trigger levies on additional Chinese imports, seemingly voiding an invitation sent days earlier from Treasury Secretary Steven Mnuchin to rekindle negotiations.

Hours earlier Monday, Trump tweeted (https://twitter.com/realDonaldTrump/status/1041630722413527040): “If countries will not make fair deals with us, they will be ‘Tariffed!’” he said on Twitter.

The tough tone effectively ties Xi's hands, said James Zimmerman, former chairman of the American Chamber of Commerce in China.

“Getting the Chinese to the bargaining table should be all about face-saving — not a chest-thumping exercise,” Zimmerman said. “Xi has no choice but to stand firm and stand tall.”

Until the past few days, when Trump stepped up his tweeting about the negotiations with Beijing, public opinion in China appeared in recent months to be leaning in Trump's favor.

Members of the middle class, a force of as many as 400 million people (http://www.viet-studies.net/kinhte/ChineseMiddleClassTradeWar_FA.pdf) in both blue-collar jobs and professional roles, per government estimates,had been posting criticism of Xi's leadership online, particularly when it came to his dealings with the United States, said Cheng Li, a contemporary China scholar at the Brookings Institution in Washington.

The unease came as the country's stock markets plunged nearly 24 percent (https://www.washingtonpost.com/business/economy/why-china-could-withstand-the-trade-war-far-longer-than-trump-thinks/2018/09/13/a0d9fca2-b77b-11e8-a7b5-adaaa5b2a57f_story.html) from January peaks, and the Chinese currency dropped almost 10 percent (https://asia.nikkei.com/Business/Markets/Currencies/China-moves-to-curb-yuan-s-fall-but-hesitantly) against the dollar this year amid the trade tensions. Rising rent (https://www.reuters.com/article/us-china-economy-houseprices-rent-analys/how-chinas-plan-to-develop-rental-housing-backfired-idUSKCN1LU0JA), debt (https://www.bloomberg.com/news/articles/2018-07-19/why-china-s-local-bonds-are-defaulting-at-record-pace-quicktake) and grocery store prices (https://www.nytimes.com/2018/09/10/business/china-prices-inflation.html) also played into citizens' concerns.

Officials have responded to the growing anxiety by blaming Trump and framing Beijing as the adult trying to cool a geopolitical tantrum. China's retaliatory tariffs (https://www.washingtonpost.com/world/asia_pacific/china-retaliates-with-tariffs-on-16-billion-worth-of-us-imports-after-trumps-latest-trade-hit/2018/08/08/167684ce-9b09-11e8-8d5e-c6c594024954_story.html) on $50 billion in U.S. goods this summer, they said, were measured responses forced by Trump's swings.

The message appears to have stuck, Li said.

“The middle class has been critical of the Chinese government, but now that anger is shifting to the United States,” he said. “Chinese media has portrayed Trump as greedy and crazy.”

Trump has threatened to slap duties on practically everything the United States buys from China, a $505 billion order. He wants China to buy more U.S. goods, correcting what he considers an unfair relationship, and to stop stealing intellectual property from American companies.

But to some Chinese, the U.S. president just looks like a bully.

Chen Weiyong, 64, a retired dock worker from coastal Zhejiang province, said he thinks Trump is taunting China by moving the goal posts.

“He says one thing one day and does another the next,” he said.

Chen, who spent decades unloading cargo ships at one of the country's major ports, said he has seen the nation's commercial power up close. That muscle, he said, could survive without the United States. “The chain will not break,” he said, giving Xi's defiance a thumbs up.

Li Yunfei, a 35-year-old salesman in Beijing, said he expects the cost of food to soar as the trade war heats up. He is especially worried about soybean oil, which he uses to cook just about everything.

Still, he would take the financial hit.for his country “The government must fight back,” he said.

Rill Liu, 40, who runs a cafe in Dongsi, a Beijing neighborhood known for a network of traditional alleyways called hutongs, said Xi's actions do not concern her, “an ordinary person.”

China, however, is full of ordinary people who hear the United States' insults.

After Trump started publicly slamming her country, she said she protested with her shopping cart. “Before we used Apple, but now we've changed to Huawei,” she said of the Chinese phone maker. “It makes you emotional like that.”

__________________________________________________________________________

• Yang Liu contributed to this report.

• Danielle Paquette (https://www.washingtonpost.com/people/danielle-paquette) is a reporter focusing on national labor issues. Before joining The Washington Post in 2014, she covered crime for the Tampa Bay Times in St. Petersburg, Florida. Her byline has appeared in the Los Angeles Times, Cosmopolitan and on CNN.com (https://edition.cnn.com). She has also reported stories from Kigali, Rwanda, and Davos, Switzerland.

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• Trump to impose tariffs on $200 billion in Chinese goods in trade escalation (https://www.washingtonpost.com/business/2018/09/15/trump-plans-tariffs-billion-chinese-goods-dramatic-escalation-trade-battle)

• U.S. companies in China are suffering in trade war, survey says (http://www.washingtonpost.com/world/us-companies-in-china-are-suffering-in-trade-war-survey-says/2018/09/13/ee83c75e-b70c-11e8-b79f-f6e31e555258_story.html)

• Trump threatens tariffs on $267 billion in Chinese goods (https://www.washingtonpost.com/business/2018/09/07/trump-threatens-tariffs-billion-chinese-goods-expanding-trade-war-all-chinese-imports-entering-us)

• Businesses beg for tariff relief as trade war with China rolls on (https://www.washingtonpost.com/business/2018/08/20/businesses-beg-tariff-relief-trade-war-with-china-rolls)

https://www.washingtonpost.com/world/asia_pacific/trump-started-a-nasty-fight-with-chinas-middle-class-that-could-extend-the-trade-war/2018/09/17/887bb05e-ba43-11e8-b1c5-7a2126bc722c_story.html (https://www.washingtonpost.com/world/asia_pacific/trump-started-a-nasty-fight-with-chinas-middle-class-that-could-extend-the-trade-war/2018/09/17/887bb05e-ba43-11e8-b1c5-7a2126bc722c_story.html)

from The Washington Post…

Trump administration slaps tariffs on roughly $200 billion more
in Chinese goods — a move almost certain to trigger retaliation

The move puts new import taxes on about half of all the goods
Americans buy from China, including common household items.

By DAVID J. LYNCH and DAMIAN PALETTA | 2:45PM EDT — Monday, September 17, 2018

(https://www.washingtonpost.com/rf/image_1111w/2010-2019/WashingtonPost/2018/09/06/National-Economy/Images/2018-09-06T052224Z_87415183_RC14D68959D0_RTRMADP_3_USA-TRADE-CHINA.jpg) (https://www.washingtonpost.com/rw/2010-2019/WashingtonPost/2018/09/06/National-Economy/Images/2018-09-06T052224Z_87415183_RC14D68959D0_RTRMADP_3_USA-TRADE-CHINA.jpg)
A U.S. flag is seen during a welcoming ceremony in Beijing, China, on November 9, 2017. — Photograph: Thomas Peter/Reuters.

PRESIDENT TRUMP threw his biggest punch yet at China, imposing tariffs on an additional $200 billion worth of Chinese imports and gambling that American consumers (https://www.washingtonpost.com/business/economy/trump-is-right-about-trade-with-china-but-his-answer-is-all-wrong/2018/07/20/24f4755e-86c0-11e8-9e80-403a221946a7_story.html) are willing to pay more for popular products to wring trade concessions from Beijing.

With Monday's announcement, roughly half of the $505 billion in goods that Americans buy annually from Chinese firms will face new import levies.

Unlike the $50 billion in Chinese products that Trump hit in the first tariff wave, in July — which fell mainly on industrial goods — Monday's action will affect consumer products such as air conditioners, spark plugs, furniture and lamps.

Starting from September 24, American importers will pay an extra 10 percent tariff for the affected items, rising to 25 percent at the end of the year, according to senior administration officials, who briefed reporters on the condition of anonymity.

China has vowed to retaliate against the latest U.S. tariffs (https://www.washingtonpost.com/world/asia_pacific/china-retaliates-with-tariffs-on-16-billion-worth-of-us-imports-after-trumps-latest-trade-hit/2018/08/08/167684ce-9b09-11e8-8d5e-c6c594024954_story.html) with new import taxes on $60 billion in American products. If that happens, the president said he would immediately begin the process of approving tariffs on a further $267 billion in Chinese imports — effectively taxing everything Americans buy from China.

Trump acted — accusing China of posing “a grave threat to the long-term health and prosperity of the United States economy” — even as Chinese officials weighed an invitation to visit Washington for talks aimed at ending the months-old dispute.

“The Trump administration is yet again sending a perplexing mixed message by inviting Chinese officials for negotiations and then imposing additional tariffs in the run-up to the talks,” said Eswar Prasad, former head of the International Monetary Fund's China division. “It is difficult to see what the administration's vision of an end game might be other than total capitulation by China to all U.S. demands.”

Trump said the tariffs (https://www.washingtonpost.com/business/economy/president-trump-makes-good-on-his-threat-to-target-an-additional-200-billion-in-chinese-imports-with-tariffs-ramping-up-the-trade-war/2018/07/10/aee91cbc-8489-11e8-8f6c-46cb43e3f306_story.html) are designed to force China to change a range of unfair trade practices, including compelling American companies to surrender their technology in return for access to the Chinese market.

“For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies,” the president said. “We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices.”

Trump has described the tariffs as leverage in negotiating Chinese policy changes with Chinese President Xi Jinping. But several preliminary rounds of talks have yielded no agreement (https://www.washingtonpost.com/business/economy/trump-cant-figure-out-what-he-wants-from-china/2018/06/27/691af880-7a4e-11e8-80be-6d32e182a3bc_story.html) and Trump has said he was in no hurry to settle the dispute.

“We stand ready to negotiate with China any time if they are willing to move towards serious talks to remedy trade problems,” White House National Economic Council Director Larry Kudlow said in New York on Monday.

He said China had to agree to some of the White House's demands for any progress to be made.

“He has not been satisfied with the talks with China on this,” Kudlow said of Trump.

In deciding to proceed with additional tariffs, the president ignored pleas from hundreds of U.S. companies (https://www.washingtonpost.com/business/2018/08/20/businesses-beg-tariff-relief-trade-war-with-china-rolls) that appeared at public hearings last month to oppose the new levies. Executives complained that the tariffs would make their products more expensive, costing them sales.

The U.S. Trade Representative's office received roughly 6,000 written comments when Trump first proposed the new tariffs, most opposing them.

Initial reaction from the business community on Monday was unfavorable.

“Let's face it, nobody on either side has any idea how long this tariff war will last or where it will end up,” said Rufus Yerxa, president of the National Foreign Trade Council. “Setting aside whether this would be a successful negotiating tactic by the president, which only time will tell, the rapid escalation of tariffs and increasing uncertainty will cause significant short-term harm to both businesses and consumers.”

Jim O'Sullivan, chief economist for High-Frequency Economics, said financial markets will probably adopt a “could have been worse” reaction to the latest tariffs.

At the White House, Trump wrongly said that “China is now paying us billions of dollars in tariffs” and he celebrated the Treasury Department collecting “tremendous amounts of money, which is great for our country.”

In fact, tariffs are taxes that are paid by Americans who import goods from abroad. Through the end of August, the administration had collected nearly $22 billion in revenue because of its new tariffs, according to the non-partisan Tax Foundation.

Officials agreed to exclude roughly 300 product categories from the final product list, including bluetooth electronics, car seats for children, and some chemicals. Apple won waivers for several of its popular consumer products including the Apple Watch.

The president has long been fiercely critical of China, accusing it during the 2016 campaign of “the rape” of the American economy and vowing to create a more balanced trade pattern. Yet despite months of tariff talk, the gap between what the United States buys from China and what it sells there continues to widen.

Through July, the United States ran a $233.5 billion trade deficit in goods trade with China, an 8 percent increase compared with the same period in 2017.

The tariff duel is causing companies that rely on Chinese factories to rethink their business relationships, said Craig Allen, president of the U.S.-China Business Council. “These supply chains are incredibly complex and the disruption will be inflationary,” he said. “There's no way around it.”

So far, however, the U.S. economy has shrugged off the president's trade war. Although individual companies have complained about their operations being disrupted by material shortages or cost increases, growth remains strong and unemployment is approaching a half-century low.

Excluding fuel, import prices rose just 1.3 percent over the past year, according to the Bureau of Labor Statistics.

But uncertainty over trade policy remains unusually high. The United States is trying to negotiate a new North American trade deal even as it threatens to impose national security tariffs on imported automobiles, especially those from Europe.

The president on Monday said he will soon reach new deals with U.S. trading partners that will reverse the offshoring trend of the past generation. “What's going to happen is businesses will start moving back into the United States, which to me is — that's the dream,” Trump said. “The businesses are going to pour back into the United States. That's jobs, that's a lot of other things; that's a lot of taxes coming to us. And product will start being made here again.”

Trump's showdown with China also could intensify. The president has threatened to expand his tariffs to cover all Chinese imports, an escalation that many economists say would be costly (https://www.washingtonpost.com/business/2018/07/19/trumps-next-tariffs-could-cost-us-race-self-driving-cars).

“Attempts to help those hurt by globalization via higher tariffs or other forms of protectionism, even if well meaning, will raise prices and hurt all consumers, especially poor and middle-class families,” said economist Satyam Panday of S & P Global Ratings. “Not to mention damage the competitiveness of companies that import raw materials and components from other countries and folks who work in export industries.”

China no longer can match U.S. tariffs on a dollar-for-dollar basis, since it imports only $135 billion of American products. But Chinese officials have other ways of making the United States hurt, including by harassing American multinationals with tax audits and customs inspections or mobilizing consumer boycotts against them.

Business groups are pinning their hopes for defusing the standoff on talk that Trump and Xi could meet this fall on the sidelines of an international gathering such as the Group of 20 summit in Buenos Aires in November.

A decision to back away from confrontation with China could only be made by one man. “China trade is now a presidential level, political issue. It was not under Obama. And it was not under Bush,” said Derek Scissors, a China expert at the American Enterprise Institute. “Now everything is subject to the president deciding.”

__________________________________________________________________________

• David J. Lynch (https://www.washingtonpost.com/people/david-j-lynch) joined The Washington Post in November 2017 from the Financial Times, where he covered white-collar crime. He was previously the cybersecurity editor at Politico and a senior writer with Bloomberg News, focusing on the intersection of politics and economics. Earlier, he followed the global economy for USA Today, where he was the founding bureau chief in both London and Beijing. He covered the wars in Kosovo and Iraq, the latter as an embedded reporter with the U.S. Marines, and was the paper's first recipient of a Nieman fellowship at Harvard University. He has reported from more than 60 countries.

• Damian Paletta (https://www.washingtonpost.com/people/damian-paletta) is White House economic policy reporter for The Washington Post. Before joining The Post, he covered the White House for The Wall Street Journal.

https://www.washingtonpost.com/business/economy/trump-administration-slaps-tariffs-on-roughly-200-billion-more-in-chinese-goods--a-move-almost-certain-to-trigger-retaliation/2018/09/17/15ded2f0-b215-11e8-a20b-5f4f84429666_story.html (https://www.washingtonpost.com/business/economy/trump-administration-slaps-tariffs-on-roughly-200-billion-more-in-chinese-goods--a-move-almost-certain-to-trigger-retaliation/2018/09/17/15ded2f0-b215-11e8-a20b-5f4f84429666_story.html)

from The Washington Post…

China says it will immediately retaliate when Trump tariffs take effect

Beijing has warned it will impose tariffs on $60 billion in American goods.

By DANIELLE PAQUETTE | 10:17AM EDT — Tuesday, September 18, 2018

(https://www.washingtonpost.com/rf/image_1111w/2010-2019/WashingtonPost/2018/09/18/Foreign/Images/2018-09-18T022955Z_1969228877_RC1AB8A33950_RTRMADP_3_USA-TRADE-CHINA.jpg) (https://www.washingtonpost.com/rw/2010-2019/WashingtonPost/2018/09/18/Foreign/Images/2018-09-18T022955Z_1969228877_RC1AB8A33950_RTRMADP_3_USA-TRADE-CHINA.jpg)
A container truck moves past containers at the Yangshan Deep Water Port in Shanghai, China, on April 24, 2018. — Photograph: Aly Song/Reuters.

BEIJING — Beijing struck back on Tuesday against President Trump's new tariffs on $200 billion in Chinese imports, vowing it would immediately retaliate when they take effect and threatening a protracted dispute that could raise the prices of household goods in both countries.

Chinese President Xi Jinping has refused to budge amid mounting threats from Trump, who vowed to place higher border taxes on practically everything the United States buys from China if Beijing unveils new duties, effective from Monday at noon.

“In order to safeguard our legitimate rights and interests and the global free trade order, China will have to take countermeasures,” the country's Ministry of Commerce said in a statement. “We deeply regret this.”

The Chinese government will impose tariffs of up to 10 percent on an additional $60 billion in American goods following Trump's escalation, slapping higher border taxes on nearly all U.S. exports to China.

Officials also signaled that they would add a complaint about the latest U.S. action to more than a dozen China has already lodged with the World Trade Organization.

Trump accused China in a pair (https://twitter.com/realDonaldTrump/status/1042033116695670786) of tweets (https://twitter.com/realDonaldTrump/status/1042034269374361600) on Tuesday of targeting American workers in the heartland, wrongly saying the country had “openly stated” it was aiming to sway U.S. elections. (Beijing's earlier round of tariffs, launched in July (https://www.washingtonpost.com/world/china-fires-back-at-us-tariffs-vows-to-defend-its-core-interests/2018/07/06/f42fc812-8091-11e8-a63f-7b5d2aba7ac5_story.html), hit U.S. soybeans and pork, among other goods.)

“China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me,” Trump wrote.

“There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!” he added.

Analysts said Xi's defiance reflects his desire to present China to the world as a superpower.

“China needs to show that it will stand up to Trump and the United States in order to demonstrate to the rest of the world that it is now America's rival,” said Shaun Rein, managing director at the China Market Research Group in Shanghai.

Trump's latest measures inject uncertainty into the status of the trade talks, Chinese officials said, suggesting the commercial battle between the world's two largest economies could drag on indefinitely.

Beijing said it hopes the American president will “correct” his actions before the Monday deadline, urging the White House to consider the far-reaching consequences. Economists say the cost of consumer products such as air conditioners, furniture, lamps and handbags will rise, since many American manufacturers assemble goods on Chinese soil.

But Trump has pledged to punch back if Beijing retaliates, this time on $267 billion in Chinese products.

China purchased roughly $130 billion in American goods last year — less than a third of what the United States ordered from Chinese enterprises. Now Beijing is poised to impose higher border taxes on a total of $110 billion in U.S. products.

China's Foreign Ministry said it will respond to Trump's latest round of tariffs with duties on more than 5,200 types of American imports, including industrial parts, chemicals and medical instruments.

Chen Dingding, founder of the think tank Intellisia in Guangzhou, said China will continue to welcome negotiations.

“We will fight and talk at the same time,” he said.

China's vice premier, Liu He, was expected to visit Washington next week to restart negotiations with Treasury Secretary Steven Mnuchin, but analysts say the $200 billion development likely knocked that meeting off the table.

Fang Xinghai, vice chairman of China's securities regulator, said at a forum in Tianjin on Tuesday that Trump's tactics have “poisoned” the deal-making atmosphere.

Trump's announcement landed in China on September 18, a day considered the start of Japanese aggression 87 years ago and an anniversary some Chinese see as an informal day of national humiliation.

Beijing has said it would also unleash “qualitative” measures against the United States, which some American firms have interpreted as heightened regulations and stalled visas (https://www.washingtonpost.com/world/asia_pacific/us-companies-in-china-think-the-government-is-already-messing-with-them/2018/07/04/565a333a-7ebf-11e8-b9f0-61b08cdd0ea1_story.html).

The threat of more tariffs on $60 billion in U.S. products — and Trump's pledge to target an additional $267 billion in Chinese goods if that retaliation materializes — have worried the American business community in China.

“Contrary to views in Washington, China can — and will — dig its heels in, and we are not optimistic about the prospect for a resolution in the short term,” William Zarit, chairman of the American U.S. Chamber of Commerce in China, said in a statement on Tuesday.

China has maintained that it is well positioned to withstand blows in a geopolitical tussle, even as the nation's growth is projected to slow this year.

The country's central bank, meanwhile, has allowed its currency to slide about 5 percent since January, giving Chinese exports an edge in overseas markets while making imports costlier. (On Tuesday, it cost 6.88 renminbi to buy a dollar.)

Analysts say the People's Bank of China probably will not greenlight much more tumbling, since a fading renminbi (RMB) could spook more assets out of the country.

“The weakening of the RMB could help offset the new tariffs,” said Larry Hu, chief China economist at Macquarie Commodities and Global Markets, a consultancy in Hong Kong. “However, it will also hurt China itself.”

Other signs of weakness in China's economy as the trade war escalates include cooling consumer spending (https://asia.nikkei.com/Economy/China-s-economy-leans-on-exports-as-consumer-spending-slows), slowing infrastructure investment (https://www.reuters.com/article/us-china-economy-activity/china-holds-fire-on-rates-posts-shockingly-weak-activity-growth-idUSKBN1JA06Y) and a relatively low but growing rate (https://www.reuters.com/article/china-economy-defaults/table-china-corporate-bond-defaults-at-64-billion-so-far-in-2018-idUSL3N1VI2YU) of corporate bond defaults.

The Shanghai Composite Index, meanwhile, has plummeted more than 20 percent since the year's start, with losses snowballing after Trump launched the trade war.

Some analysts have predicted that the business uncertainty will prompt layoffs in China, which has a tight labor market, with unemployment (https://tradingeconomics.com/china/unemployment-rate) at 3.8 percent.

But demand for Chinese products on American soil has jumped amid rising tensions: The latest census data (https://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf), released on Wednesday, showed the U.S. goods deficit with China this year has grown about 8 percent to $234 billion from the same time last year.

Deutsche Bank economists Zhiwei Zhang and Yi Xiong estimated in a September analysis that an escalated trade war would shave only a half percentage point off the country's growth. Goods to the United States, they noted, accounted last year for just 12 percent of China's total exports.

“The Chinese authorities likely feel no urgency to give in and agree with all the terms the U.S. side requested,” Zhiwei and Yi wrote.

Tim Stratford, former assistant U.S. trade representative and managing partner of the global law firm Covington's Beijing office, predicted at a World Economic Forum panel in Tianjin on Tuesday the fight would see no winner soon.

“They're concerned the U.S. motivation is wanting to keep China down,” Stratford said. “I expect therefore we're going to have a deadlock for quite some time.”

__________________________________________________________________________

• Luna Lin and Yang Liu contributed to this report.

• Danielle Paquette (https://www.washingtonpost.com/people/danielle-paquette) is a reporter focusing on national labor issues. Before joining The Washington Post in 2014, she covered crime for the Tampa Bay Times in St. Petersburg, Florida. Her byline has appeared in the Los Angeles Times, Cosmopolitan and on CNN.com (https://edition.cnn.com). She has also reported stories from Kigali, Rwanda, and Davos, Switzerland.

__________________________________________________________________________

Related to this topic:

• VIDEO: Trump praises his tarrifs' ‘tremendous impact on China’ (https://www.washingtonpost.com/video/politics/trump-praises-his-tariffs-tremendous-impact-on-china/2018/09/18/410a676a-bb65-11e8-adb8-01125416c102_video.html)

https://www.washingtonpost.com/world/china-could-soon-target-practically-all-us-imports-as-it-retaliates-in-trade-war/2018/09/18/7a12708a-bac9-11e8-adb8-01125416c102_story.html (https://www.washingtonpost.com/world/china-could-soon-target-practically-all-us-imports-as-it-retaliates-in-trade-war/2018/09/18/7a12708a-bac9-11e8-adb8-01125416c102_story.html)

from The Washington Post…

New U.S.-China tariffs raise fears of an economic Cold War

The trade dispute could be leading to a commercial divorce and the uncoupling of a 40-year relationship.

By DAVID J. LYNCH and DANIELLE PAQUETTE | 7:32PM EDT — Tuesday, September 18, 2018

(https://www.washingtonpost.com/rf/image_1111w/2010-2019/WashingtonPost/2018/09/13/Foreign/Images/China_US_Tariffs_17277.jpg-b5dc9.jpg) (https://www.washingtonpost.com/rw/2010-2019/WashingtonPost/2018/09/13/Foreign/Images/China_US_Tariffs_17277.jpg-b5dc9.jpg)
Delivery workers pull carts loaded with boxes of goods for their customers outside an office building in Beijing. By next week, the United States and China appear
likely to be on the brink of slapping tariffs on their entire goods trade, which exceeds $635 billion annually. — Photograph: Andy Wong/Associated Press.

CHINA said on Tuesday it would retaliate for President Trump's latest tariff salvo, risking further U.S. trade actions that could result in what some analysts are calling an economic Cold War.

By next week, the United States and China appear likely to be on the brink of slapping tariffs on their entire goods trade, which exceeds $635 billion annually.

Chinese officials in Beijing said they would meet the 10 percent tariffs (https://www.washingtonpost.com/business/2018/09/15/trump-plans-tariffs-billion-chinese-goods-dramatic-escalation-trade-battle) that Trump announced on Monday on nearly $200 billion in imports with similar measures on $60 billion in U.S. products (https://www.washingtonpost.com/world/china-could-soon-target-practically-all-us-imports-as-it-retaliates-in-trade-war/2018/09/18/7a12708a-bac9-11e8-adb8-01125416c102_story.html). If that occurs, Trump has said he will “immediately” begin the process of applying tariffs to all Chinese items entering the United States.

The showdown comes as Chinese officials were preparing to travel to Washington for new talks aimed at resolving the months-old trade dispute. Negotiations earlier this year failed to make much progress (https://www.washingtonpost.com/news/business/wp/2018/05/16/top-trump-trade-officials-still-at-odds-after-profane-shouting-match-in-beijing) and it remains unclear whether Chinese officials will resume bargaining in the wake of the president's latest escalation.

As hopes dim for an early end to the conflict, the likelihood grows that the two countries are moving toward some sort of commercial divorce. Some analysts anticipate an economic partition reminiscent of the globe-splitting divide between the United States and the Soviet Union following World War II.

“We're probably talking about a world with two centers: a China-centered economic domain … and another centered on the United States,” said Aaron Friedberg, a professor of politics and international affairs at Princeton University, who handled China policy as an aide to Vice President Richard B. Cheney in the George W. Bush administration. “It's heading toward a bifurcated global economy.”

Such a fundamental reshaping of the U.S.-China commercial relationship after nearly four decades of growing interdependence would ripple through the global economy, shaking financial markets, reordering business supply chains and perhaps even raising the danger of military conflict, analysts said.

The two countries' annual goods trade, which has almost doubled since 2006, is roughly equal to the output of Argentina, which is widely considered to have the world's 21st-largest economy.

For now, a genuine breakdown in the U.S.-China relationship, affecting roughly 40 percent of the global economy, remains a long-term prospect. The immediate prospect is for the trade dispute to percolate for the remainder of this year, gradually ratcheting up the economic pain in both countries.

Trump says the tariffs are needed to compel China to abandon a host of unfair trade practices, including making American companies surrender their trade secrets in return for access to the Chinese market and subsidizing state firms in advanced-technology industries.

“The purpose of the tariffs is to modify China's behavior,” Commerce Secretary Wilbur Ross said on CNBC. “The real purpose is not to end up with tariffs. The real purpose is to end up with a level playing field so that American firms can compete properly.”

The newest tariffs will hit consumer goods such as appliances and auto parts, but Ross insisted the impact would be so slight that “nobody's going to actually notice it at the end of the day.”

That's unlikely to be true in every case. The 25 percent tariffs that Trump imposed on imported washing machines in January quickly translated into sticker shock for shoppers. Over the past year, retail prices rose 13.6 percent, according to the Bureau of Labor Statistics.

In the short run, the president's newest tariffs will be weaker than his earlier trade actions, as a strong dollar allows Americans to overlook any modest price increase on Chinese goods.

The president announced on Monday that he will hit up to $200 billion in Chinese goods — itemized on a 194-page list — with a 10 percent tariff starting from September 24. That's a smaller tax than the 25 percent levy he applied to $50 billion of imports from China in July, as well as the foreign steel and aluminum shipments that he began taxing in March.

Changes in the value of the U.S. dollar and China's currency over the course of this year are certain to sap some of the new tariffs' power. Since early February, the dollar has gained more than 6 percent against the Chinese yuan, a move that could erode more than half of the new tariffs' impact.

“This shows you how complex it is to narrow the trade deficit,” said Torsten Slok, chief international economist for Deutsche Bank Securities. “Tariffs are a small part of the picture. There are many other moving parts and the rising dollar is offsetting some of the effects.”

The drop in China's currency likewise will exaggerate the effect of China's retaliatory tariffs, making goods imported from the United States even more expensive for Chinese customers.

“American exporters now face a double whammy in terms of their competitiveness in the Chinese markets due to China's retaliatory tariffs and the strengthening of the dollar,” said economist Eswar Prasad of Cornell University, who formerly was the head of the International Monetary Fund's China division.

Under Trump's plan, the tariff pain on the $200 billion batch of Chinese goods will grow on January 1, 2019, rising to 25 percent from the original 10 percent. If there remains little sign of diplomatic progress by that point, more companies may switch their orders from Chinese suppliers to factories in countries such as Vietnam or India, executives said.

“We have not yet seen any significant shift in the customer supply chains. However, if the situation continues for any amount of time, we do expect customers to diversify their supply chains and perhaps some of the trade patterns might change,” Rajesh Subramaniam, executive vice president of FedEx, told investors last week.

As the president pursues his uncompromising approach to China, business leaders are growing increasingly frustrated. The U.S. Chamber of Commerce, National Association of Manufacturers and the National Retail Federation were among those blasting the administration's use of tariffs as costly and counterproductive.

“We are disappointed that the administration seems to continue to misunderstand the complexities and reality of global trade,” said Ed Black, president of the Computer & Communications Industry Association. “There are many legitimate trade concerns U.S. companies have in the global marketplace, but tariffs are unwieldy and often counterproductive to address those problems.”

China's Foreign Ministry said it will respond to Trump's latest round of tariffs with duties on more than 5,200 types of American imports, including industrial parts, chemicals and medical instruments.

Trump has promised to respond to Chinese retaliation with further tariffs on the remainder of Chinese imports — which he has variously characterized as $267 billion or $257 billion worth of products. Goldman Sachs published a research note on Tuesday saying that announcement could come within “the next couple of weeks” with imposition sometime early next year.

“If he does that, we're just headed inevitably for an economic Cold War with China,” said economist Gary Hufbauer of the Peterson Institute for International Economics. “Down this path, we will see a limitation of all economic contact.”

The administration also has taken steps to discourage Chinese investment in the United States. Congress this year passed legislation, with the backing of the White House, to scrutinize more closely a wider array of potential Chinese acquisitions of American technology companies.

“People are very focused on tariffs. But that's just one element,” said Michael Hirson, director for Asia at the Eurasia Group. “The non-tariff measures are equally important and may be a longer lasting legacy.”

Some administration hard-liners would be content to see the trade and investment restrictions lead to a decoupling of the U.S. and Chinese economies, Hirson said.

That could be costly, according to Caroline Freund, director of macro trade and investment at the World Bank.

If 25 percent tariffs were applied to all U.S.-China trade, and investors withdrew, the U.S. economy would be 1.6 percent — or $320 billion — smaller than under normal trading circumstances while China would lose 3.5 percent of its gross domestic product, according to a presentation Freund gave on Monday at the Peterson Institute.

At the White House on Tuesday, Trump said that while he might make a deal with Chinese President Xi Jinping “at some point,” his focus for now remains on tariffs.

“We are always open to talking. But we have to do something,” the president said. “We have a tremendous trade imbalance with China, tremendous trade deficit. And the way I look at it: Last year, we lost over $500 billion to China. We can't do that. I don't want to do that. And that's been going on for many years. Other presidents should have taken care of this situation, and they didn't. But I'm going to.”

__________________________________________________________________________

• Danielle Paquette reported from Beijing. Luna Lin and Yang Liu in Beijing contributed to this report.

• David J. Lynch (https://www.washingtonpost.com/people/david-j-lynch) joined The Washington Post in November 2017 from the Financial Times, where he covered white-collar crime. He was previously the cybersecurity editor at Politico and a senior writer with Bloomberg News, focusing on the intersection of politics and economics. Earlier, he followed the global economy for USA Today, where he was the founding bureau chief in both London and Beijing. He covered the wars in Kosovo and Iraq, the latter as an embedded reporter with the U.S. Marines, and was the paper's first recipient of a Nieman fellowship at Harvard University. He has reported from more than 60 countries.

• Danielle Paquette (https://www.washingtonpost.com/people/danielle-paquette) is a reporter focusing on national labor issues. Before joining The Washington Post in 2014, she covered crime for the Tampa Bay Times in St. Petersburg, Florida. Her byline has appeared in the Los Angeles Times, Cosmopolitan and on CNN.com (https://edition.cnn.com). She has also reported stories from Kigali, Rwanda, and Davos, Switzerland.

https://www.washingtonpost.com/business/economy/new-round-of-us-china-tariffs-raise-fears-of-an-economic-cold-war/2018/09/18/749ec99a-bb74-11e8-bdc0-90f81cc58c5d_story.html (https://www.washingtonpost.com/business/economy/new-round-of-us-china-tariffs-raise-fears-of-an-economic-cold-war/2018/09/18/749ec99a-bb74-11e8-bdc0-90f81cc58c5d_story.html)

EXCELLENT NEWS: China tells Trump to “go fuck yourself!!”

from The Washington Post…

China cancels trade talks with U.S. as new Trump tariffs loom

Chinese officials, who reportedly were preparing to send a high-ranking official and a delegation
to Washington D.C., canceled the planned negotiations after President Trump announced he
would impose new levies on another $200 billion in Chinese imports, effective from Monday.

By DANIELLE PAQUETTE | 2:05AM EDT — Saturday, September 22, 2018

(https://www.washingtonpost.com/resizer/6YU-sappaUSBr7sKmsLTls0he6Y=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/2JWXBZF6C4I6RN6SA5Z2UHRT3I.jpg) (https://www.washingtonpost.com/resizer/6YU-sappaUSBr7sKmsLTls0he6Y=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/2JWXBZF6C4I6RN6SA5Z2UHRT3I.jpg)
Chinese President Xi Jinping, left, and President Donald J. Trump attend a welcome ceremony in Beijing on November 9, 2017.
— Photograph: Nicolas Asfouri/Agence France-Presse/Getty Images.

CHINA has scrapped trade talks with the United States days before President Trump is set to escalate the commercial battle with a new round of tariffs, according to a person familiar with the discussion.

Chinese officials canceled the planned negotiations after Trump announced he would impose new levies of up to 10 percent on another $200 billion in Chinese imports, effective from Monday. Beijing vowed to strike back (https://www.washingtonpost.com/world/china-could-soon-target-practically-all-us-imports-as-it-retaliates-in-trade-war/2018/09/18/7a12708a-bac9-11e8-adb8-01125416c102_story.html), slapping duties of up to 10 percent on an additional $60 billion in American products.

China's Ministry of Commerce did not immediately respond on Saturday.

Beijing had prepared to send Vice Premier Liu He, the country's top-ranking economic official, to Washington next week, along with a mid-level delegation to prepare for his visit, The Wall Street Journal reported (https://www.wsj.com/articles/china-cancels-trade-talks-with-u-s-amid-escalation-of-tariff-threats-1537581226).

Treasury Secretary Steven Mnuchin had been expected to oversee the talks, which were called in hopes of easing tensions between the world's two largest economies, U.S. officials have said.

The effort crumbled a week after Trump tweeted the White House felt “no pressure” to resolve the dispute with China. He has accused the country of stealing intellectual property from American businesses, among other trade infractions.

“We are under no pressure to make a deal with China, they are under pressure to make a deal with us,” he wrote (https://twitter.com/realDonaldTrump/status/1040242677877551104), adding: “If we meet, we meet?”

Analysts said the news reflects the breakdown in the international relationship.

“This is brinkmanship that benefits no one and a reflection that four decades of constructive U.S.-China relations are spiraling out of control,” said James Zimmerman, partner in the Beijing office of the international firm Perkins Coie LLP and former chairman of the American Chamber of Commerce in China.

U.S. industry groups in China urged Trump on Saturday to restart negotiations, asserting that fraying ties between the countries is bad for global business.

“We encourage both sides to resume a results-oriented dialogue in earnest,” said Jake Parker, vice president of China operations at the U.S.-China Business Council, which represents about 200 firms, including PepsiCo, Apple and General Motors.

Chinese President Xi Jinping has refused to bend to the White House's demands amid escalating threats from Trump, who pledged to place tariffs on virtually everything the United States buys from China if Beijing responds with the new duties.

Xi faces public pressure (https://www.washingtonpost.com/world/asia_pacific/trump-started-a-nasty-fight-with-chinas-middle-class-that-could-extend-the-trade-war/2018/09/17/887bb05e-ba43-11e8-b1c5-7a2126bc722c_story.html) to stand undaunted by Trump's financial swings at his country, analysts say, as he seeks to prove that China, too, is a superpower on the international stage.

Beijing's next round of tariffs, slated to take effect on Monday at noon, target more than 5,200 kinds of American imports, including industrial parts, chemicals and medical instruments.

“In order to safeguard our legitimate rights and interests and the global free trade order, China will have to take countermeasures,” the country's Ministry of Commerce said in a statement on Tuesday. “We deeply regret this.”

Trump's latest levies bring more uncertainty into the status of negotiations, Chinese officials said at the time, suggesting the economic conflict could drag on indefinitely.

By next week, the United States and China could be poised to impose tariffs on their entire exchange of goods, which surpasses $635 billion annually. An all-out trade war would trigger job losses in both countries, economists say, as well as a spike in the cost of household goods, including bedding, furniture, toys, razors and toaster ovens.

Trump's next opportunity to meet with Xi is in November at the Group of 20 summit in Argentina. Both leaders are expected to attend the multilateral conference.

__________________________________________________________________________

• Danielle Paquette (https://www.washingtonpost.com/people/danielle-paquette) is a reporter focusing on national labor issues. Before joining The Washington Post in 2014, she covered crime for the Tampa Bay Times in St. Petersburg, Florida. Her byline has appeared in the Los Angeles Times, Cosmopolitan and on CNN.com (https://edition.cnn.com). She has also reported stories from Kigali, Rwanda, and Davos, Switzerland.

https://www.washingtonpost.com/world/china-cancels-trade-talks-with-us-as-new-trump-tariffs-loom/2018/09/21/c36138ac-be16-11e8-97f6-0cbdd4d9270e_story.html (https://www.washingtonpost.com/world/china-cancels-trade-talks-with-us-as-new-trump-tariffs-loom/2018/09/21/c36138ac-be16-11e8-97f6-0cbdd4d9270e_story.html)

from the print edition of the Los Angeles Times…

The trade war and its costs

The longer the U.S.-China feud, the more unpredictable its outcome.

By ROBYN DIXON | Saturday, October 06, 2018

(http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-AP_18194230035338_2_1_3C4CNV2H.jpg) (http://origin.misc.pagesuite.com/3630c326-c935-42f5-b0da-daebc36b7646/images/IMG_LA-AP_18194230035338_2_1_3C4CNV2H.jpg)
Presidents Xi Jinping and Donald J. Trump at their summit in Beijing last November. The U.S.-China relationship since then has deteriorated quickly
and significantly. — Photograph: Kyodo.

BEIJING — President Trump and his supporters say he is winning his trade war with Beijing. Just look at the Chinese economy. The nation is dealing with a mountain of debt, and its growth and investment are slowing. But are Trump's trade policies responsible? And if Trump keeps on pushing, can he win? And if so, at what cost?

What is Trump's real objective?

No one is quite sure how far Trump plans to go in pressuring China with hefty trade tariffs. One analysis late last month by the Australia-based ANZ Bank predicted the warfare will last until 2020 because the two sides are so far apart. Washington accuses China of stealing American intellectual property and demands it open its economy up more to foreign competition. China contends that it is playing by World Trade Organization rules.

Some analysts think the real U.S. objective is a gradual “decoupling” of the world's two biggest economies, hitherto deeply entwined and interdependent. The U.S. government has blocked investments by several prominent Chinese companies — particularly in the telecommunications and high-tech fields — as threats to American security, and Chinese investment in the U.S. economy has plummeted. Meanwhile, some U.S. companies are planning to move operations out of China if the trade war drags on.

“There is no doubt that U.S.-China relations have flipped, from some kind of hedged, competitive engagement, to all-out competition on numerous fronts,” said analyst Richard McGregor of the Sydney-based Lowy Institute, who is currently in Washington. “It's not just about trade. It's geopolitical, military, diplomatic and economic, which is why there's no real endpoint in sight.

“Both sides want to untangle parts of their economic relationship on national security grounds, to ensure that they don't rely on each other in any pivotal areas. Business and trade used to provide some ballast to the geopolitical competition. Now, business is just another battleground.”

One interpretation popular in China is that the economic conflict is all about “containing” its rise as a high-tech global leader. The longer the warfare continues, the more uncertain its outcome, as both sides ratchet up pressure in ways designed to antagonize.

Is Trump's trade war putting the Chinese economy under so much pressure that it is slowing down?

China's economy is slowing and may slow down further, analysts warn. But it has nothing to do, they say, with Trump or the trade war. Instead, it is related to Chinese government policies since 2016 to bring the country's mountain of debt under control.

For years, Chinese growth was fueled by credit, some of it issued by murky institutions known as “shadow banks” because they operated outside the formal banking sector, making it difficult for the government to control. Between 2008 and 2017, China's credit grew faster than that of any other economy in history: by $29 trillion, compared with gross domestic product growth of $7 trillion.

It seemed the normal rules of boom and bust did not apply. But others say those days are ending.

Chinese GDP growth eased from 6.8% in the first quarter to 6.7% in the second, and it is expected to slow further in coming months. Spending on infrastructure was 6% in the first half, compared with 8.6% the previous year.

“China is no longer insulated from a slowdown in its economic growth by virtue of its extraordinary savings rate. Similarly it is not U.S. trade pressure that is bringing about this reckoning in its economic outlook. That's very important because it means that China must change its course regardless of whether what we do here in Washington is naughty or nice,” said China economic analyst Daniel Rosen, launching a report he co-wrote, “Credit and Credibility: Risks to China's Economic Resilience”, at the Center for Strategic and International Studies in Washington on Wednesday.

China has been moving to reduce bad loans by banks and off-budget loans by local governments, leading to an economic slowdown as credit tightens. Those moves are complicated by the trade war, which further threatens growth and puts the Chinese economy under additional pressure.

Do China's economic problems mean that Trump can win the trade war? And what are the dangers of pressing on?

Trump seems so confident of victory that there is little likelihood he will ease up the pressure. He told reporters on Monday that China badly wanted new trade talks, but that “it's too early to talk … because they're not ready.”

But the problem with trade wars that drag on is that they have a way of souring entire relationships. This week's near collision between the U.S. destroyer Decatur and a Chinese warship in the South China Sea showed the potential for a serious military clash. The vessels came within 50 yards of each other. The United States accused the Chinese ship of “unsafe and unprofessional” conduct, and China warned the U.S. to cease “provocative” action.

There are other frictions: American sanctions on a Chinese military agency and U.S. sales of military equipment to Taiwan have angered China. Trump has also accused China of interfering in the U.S. mid-term election. And after the recent arrest of a Chinese student suspected of spying, the Trump administration announced moves to limit visas to Chinese students in high-tech fields.

Vice President Mike Pence delivered a broad-ranging attack on China on Thursday, just days before Secretary of State Michael R. Pompeo is due for talks in China. The relationship has deteriorated so much, so fast in recent weeks that it is beginning to feel as if something has broken.

“Both China and the U.S. — and their leaders — currently seem committed to economic and security policies that will increase the tension between them, heighten the cost and scale of their de facto arms race, and at least marginally increase the risk of incidents, clashes, or more serious conflict,” military analyst Anthony Cordesman, former director of intelligence assessment in the Office of the Secretary of Defense, wrote in an analysis for the Center for Strategic and International Studies. He compared the U.S.-China competition to the arms race pursued by Britain and Germany before World War I, setting the stage for last century's two most devastating wars.

“Each is pursuing policies that are broadening the range of technologies and forces it can use against the other. Each is adjusting its strategic posture to put more emphasis on containment and conflict. Each is effectively attempting to ‘win’ the future at the other's expense,” he wrote.

As relations worsen, he continued, “it is becoming steadily harder to distinguish between efforts designed to limit or contain the other state and those that might lead to actual conflict.”

__________________________________________________________________________

• Robyn Dixon is a foreign correspondent for the Los Angeles Times. She has reported from China, sub-Saharan Africa, Russia, the Caucasus, Central Asia and other parts of the former Soviet Union, as well as Afghanistan and Iraq. Dixon spent 10 years in Moscow, traveling extensively to Ukraine, Georgia and Tajikistan and across Russia. She started as a cub reporter in her home city of Melbourne, Australia. After doing every conceivable job, including writing a daily TV column and covering national politics in Canberra, she went to Moscow for The Sydney Morning Herald and The Age, sister papers of the Fairfax group in Australia. In 1999, Dixon moved to the L.A. Times' Moscow bureau. She became the Johannesburg bureau chief in 2003.

http://enewspaper.latimes.com/infinity/article_share.aspx?guid=9d9f670d-b667-4bce-9b30-5f15f98369db (http://enewspaper.latimes.com/infinity/article_share.aspx?guid=9d9f670d-b667-4bce-9b30-5f15f98369db)

from The Washington Post…

As Trump escalates China trade dispute, economic ties
lose stabilizing force in matters of national security

Tensions could extend beyond the trade sphere and impact
other areas of contention between Washington and Beijing.

By PAUL SONNE | 2:59PM EDT — Sunday, May 19, 2019

(https://www.washingtonpost.com/resizer/iU8tRrNlRIw8NOCeigLU_-vrD4Q=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/67KQH7RQUYI6TAJ2BKZPC7RQLM.jpg) (https://www.washingtonpost.com/resizer/iU8tRrNlRIw8NOCeigLU_-vrD4Q=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/67KQH7RQUYI6TAJ2BKZPC7RQLM.jpg)
From left, U.S. Trade Representative Robert E. Lighthizer, U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He line up for a photo before the
opening session of trade negotiations in Beijing in February 2019. — Photograph: Mark Schiefelbein/European Pressphoto Agency/Agencia-EFE/Shutterstock.

THE United States for years relied on economic interdependence with China as a stabilizing force in relations with Beijing, with business between the two nations forming what former treasury secretary Hank Paulson used to call the “ballast” (http://fortune.com/2015/11/16/hank-paulson-us-china-green-project) in U.S.-China affairs.

But as President Trump escalates his trade dispute with Chinese President Xi Jinping, there is a realization that those days are gone. The result is a reduced incentive for stability and restraint in Washington when it comes to China, raising the possibility that tensions could extend beyond the trade sphere and impact other areas of contention, including Taiwan or the South China Sea.

“The way a lot of people have been talking about this is that you have lost, or you're losing, the ballast,” said Zack Cooper, a research fellow at the American Enterprise Institute and a former official in the George W. Bush administration. “The challenge now is that there is not much of a constituency that wants to protect the relationship amidst trade tensions, security concerns and human rights concerns.”

The U.S. military is expressing growing alarm (https://www.washingtonpost.com/national-security/2019/05/03/pentagon-cites-chinas-tremendous-progress-building-missiles-it-details-chinese-military-report) about China's defense buildup. Human rights advocates are crying foul over China's use of surveillance technology and internal re-education camps (https://www.washingtonpost.com/world/asia_pacific/china-defends-its-people-oriented-muslim-reeducation-program-as-job-training/2018/10/16/521964a8-d12b-11e8-a275-81c671a50422_story.html) for Muslims. And some American business executives, who once prized China and advocated for a more conciliatory stance toward Beijing, say they feel stung by what they see as unfair practices (https://www.wsj.com/articles/american-entrepreneurs-who-flocked-to-china-are-heading-home-disillusioned-1544197068), ranging from intellectual-property theft to rules that require partnerships with local Chinese entities.

Underpinning the growing strain is a sense among many Americans, harnessed by Trump during the 2016 presidential election, that China is not playing fair, and the time has come for Washington to shift the balance. While Trump has focused on trade, raising the stakes in recent days by applying 25 percent tariffs (https://www.washingtonpost.com/business/2019/05/13/trump-warns-china-not-retaliate-tariffs-insists-they-wont-hurt-us-consumers) to billions of dollars in Chinese goods, his administration's tougher line has extended to national security, too. The Pentagon's defense strategy calls for “great power competition” that aims to prevent China from achieving any substantive military advantage.

On Wednesday, the Trump administration added the Chinese telecom equipment maker Huawei to the U.S. Commerce Department's “entity list” (https://www.washingtonpost.com/world/national-security/trump-signs-order-to-protect-us-networks-from-foreign-espionage-a-move-that-appears-to-target-china/2019/05/15/d982ec50-7727-11e9-bd25-c989555e7766_story.html), making it difficult for the Chinese firm to do business with any American company. The Commerce Department said Huawei “is engaged in activities that are contrary to U.S. national security or foreign policy interest.” The dispute over Huawei demonstrated the confluence of Washington's economic and national security concerns.

“Putting these in two completely separate boxes — and saying we have to maintain close economic ties even as we compete in the national security realm — I don't think that's possible anymore,” said Bonnie S. Glaser, senior adviser for Asia at the Center for Strategic and International Studies. “I don't think that we have the strong support from the business community that used to exist for this relationship. To me, the playing field has changed so fundamentally.”

Still, the United States and China have developed a complex and robust economic relationship that dates to the normalization of diplomatic ties four decades ago. Today, the United States imports more than half a trillion dollars (https://www.census.gov/foreign-trade/balance/c5700.html) in Chinese goods per year, underscoring the extent to which both nations have hitched their economic futures to each other and melded their supply chains in the decades since the diplomatic breakthrough of 1979.

That reality raises a broader question about the Trump administration's approach to the world's second-biggest economy: How can the United States execute full-fledged “great power competition” with China, the likes of which Washington has not seen since the Cold War, when the nations remain so economically intertwined?

The conundrum highlights one of the key differences between the Cold War and the burgeoning competition between the United States and China. The United States and the Soviet Union had few economic and trade links in the decades after World War II. The U.S. policy of containment, as the late diplomat George F. Kennan put it (https://www.foreignaffairs.com/articles/russian-federation/2016-10-31/sources-soviet-conduct-excerpt), ultimately sought to cause the “breakup or the gradual mellowing of Soviet power.” Any such containment policy with China would carry great economic risks for the United States.

“While I understand the appeal of thrusting China into a role of Soviet Union 2.0, thrusting or forcing China into that role would lead us toward a very misguided goal of containment,” said Ali Wyne, a policy analyst at Rand Corporation. “China is far more powerful economically than the Soviet Union ever was.”

The Trump administration has sent mixed messages about what it is seeking to achieve long term with its trade and national security policies on China. Some officials, including Trump at times, suggest economic ties with China will continue apace and possibly even deepen, so long as Beijing agrees to new, fairer rules. Others emphasize American resolve to restrain China's unfair expansionism and end the economic linkages that have been fueling its rise.

“For some sides of the administration, the purpose of the tariffs was to build leverage so as to pressure China to open its markets to American businesses, thereby deepening the U.S.-China relationship,” said Ely Ratner, director of studies at the Center for a New American Security, who was previously an adviser to former vice president Joe Biden. “Others see economic interdependence as a huge vulnerability and a problem that needs to be solved. Is the goal a more reciprocal economic relationship or is it one that's less interdependent?”

Ratner said he didn't expect the worsening trade relations necessarily to result in more Chinese aggression in Taiwan or the South China Sea. He said the question is more on the U.S. side — whether the failure to reach a trade deal will prompt the Trump administration to unleash harsher measures against China that until now it has been holding back in the interest of striking a deal. He said those measures could extend to the national security space — for instance, with more a more muscular U.S. military presence in the South China Sea.

Paulson, the former Goldman Sachs executive and treasury secretary under George W. Bush, is no longer describing business as the “ballast” in U.S.-China relations. These days, he is warning of an “economic iron curtain” that could descend between the United States and China, noting the risks that entails for the American economy. One reason, he said in a speech (http://www.paulsoninstitute.org/news/2019/02/27/remarks-by-henry-m-paulson-jr-on-the-risks-of-an-economic-iron-curtain) in February, is that “national security concerns are now bleeding into virtually every aspect of our economic relationship.”

“The problem with applying a blunt hammer is that it can end up breaking everything,” Paulson said. “If you aim to hurt others but end up hurting yourself, you cannot always recover for a second chance.”

__________________________________________________________________________

• Paul Sonne (https://www.washingtonpost.com/people/paul-sonne) is a national security reporter for The Washington Post, where he covers the U.S. military and writes about defense policy at the Pentagon. He joined The Washington Post's National desk in 2018 after nearly nine years as a correspondent for The Wall Street Journal in Moscow, London and Washington, most recently covering national security from the D.C. bureau. As Moscow correspondent for The W.S. Journal, he covered Vladimir Putin, the 2014 Winter Olympics and the conflict in Ukraine. Before that, Sonne wrote political, general news and corporate stories out of The W.S. Journal's bureau in London. He started his career as an intern for The New York Times and the Associated Press. Sonne graduated from Columbia University with a degree in Russian literature and received his master's from the University of Oxford, where he studied Russian history and politics as a Marshall Scholar.

__________________________________________________________________________

Related to this topic:

• After tariff threats, many Chinese see Trump as a Marvel villain out to destroy them (https://www.washingtonpost.com/world/asia_pacific/after-latest-threats-chinese-see-trump-as-a-marvel-villain-out-to-destroy-it/2019/05/06/e523960a-6ff1-11e9-b5ca-3d72a9fa8ff1_story.html)

https://www.washingtonpost.com/world/national-security/as-trump-escalates-china-trade-dispute-economic-ties-lose-stabilizing-force-in-matters-of-national-security/2019/05/19/61d50abc-78da-11e9-ac17-284a66782c41_story.html (https://www.washingtonpost.com/world/national-security/as-trump-escalates-china-trade-dispute-economic-ties-lose-stabilizing-force-in-matters-of-national-security/2019/05/19/61d50abc-78da-11e9-ac17-284a66782c41_story.html)

from The Washington Post…

Trump's tariffs could fizzle fireworks, an American
tradition that's 95 percent made in China

If fireworks aren't removed from the list of tariffs, executives said,
their businesses will not be able to absorb the costs.

By TAYLOR TELFORD | 4:39PM EDT — Friday, May 24, 2019

(https://www.washingtonpost.com/resizer/vGtxx7FEKTc6DMP9PrM4SC47BQM=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/NKFHINXMFII6RC2HXUEXL7LBTE.jpg) (https://www.washingtonpost.com/resizer/vGtxx7FEKTc6DMP9PrM4SC47BQM=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/NKFHINXMFII6RC2HXUEXL7LBTE.jpg)
Of the 250 million pounds of fireworks that are imported by the United States each year, nearly 95 percent come from China,
according to the American Pyrotechnics Association. — Photograph: Calla Kessler/The Washington Post.

THE escalating trade clash between the United States and China has sent thousands of U.S. companies scrambling to determine whether they could source goods from other countries to escape higher tariffs. But when President Trump threatened to tag large penalties on $300 billion in Chinese imports (https://www.federalregister.gov/documents/2019/05/17/2019-10191/request-for-comments-concerning-proposed-modification-of-action-pursuant-to-section-301-chinas-acts) earlier this month, a sense of panic settled over the fireworks industry. It had nowhere else to go.

“It's virtually impossible for our product to be made anywhere else but in China,” said Bruce Zoldan, the chief executive of Phantom Fireworks in Youngstown, Ohio. “If these tariffs happen, it'll be the greatest threat to our industry.”

Zoldan met with White House officials on Wednesday to press his case, and he is working on a formal request to be delivered next month that he hopes would exempt the fireworks industry from the penalties. A final decision by the White House could come in late June, in the midst of the fireworks industry's busiest period.

After several months of negotiations between the White House and Beijing that left many believing a truce was within reach, a messy unraveling has left many business executives wondering how to avoid collateral damage.

Trump's showdown with Beijing has nothing to do with fireworks, but they have nonetheless been brought into the fray of the trade war and its headline issues: trade imbalances, government subsidies, intellectual property and global economic health. And while Trump has repeatedly suggested that companies can sidestep the tariffs by moving manufacturing to the United States, that is not an option for domestic fireworks sellers.

It would take years to replicate the manufacturing base in another country, and fireworks executives are extremely wary about major changes that could upend safety protocols.

And though shipments for this year's Fourth of July celebrations theoretically shouldn’t be affected by tariffs, vendors might raise prices anyway, to start making up for what they'll lose once the taxes kick in. And come next summer, after years of record-breaking sales, fireworks might suddenly be scarce.

Fireworks have typically been the province of small businesses in the United States, starting with Italian immigrants who brought the trade with them. But regulatory shifts in the 1970s and '80s all but smothered domestic manufacturing just as demand began to spike, and the businesses that had for generations passed down the craft of making pyrotechnics were forced to primarily become importers.

Today, of the 250 million pounds of fireworks that are imported to the United States each year, nearly 95 percent come from China, according to the American Pyrotechnics Association. Trump has not yet imposed tariffs on fireworks, but they were recently added to a list of products that would face a 25 percent penalty if China doesn't reach a broader deal with the White House soon. And if fireworks aren't removed from that list, executives said, their businesses will not be able to absorb the costs.

And if the industry can’t win an exemption before tariffs take effect this summer, the levy will cut deeply into the revenue streams of legions of small businesses, local economies, and the school groups and non-profits that rely on fireworks for fundraisers.

“The fireworks stands and tents you see in grocery store parking lots and on the roadsides serve as fundraising opportunities for organizations like school boosters, churches and veterans' organizations,” the National Fireworks Association said in a news release after the tariffs were announced. “With an unfair tax that serves to raise the cost of firework devices so significantly, we're hurting the very organizations that make up the fabric of America.”

In recent years, as states have loosened the regulatory tethers and Chinese manufacturers have raised safety and production benchmarks, fireworks sales have swelled. Americans spent nearly $900 million on sparklers, roman candles and other glowing bursts in 2018 — a more than 300 percent increase since 1998.

But ever since Trump slapped tariffs on $50 billion in select Chinese goods in July, the fireworks industry has waited warily for the second act. Luck held until early May, when the president jolted the trade talks by imposing 25 percent tariffs on $200 billion in Chinese goods. Beijing retaliated with tariffs of its own, and Trump hit back by proposing tariffs on all remaining Chinese imports.

Steven Houser, secretary of the National Fireworks Association, said he's heard from many of the group's 1,200 members, who are frantically trying to understand what's happening.

“They listen to the news and hear them say tariffs and they think the sky is falling,” said Houser, who also owns and operates a wholesale fireworks company called Red Rhino Fireworks in Missouri.

The industry — including groups such as the National Fireworks Association and the American Pyrotechnics Association — is now mobilizing and hoping to finesse an exemption for fireworks before the list of impacted imports is finalized and the tariffs take effect July 1.

Zoldan said that he tried to emphasize the economic impact of new tariffs when he met with top White House officials this week. Though “sympathetic” to his argument, he said, they didn't provide any answers. White House officials did not respond to a request for comment.

“I just explained the future potential crisis in our industry,” said Zoldan, 70, who has been in the business since he was a teen, selling firecrackers to friends out of the back of his mother's Impala. “We help Americans celebrate America's birthday, and the majority of these people aren't those with a high income. If this fourth tranche passes, those people will be hit hard.”

Zoldan, who has met with past White House occupants, said his customers include both devout supporters of the president and those with the opposite sentiment. He said fireworks cuts through politics and appeal to everyone, but that higher costs due to tariffs could change the industry and put many companies out of business.

The American Pyrotechnics Association on Thursday filed a request to testify during the U.S. trade representative's public hearing for the latest round of proposed tariffs on June 17.

“The proposed 25 percent tariff would cause severe economic harm to the industry and municipalities nationwide would no longer be able to afford an Independence Day fireworks display,” the APA wrote in the request.

Trump began imposing tariffs on Chinese imports last year, and the economic impact has been mixed. Some companies have worked to absorb the cost, limiting the effect on consumers. But others have passed it along to their customers, and Zoldan said fireworks margins are slim enough that he predicted a similar result.

Because of the way these import penalties work, a typical small business bringing in 10 shipping containers of consumer-grade fireworks would see its tax jump from the $10,000 to $12,000 range to as much as $70,000, said Stephen Pelkey, chief executive of Atlas PyroVision Entertainment in Jaffrey, New Hampshire.

Shipping across the ocean adds to the complexity because established companies often place orders several years in advance, meaning they could find themselves owing more than they anticipated or could afford. Even passing most of the tariff on to customers probably wouldn’t be enough to neutralize the damage, said Pelkey, who says he supplies holiday fireworks to more than 300 New England communities.

“The average small business is going to see anywhere from $100,000 to $250,000 in additional costs just to deal with current inventories,” Pelkey said. “We're not even sure how we’re going to deal with it. Everyone is going to feel this pain.”

“This will cripple those tiny companies,” said Julie Heckman, executive director of the American Pyrotechnics Association.

It's not just small businesses that stand to lose. Come summertime, many non-profits, schools and churches briefly transform into fireworks retailers to raise money for other ventures they might otherwise struggle to afford: dances, uniforms, events, trips. For most of these groups, the tariffs would eat into an essential revenue stream.

Fireworks shows can also generate interest and maximize receipts at events that might otherwise struggle to attract crowds — minor league baseball games, county fairs, small-town celebrations. Each spring, the Thunder Over Louisville fireworks show (https://thunderoverlouisville.org) at the Kentucky Derby Festival brings about half a million people to the city, according to Aimee Boyd, vice president of communications for the festival. The show costs more than $1 million to stage and pours more than $56 million into the local economy.

“Thunder is the largest event held in Louisville each year, not only because of its attendance, but also through its impact on the local economy. For every $1 spent, more than $22 is generated.” said Mike Berry, president and chief executive of the Kentucky Derby Festival. “Fans travel from all over to see Thunder. They're staying here for the weekend, eating at the local restaurants and buying souvenirs. It all helps support the Louisville economy.”

__________________________________________________________________________

• Taylor Telford (https://www.washingtonpost.com/people/taylor-telford) is a reporter covering national and breaking news at The Washington Post, where she has worked since June 2018. Previously, Telford was a features intern with The Post. She also worked in metro at the Tampa Bay Times and the Daily Hampshire Gazette.

__________________________________________________________________________

Related to this topic:

• How one Chinese businessman became the largest supplier of pyrotechnics in the United States (https://www.washingtonpost.com/graphics/2018/business/the-largest-supplier-of-american-fireworks-is-from-china)

https://www.washingtonpost.com/business/2019/05/24/trumps-tariffs-could-fizzle-fireworks-an-american-tradition-thats-percent-made-china (https://www.washingtonpost.com/business/2019/05/24/trumps-tariffs-could-fizzle-fireworks-an-american-tradition-thats-percent-made-china)

from The New York Times…

China Steps Up Trade War and Plans Blacklist of U.S. Firms

Without disclosing details, officials say they plan to retaliate against those who
blockade Chinese companies, in an apparent response to Huawei's problems.

By ALEXANDRA STEVENSON and PAUL MOZUR | Friday, May 31, 2019

(https://static01.nyt.com/images/2019/05/31/business/31chinalist1/merlin_155583480_d71ad27c-2bbb-4aac-985f-34a430192399-jumbo.jpg) (https://static01.nyt.com/images/2019/05/31/business/31chinalist1/merlin_155583480_d71ad27c-2bbb-4aac-985f-34a430192399-superJumbo.jpg)
A Huawei advertisement in Shanghai. The company was placed on an American blacklist two weeks ago. — Photograph: Lam Yik Fei/for The New York Times.

BEIJING — The Chinese government said on Friday that it was putting together an “unreliable entities list” of foreign companies and people, an apparent first step toward retaliating against the United States for denying vital American technology to Chinese companies.

China's Ministry of Commerce said the list would contain foreign companies, individuals and organizations that “do not follow market rules, violate the spirit of contracts, blockade and stop supplying Chinese companies for non-commercial reasons, and seriously damage the legitimate rights and interests of Chinese companies.”

It did not give any details of which companies or entities it would include on the list, or what would happen to them. The ministry said that specific measures would be announced in the “near future.”

Still, the language echoes that of the United States government, which in recent months has placed Chinese companies on what it calls an “entity list” of firms that need special permission to buy American components and technology. Two weeks ago, the Trump administration placed Huawei, the Chinese maker of telecommunications gear, on the entity list (https://www.nytimes.com/2019/05/16/technology/huawei-ban-president-trump.html), which could deny it access to microchips, software and other American-provided technology it needs to make and sell its products.

Shortly afterward, some American technology companies, including Google (https://www.nytimes.com/2019/05/20/technology/google-android-huawei.html), said they would stop supplying Huawei. The American government has since granted Huawei a 90-day waiver (https://www.nytimes.com/aponline/2019/05/21/world/asia/ap-us-china-trade-huawei-.html), giving Chinese and American officials time to reach an agreement. The Trump administration is also said to be considering putting Hikvision, a Chinese video surveillance company, on the list (https://www.nytimes.com/2019/05/21/us/politics/hikvision-trump.html).

If Friday's move is calculated to be a tit-for-tat strike back at American technology companies, Beijing will have ample targets.

Although major websites like Facebook, Twitter, and Google are already blocked in China, and rules strictly control other businesses like online payments and cloud services, most American technology firms have a big presence in China.

Both Google and Microsoft run sizable research and development operations in the country, and their Android and Windows operating systems are ubiquitous on Chinese smartphones and computers. Google and Facebook probably pull in billions of dollars in advertising revenue from Chinese companies.

The vague announcement also opens the door to retaliation of other kinds, perhaps against individuals or companies that depend heavily on the Chinese market for selling their products. If China decided to target individuals specifically, it could raise questions for foreigners doing business in China.

It could also give Beijing a way to punish American firms without forcing them to shut down operations in a way that would hurt China's economy or its long-term growth prospects.

(https://static01.nyt.com/images/2019/05/31/business/31techchina1/merlin_149672547_6774e40e-995f-4138-a69b-576076dc195c-master768.jpg) (https://static01.nyt.com/images/2019/05/31/business/31techchina1/merlin_149672547_6774e40e-995f-4138-a69b-576076dc195c-superJumbo.jpg)
Microsoft's research lab in Beijing is its largest outside the United States. — Photograph: Thomas Peter/Reuters.

Gao Feng, the Commerce Ministry's spokesman, said in the statement that the list would be aimed at those who block supplies and “take other discriminatory measures.”

An entity would be added to the list, he added, when its activity “not only damages the legitimate rights and interests of Chinese enterprises, and endangers China's national security and interests, but also threatens the global industrial chain and supply chain security.”

But China must be careful in how it retaliates, since many American companies are already reconsidering their dependence on the Chinese market and Chinese suppliers. If neither side backs off, the brinkmanship could permanently pull apart the supply chains that entwine the countries' economies.

Still, any move to shut down American technology companies' operations in China could hurt Chinese companies and the country's longer-term tech development. A shutdown of Microsoft's and Google's offices would mean that Chinese workers lose access to valuable training. Many of China's leading artificial intelligence entrepreneurs got their beginnings at Microsoft's A.I. lab.

Forcing American companies out of China's electronics supply chain could have a major impact on Chinese manufacturers. It would also most likely hasten strategies by American technology firms to diversify their supply chains away from China.

Yet if Beijing was willing to take that hit, many companies would struggle to immediately replicate production elsewhere. China's density of component makers and assembly factories is unmatched around the world.

“It's a really high-risk way to go about it,” said Andrew Polk, a founder of Trivium, a consulting firm in Beijing. “They are effectively forcing companies to choose, and companies will probably choose the U.S.”

__________________________________________________________________________

• Alexandra Stevenson reported from Beijing, and Paul Mozur from Shanghai. Elsie Chen and Ailin Tang contributed research to this story.

• Alexandra Stevenson (https://www.nytimes.com/by/alexandra-stevenson) is a business correspondent based in Hong Kong covering Chinese corporate giants, the changing landscape for multi-national companies and China's growing economic and financial influence in Asia. Before moving to Hong Kong, she covered the world of high finance and its darker corners, charting the influence of billionaire financiers in the markets and on the political stage for The New York Times in New York. She was a reporter for the Financial Times in New Delhi and London prior to joining The New York Times in 2013. Originally from Canada, she has also lived in Thailand, Singapore, and China, where she got her start as a reporter.

• Paul Mozur (https://www.nytimes.com/by/paul-mozur) is a technology reporter based in Shanghai. Along with writing about Asia's biggest tech companies, he covers cyber-security, emerging internet cultures, censorship and the intersection of geopolitics and technology in Asia. A Mandarin speaker, he was a reporter for The Wall Street Journal in China and Taiwan prior to joining The New York Times in 2014. He cut his teeth covering smuggling, wild boars and the courts for The Standard in Hong Kong, and got his start as an editorial assistant at The Far Eastern Economic Review.

• A version of this article appears in The New York Times on Saturday, June 1, 2019, on Page B4 of the New York print edition with the headline: “China, Stepping Up Trade War, Plans a Blacklist of U.S. Firms”.

__________________________________________________________________________

Related to this topic:

• As China Takes Aim, Silicon Valley Braces for Pain (https://www.nytimes.com/2019/05/31/technology/china-trade-unreliable-entities.html)

• Things Were Going Great for Wall Street. Then the Trade War Heated Up. (https://www.nytimes.com/2019/05/31/business/trump-tariffs-markets.html)

• Trade War Starts Changing Manufacturers in Hard-to-Reverse Ways (https://www.nytimes.com/2019/05/30/business/economy/trump-tariff-manufacturer.html)

• Huawei Revs Up Its U.S. Lawsuit, With the Media in Mind (https://www.nytimes.com/2019/05/29/business/huawei-us-lawsuit.html)

• The Trade War's Next Battle Could Be China's Access to Wall Street (https://www.nytimes.com/2019/05/28/business/alibaba-trade-war-wall-street.html)

• Huawei Ban Threatens Wireless Service in Rural Areas (https://www.nytimes.com/2019/05/25/technology/huawei-rural-wireless-service.html)

• Huawei Is a Target as Trump Moves to Ban Foreign Telecom Gear (https://www.nytimes.com/2019/05/15/business/huawei-ban-trump.html)

https://www.nytimes.com/2019/05/31/business/china-list-us-huawei-retaliate.html (https://www.nytimes.com/2019/05/31/business/china-list-us-huawei-retaliate.html)

from The Washington Post…

Trump team fears new face on China trade team signals tougher stance

The G-20 summit seemed to offer signs of progress on a U.S.-China trade deal. But those hopes are fading.

By ROBERT COSTA and DAVID J. LYNCH | 8:01PM EDT — Wednesday, July 10, 2019

(https://www.washingtonpost.com/rf/image_1099w/2010-2019/WashingtonPost/2019/07/10/National-Economy/Images/2019-07-04T043810Z_942336686_RC1DD7F16CC0_RTRMADP_5_CHINA-BANGLADESH.jpg) (https://www.washingtonpost.com/rw/2010-2019/WashingtonPost/2019/07/10/National-Economy/Images/2019-07-04T043810Z_942336686_RC1DD7F16CC0_RTRMADP_5_CHINA-BANGLADESH.jpg)
Chinese Commerce Minister Zhong Shan, regarded by some White House officials as a hard-liner, greets a Bangladeshi delegate in Beijing on July 4.
— Photograph: Pool/Reuters.

THE Trump administration is increasingly concerned about prospects for a trade deal with China (https://www.washingtonpost.com/business/economy/2019/06/07/80a06794-8649-11e9-a491-25df61c78dc4_story.html), amid an unexpected reshuffling of the Chinese negotiating team and a lack of progress on core issues since the Group of 20 summit in Japan, according to U.S. officials and senior Republicans briefed on the discussions.

Commerce Minister Zhong Shan, regarded by some White House officials as a hard-liner, has assumed new prominence in the talks, participating in a Tuesday tele-conference alongside Chinese Vice Premier Liu He, who has headed the Chinese trade team for more than a year.

Hopes for a deal also have been dented by China's failure to make large new purchases of U.S. farm products — despite President Trump's claim at the G-20 that Chinese President Xi Jinping had agreed to place such orders “almost immediately” — and the lack of any announced schedule for the next round of direct talks.

Zhong's sudden emergence comes two months after the U.S.-China trade negotiations collapsed with the Trump administration accusing Beijing of having reneged on a preliminary agreement.

“This has to be seen as a loss of confidence in Liu He and the desire of the leadership to bring in someone more politically savvy,” said Dennis Wilder, a former China analyst at the Central Intelligence Agency. “I am sure his instructions are to get tougher with the U.S.”

In an effort to revive the stalled trade talks, Trump agreed at the G-20 summit to postpone new tariffs (https://www.washingtonpost.com/business/economy/trumps-plan-for-more-china-tariffs-sparks-business-uproar/2019/06/16/5e7f71d8-9048-11e9-aadb-74e6b2b46f6a_story.html) on $300 billion in imports from China and to allow Huawei, a Chinese telecommunications company that U.S. officials call a national security threat, to continue buying American computer chips.

Trump told his trade team before the Tuesday call to secure the new Chinese orders for soybeans and wheat he believed he had been promised in Osaka, Japan. But Zhong and Liu offered no specific commitments, leaving negotiations at a virtual standstill, according to a White House official who spoke on the condition of anonymity because the official was not authorized to speak publicly.

The administration also has yet to reach agreement with the Chinese government on dates for chief trade negotiator Robert E. Lighthizer and Treasury Secretary Steven Mnuchin to visit Beijing for the next round of direct talks, though U.S. officials said they remain optimistic such a meeting will happen.

Craig Allen, president of the U.S.-China Business Council, said administration statements about how the president's shift on Huawei (https://www.washingtonpost.com/business/economy/china-hawks-fear-trump-is-ready-to-deal-on-huawei/2019/06/27/1093e49c-991a-11e9-916d-9c61607d8190_story.html) would be implemented have been “confusing to American companies” and reflected a broader lack of follow-through to the discussions in Osaka. “All of the things they spoke of — none of them have happened,” said Allen, who added that he worries about an erosion of trust between the United States and China.

U.S. officials and Trump allies have privately expressed concern this week that the Chinese are digging in and avoiding firm commitments.

“Republicans in general are frustrated that the Chinese have been so uncooperative at this stage, and it's now clear this is going to be a slow process,” said conservative economist Stephen Moore, an informal Trump adviser. “They keep backpedaling, and the hard-liners in China play right into the hands of hard-liners in the U.S.”

As the faint glow of the most recent Trump-Xi meeting (https://www.washingtonpost.com/politics/trumps-hard-line-approach-appears-to-soften-in-meetings-with-world-leaders/2019/07/01/93b470c2-9c25-11e9-b27f-ed2942f73d70_story.html) fades, negotiators are confronting the same to-do list that vexed them two months ago. Talks broke down in early May over U.S. demands that China commit to rewrite its laws to address complaints over its theft of intellectual property and forced technology transfer policies.

The two sides also deadlocked over Beijing's demand that Trump remove all of the tariffs he imposed on $250 billion in Chinese goods last year.

“We're stuck at the same point we were before,” said Derek Scissors, a China expert at the American Enterprise Institute and occasional administration adviser. “We're not getting anywhere.”

Zhong, 63, rose to a cabinet-level post in Beijing in 2017 after running two state-owned companies and serving as vice governor of Zhejiang province when Xi was the top official there.

“Zhong is a hard-liner's hard-liner,” said former White House chief strategist Stephen K. Bannon, who remains close to several Trump advisers.

Zhong, who joined the Communist Party at age 18, is the second veteran trade official to be added to the Chinese team in recent weeks. In April, Yu Jianhua, one of China's most experienced trade negotiators and its ambassador to the United Nations Office in Geneva, returned to Beijing to bolster Liu's delegation.

Some China specialists said the Trump administration is over-reacting to a minor personnel move.

James Green, a senior trade official until earlier this year at the U.S. Embassy in Beijing, said Liu is in no danger of being upstaged by the commerce minister. Liu and Xi were childhood friends.

“Some folks in the White House, who may not have had the same deep level of experience in dealing with a wide range of Chinese interlocutors, may read too much into who's on a call,” said Green, a senior adviser at McLarty Associates. “All Chinese negotiators are on an incredibly short leash.”

Clete Willems of the law firm Akin Gump, who worked on trade talks in the White House until April, said Zhong's inclusion on the Chinese delegation could reflect internal Chinese bureaucratic politics.

Just as the U.S. team includes Lighthizer, who is intent on striking an ironclad accord, and Mnuchin, who is more sensitive to the effects of trade tensions on financial markets, Beijing has its own hawks and doves.

“If Xi wants a deal, he needs to have both sides bought in,” said Willems.

Though China's Commerce Ministry is generally regarded as supportive of trade links, Zhong is likely to fight fiercely to protect the country's commercial interests, according to Scott Kennedy, a senior adviser on China at the Center for Strategic and International Studies.

Chinese officials may be delaying any trade concessions until they see how Trump's G-20 change on Huawei's purchases from U.S. companies is implemented and how the administration reacts to continuing protests in Hong Kong, according to one Trump supporter who has been briefed by administration officials and spoke on the condition of anonymity because the person was not authorized to speak publicly.

The president in May signed an executive order that bars Huawei from supplying equipment (https://www.washingtonpost.com/world/national-security/trump-signs-order-to-protect-us-networks-from-foreign-espionage-a-move-that-appears-to-target-china/2019/05/15/d982ec50-7727-11e9-bd25-c989555e7766_story.html) for next-generation 5G communications networks in the United States, while the Commerce Department prohibited American companies from selling parts to the Chinese company without a government license, effectively blacklisting one of China's most prominent global corporations.

China may be prepared to wait Trump out because its economy, which slowed sharply last year, has stabilized thanks to government stimulus measures. The president's on-again, off-again tariff threats also have eroded the Chinese government’s faith in his ability to stick with any deal (https://www.washingtonpost.com/politics/trumps-erratic-policy-moves-put-national-security-at-risk-experts-warn/2019/06/23/9cfae958-95d2-11e9-830a-21b9b36b64ad_story.html).

“The reality is that this likely means no deal for the foreseeable future,” said Kennedy. “China is no longer interested in reaching a big deal with Trump.”

__________________________________________________________________________

• Robert Costa (https://www.washingtonpost.com/people/robert-costa) is a national political reporter for The Washington Post. He covers the White House, Congress, and campaigns. He joined The Post in January 2014. He is also the moderator of PBS's “Washington Week” and a political analyst for NBC News and MSNBC.

• David J. Lynch (https://www.washingtonpost.com/people/david-j-lynch) joined The Washington Post in November 2017 from the Financial Times, where he covered white-collar crime. He was previously the cybersecurity editor at Politico and a senior writer with Bloomberg News, focusing on the intersection of politics and economics. Earlier, he followed the global economy for USA Today, where he was the founding bureau chief in both London and Beijing. He covered the wars in Kosovo and Iraq, the latter as an embedded reporter with the U.S. Marines, and was the paper's first recipient of a Nieman fellowship at Harvard University. He has reported from more than 60 countries.

https://www.washingtonpost.com/business/economy/trump-team-fears-new-face-on-china-trade-team-signals-tougher-stance/2019/07/10/5b6c24d2-a349-11e9-b732-41a79c2551bf_story.html (https://www.washingtonpost.com/business/economy/trump-team-fears-new-face-on-china-trade-team-signals-tougher-stance/2019/07/10/5b6c24d2-a349-11e9-b732-41a79c2551bf_story.html)

from The New York Times…

A Koch Executive's Harassment in China Adds to Fears Among Visitors

Amid worsening trade tensions, an American businessman was barred for days from leaving,
in an apparent message to President Trump. Others worry they may be next.

By PAUL MOZUR, ALEXANDRA STEVENSON and EDWARD WONG | Thursday, July 11, 2019

(https://static01.nyt.com/images/2019/07/09/business/00chinaexec-1/00chinaexec-1-jumbo.jpg) (https://static01.nyt.com/images/2019/07/09/business/00chinaexec-1/00chinaexec-1-superJumbo.jpg)
Business executives, other frequent visitors to China and Washington officials have expressed increasing alarm over instances in which the Chinese
authorities have detained or harassed Americans. — Photograph: Lam Yik Fei/for The New York Times.

A KOCH INDUSTRIES EXECUTIVE was told he could not leave China. An ex-diplomat who helped organize a technology forum in Beijing was hassled by authorities who wanted to question him. An industry group developed contingency plans, in case its offices were raided and computer servers were seized.

Business executives, Washington D.C. officials and other frequent visitors to China who were interviewed by The New York Times expressed increasing alarm about the Chinese authorities' harassment of Americans by holding them for questioning and preventing them from leaving the country.

They worry that trade tensions between Washington and Beijing could turn businesspeople and former officials into potential targets. Some companies are reviewing or beefing up their plans in case one of their employees faces problems, three people said. Many of the more than a dozen people interviewed by The N.Y. Times asked for anonymity because they feared reprisals from the Chinese authorities.

“In a very not-so-subtle manner, the Chinese government has upped the ante by detaining Americans at the borders and at their hotels, and with the obvious intent to send a message to the Trump administration that they can engage in hostage diplomacy if push comes to shove,” said James Zimmerman, a partner in the Beijing office of the law firm Perkins Coie, which works with American companies in China.

“If they go in that direction, this would not be received well by the American business community, which puts at risk billions of dollars of investment in China,” he said.

The problems escalated after Canadian officials arrested an executive of Huawei, the Chinese technology giant, at the behest of American officials. China then detained a Canadian businessman and a former diplomat (https://www.nytimes.com/2019/03/04/world/asia/china-canada-michael-kovrig-huawei.html).

The fear spreading through the American business community highlights how fraught ties between the world's two largest economies have become (https://www.nytimes.com/2019/05/10/business/china-trump-trade-tariffs-reaction.html). Though President Trump and China's president, Xi Jinping, have agreed to restart trade talks (https://www.nytimes.com/2019/06/29/world/asia/g20-trump-xi-trade-talks.html), which broke off in May (https://www.nytimes.com/2019/05/08/us/politics/china-trade-trump.html), the two sides remain far apart (https://www.nytimes.com/2019/06/30/us/politics/trump-china-trade.html) on the most contentious issues.

(https://static01.nyt.com/images/2019/07/09/business/00chinaexec-2/merlin_157181262_86a6b94b-7e19-45ba-9b2f-b1bb9e3d60df-jumbo.jpg) (https://static01.nyt.com/images/2019/07/09/business/00chinaexec-2/merlin_157181262_86a6b94b-7e19-45ba-9b2f-b1bb9e3d60df-superJumbo.jpg)
President Trump and his Chinese counterpart, Xi Jinping, right, have agreed to restart trade talks, yet the two sides remain far apart
on the most contentious issues. — Photograph: Erin Schaff/The New York Times.

Chinese officials see the American trade stance as a threat to their country's economic future. By imposing tariffs on Chinese imports, the Trump administration is encouraging companies to shift their supply chains away from China (https://www.nytimes.com/2019/06/29/business/us-china-trump-trade-truce.html). The administration has also threatened to withhold crucial American technology (https://www.nytimes.com/2019/06/21/us/politics/us-china-trade-blacklist.html) from some of China's most successful companies (https://www.nytimes.com/2019/05/16/technology/huawei-ban-president-trump.html). China has had to look further afield to find ways to punch back, in part because it imports less from the United States.

The extent of the harassment is unknown, but several recent episodes are likely to add to the concerns. Companies that publicly discuss such problems in China could face punishment from the politicized court system, calls for boycotts in the state-run news media or other punishments meted out behind closed doors. Officials at China's Foreign Ministry and the Ministry of Public Security, its main police agency, did not respond to requests for comment.

Many American business figures still come and go without major incident. Elon Musk, the chief executive of the electric-car maker Tesla, was offered permanent residency (http://www.gov.cn/guowuyuan/2019-01/10/content_5356561.htm) by Li Keqiang, China's premier, after he visited China in January to open a factory.

https://www.youtube.com/watch?v=Tg3XELk1i7w (https://www.youtube.com/watch?v=Tg3XELk1i7w)

Still, a number of recent run-ins with the authorities have prompted broader worries. In late June, one American industry group sent an email to its members detailing how it was trying to mitigate its own risks.

“Foreign staff in particular have reported a high level of anxiety about the current environment,” it said in the message, which was reviewed by The New York Times. It said it was “in the process of finalizing a detailed crisis plan to be used in the event that one of our offices is raided and/or one of our staff is detained.”

Those plans included a procedure if its servers were seized. It also said it had reviewed insurance policies to ensure that staff evacuations were covered, and it recommended that workers not travel to sensitive parts of China.

Washington officials continue to warn travelers (https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/china-travel-advisory.html) that the Chinese authorities have blocked a number of Americans from leaving China, a practice known as exit bans. Many of those targeted are business people. Often they are naturalized American citizens who were born in China.

In some cases, the Chinese authorities use such bans to exert pressure on Americans who are members of the families of local officials, like the wife and children of Liu Changming (https://www.nytimes.com/2018/11/25/us/politics/china-exit-ban.html), a former executive at state-owned bank accused of fraud. Huang Wan, the American daughter-in-law of Zhou Yongkang, a fallen former senior leader (https://www.nytimes.com/2015/06/12/world/asia/zhou-yongkang-former-security-chief-in-china-gets-life-sentence-for-corruption.html), has also publicly said she has been forbidden to leave (https://www.wsj.com/articles/an-american-married-into-a-political-family-in-china-and-now-she-cant-leave-11562059807).

In early June, a Chinese-American executive at Koch Industries, the conglomerate owned by the conservative billionaire brothers David and Charles Koch, was told he could not leave the immediate vicinity of his hotel in southern China, according to three people with knowledge of the matter. He was then interrogated for multiple days, with the discussion hitting on the trade war and souring relations between the United States and China.

While the authorities told the man that he would not be allowed to leave China, they did not take his passport. After the State Department intervened, tensions subsided and he was able to fly out of the country, the people added.

Given some of the discussion, two of the people with knowledge of the episode involving the Koch Industries executive said they believed it was an attempt to send a message to Mr. Trump.

The Kochs have traditionally been major financial backers of Republicans, including Mike Pompeo, the secretary of state and a former Republican congressman from Kansas. Koch Industries also has big investments in China, where it employs more than 23,000 people. Last year, a Koch subsidiary said it would put more than $1 billion into a chemical plant in Shanghai (https://www.invista.com/News-Articles/INVISTA-and-the-Shanghai-Chemical-Industry-Park).

But the Kochs, whose views are more libertarian than populist (https://www.nytimes.com/2015/07/31/us/koch-brothers-brave-spotlight-to-try-to-alter-their-image.html), have also criticized Mr. Trump's trade and immigration policies, prompting the president on Twitter to call them “a total joke in real Republican circles” (https://www.nytimes.com/2018/07/31/us/politics/trump-koch-brothers.html).

(https://static01.nyt.com/images/2019/07/09/business/00chinaexec-3/merlin_155583459_de402216-33cf-478e-9629-844dbbb38104-jumbo.jpg) (https://static01.nyt.com/images/2019/07/09/business/00chinaexec-3/merlin_155583459_de402216-33cf-478e-9629-844dbbb38104-superJumbo.jpg)
Chinese leaders see American restrictions on companies like Huawei, the telecommunications giant, as an effort to hold back their country’s progress.
— Photograph: Lam Yik Fei for The New York Times.

In late June, the authorities tried to interrogate a former Beijing-based American diplomat, according to three people with knowledge of the incident. The former diplomat had been attending an artificial intelligence forum in Beijing, which he helped organize, when a hotel employee called his room on the night of June 25, saying that government security officers in the lobby wanted to speak with him. Alarmed, the former diplomat emailed the other American conference attendees, then went down.

Two plainclothes officers asked him to go with them to answer questions. They asked him about his diplomatic status and whether he had diplomatic immunity, the people said. They demanded to see his passport, which he refused to show.

The former diplomat called American Embassy officials. After a few senior diplomats arrived, the Chinese officers left, the people said.

Other run-ins create an atmosphere of intimidation. Early this year, a technology industry executive who has traveled to and worked in China for more than a decade without major incident encountered authorities in a smaller city in eastern China, according to an account from the person, who asked not to be identified publicly for fear of retaliation.

While the executive was traveling between meetings, a black car appeared to be following, often taking no precautions to disguise its presence. When the executive arrived at the airport to leave, a group of about six men with earpieces and bulletproof vests emerged from the car. One carried a visible sidearm, and another filmed the executive. Two of the men then followed the executive through security to the airport gate before the executive flew out.

As the trade war has intensified, China has tried to use American businesses to send a message to the Trump administration. It summoned American executives in June to warn them that they would suffer (https://www.nytimes.com/2019/06/08/business/economy/china-huawei-trump.html) if they followed the administration's proposed ban on sales of American technology. Business people have taken new steps to reduce their profiles when traveling in China, including using burner phones and wiping laptops that may contain sensitive information, according to three people with knowledge of the matter.

Over all, that has led to growing nervousness among business people.

“A lot of Western businesses are not willing to speak up loudly because they think things could get worse,” said Peter Humphrey, a British private investigator who was imprisoned in China in 2013 while working for GlaxoSmithKline (https://www.nytimes.com/2015/06/10/business/international/british-investigator-peter-humphrey-is-released-from-chinese-prison.html). Now living in Britain, he advises companies on security and business issues in China and says his clients face growing retaliation.

“I believe we are seeing the worst environment since the Cultural Revolution,” he added, “in terms of the extent to which people are under surveillance and control, and the extent to which people are punished.”

__________________________________________________________________________

• Nicholas Confessore contributed reporting from New York.

• Paul Mozur (https://www.nytimes.com/by/paul-mozur) is a technology reporter based in Shanghai. Along with writing about Asia's biggest tech companies, he covers cybersecurity, emerging internet cultures, censorship and the intersection of geopolitics and technology in Asia. A Mandarin speaker, he was a reporter for The Wall Street Journal in China and Taiwan prior to joining The New York Times in 2014. He cut his teeth covering smuggling, wild boars and the courts for The Standard in Hong Kong, and got his start as an editorial assistant at The Far Eastern Economic Review.

• Alexandra Stevenson (https://www.nytimes.com/by/alexandra-stevenson) is a business correspondent based in Hong Kong covering Chinese corporate giants, the changing landscape for multinational companies and China’s growing economic and financial influence in Asia. Before moving to Hong Kong, she covered the world of high finance and its darker corners, charting the influence of billionaire financiers in the markets and on the political stage for The New York Times in New York. She was a reporter for the Financial Times in New Delhi and London prior to joining The N.Y. Times in 2013. Originally from Canada, she has also lived in Thailand, Singapore, and China, where she got her start as a reporter.

• Edward Wong (https://www.nytimes.com/by/edward-wong) is a diplomatic and international correspondent for The New York Times who reports on foreign policy from Washington. He has spent most of his career abroad, reporting for 13 years from China and Iraq for The N.Y. Times. As Beijing bureau chief, he ran The Times's largest overseas operation. He has filed dispatches from North Korea, Afghanistan, Tajikistan, Tibet, Nepal, Mongolia, Myanmar, Vietnam and Indonesia, among other places. He was on the final flight of the Concorde. Mr. Wong began reporting for The New York Times in 1999 and worked for four years on the metro, sports and business desks before going overseas. His first posting was to Iraq to cover the American invasion and civil war, from 2003 to 2007. He then reported from China for nine years. During that period, he also wrote stories on a trek on foot through the Wakhan Corridor of Afghanistan and a cruise to North Korea run by a state-owned enterprise based in Pyongyang. He was a Nieman Fellow at Harvard University from 2017 to 2018 and taught international reporting at Princeton University as a Ferris Professor of Journalism in 2017. He is an associate at Harvard Kennedy School’s Belfer Center for Science and International Affairs. Mr. Wong has appeared in documentary films by Laura Poitras and Vanessa Hope and produced his own short film on China. He has spoken on PBS NewsHour, NPR, BBC, CBC and ARTE. He has given talks at American universities on journalism, war and foreign policy. Mr. Wong received a Livingston Award for his coverage of the Iraq War and was on a team from The New York Times's Baghdad Bureau that was a finalist for the Pulitzer Prize in international reporting. He has two awards from the Society of Publishers in Asia for coverage of China. He was on The N.Y. Times team that received an award for best documentary project from Pictures of the Year International for a series on global climate change migrants. The project was also nominated for an Emmy Award. He has a prize from the Associated Press Sports Editors. Mr. Wong graduated with honors from the University of Virginia with a bachelor’s degree in English literature. He has dual master’s degrees in journalism and international studies from the University of California at Berkeley. He has studied Mandarin Chinese at the Beijing Language and Culture University, Taiwan University and Middlebury College. He was born in Washington, D.C., and grew up in Alexandria, Virginia.

https://www.nytimes.com/2019/07/11/business/american-businesses-china.html (https://www.nytimes.com/2019/07/11/business/american-businesses-china.html)

from The Washington Post…

A year into the trade war, China learns to ride out Trump's turbulence

China increasingly adopts a policy of strategic patience amid Trump's mixed signals.

By ANNA FIFIELD and DAVID J. LYNCH | 6:12PM EDT — Tuesday, August 27, 2019

(https://www.washingtonpost.com/rf/image_1066w/2010-2019/WashingtonPost/2019/08/27/Foreign/Images/AFP_1JQ0Q0-10394.jpg) (https://www.washingtonpost.com/rw/2010-2019/WashingtonPost/2019/08/27/Foreign/Images/AFP_1JQ0Q0-10394.jpg)
President Donald J. Trump and Chinese leader Xi Jinping during a bilateral meeting alongside Group of 20 talks in Osaka, Japan, in June.
— Photograph: Brendan Smialowski/Agence France-Presse/Getty Images.

BEIJING — President Trump may think he's keeping Chinese negotiators guessing with his whiplash-inducing remarks about the U.S.-China trade war.

But he's not fooling anyone here.

More than a year into the deepening commercial conflict, Chinese officials and analysts say they've got a handle on the tweeter-in-chief and are no longer fazed by his unpredictable initiatives.

“There is a lot of fatigue with President Trump's ‘art of the deal’,” said Wang Huiyao, president of the Center for China and Globalization and an adviser to China's cabinet.

“It's like a roller coaster. Buenos Aires, Osaka, Shanghai. He says one thing one day, then hits the world with a surprise the next day,” Wang said, referring to the sites of high-level, if ill-fated, negotiating sessions. “The more they deal with him, the more they figure him out.”

At the Group of Seven leaders' summit in Biarritz, France, this weekend, Trump brushed aside complaints that his habit of swerving between tough talk and a salesman's hype was damaging the global economy.

“Sorry! It's the way I negotiate,” he told reporters on Monday. “It's done very well for me over the years. It's doing very well for the country.”

It hasn't, however, produced a deal that would commit China to make the structural changes in its state-led economy that the administration has been seeking for more than a year.

Trump has announced tariffs that by December 15 will cover almost 97 percent of the Chinese merchandise that American companies import, according to economist Chad Bown of the Peterson Institute for International Economics.

By depressing demand for Chinese goods, U.S. tariffs have cost 3 million Chinese factory workers their jobs, according to Trump, and put pressure on Chinese President Xi Jinping to make a deal.

Trump's claim to have the upper hand at the negotiating table does not appear to have convinced the Chinese.

“They've decided Trump is a vacillating guy who can't figure out what he wants and gets spooked every time the stock market goes down or someone accuses him of not being tough,” said Arthur Kroeber, managing director of Gavekal Dragonomics, a consultancy in Beijing. “Although there are problems in China, they believe they have their economy under control, more so than Trump. They think he is more vulnerable to a slowdown and that they can afford to wait him out.”

By early May, the two sides had completed 90 percent of a deal involving major Chinese purchases of American farm, industrial and energy products as well as enhanced protections for foreign companies' technology and trade secrets, Treasury Secretary Steven Mnuchin said this summer.

But the trade war between the world's economic superpowers appears to have entered a dangerous new phase this month, with new rounds of retaliatory tariffs and a demand from Trump that U.S. companies stop doing business with China.

That has caused alarm across the globe, with fears that the war could help tip leading economies such as Japan and Germany into recession and create new head winds for the American economy. China's growth rate has, meanwhile, slowed to its lowest rate in three decades.

Chinese officials were initially mystified by Trump's unconventional style, and Xi is said to have faced criticism for underestimating Trump's resolve to tackle China's trading practices.

But emerging last week from this year’s Communist Party confab at the beach resort of Beidaihe, China’s leadership appears to have decided to hunker down.

“What's the point of calling Xi Jinping ‘a good friend’ and ‘a great leader’ but still increasing tariffs?” asked Yao Xinchao, a trade professor at the University of International Business and Economics. “He's a 70-ish-year-old man but speaks like a 7-year-old kid. We just can't listen to what he says now. I think Chinese leaders have realized this, too.”

Wang Yiwei, a professor of international relations at the Renmin University, shares a similarly disdainful view. “He is a real estate developer; he is a profiteer in the eyes of the Chinese people,” he said.

But the bottom line remains that China, which is experiencing a marked economic slowdown, wants a deal.

“The trade dispute between China and the U.S. should be resolved through dialogue and consultations,” Foreign Ministry spokesman Geng Shuang said on Tuesday, adding that the United States's “maximum-pressure approach hurts both sides and is not in the least constructive.”

“We hope that the U.S. can exercise restraint, return to reason, and demonstrate sincerity in order to facilitate further consultations on the basis of mutual respect and mutual benefits,” Geng said.

The question now is how the two sides find a way out of the standoff.

Wei Jianguo, a former vice minister of commerce, said Trump's efforts to browbeat countries such as Canada, Mexico and Japan into making a deal will not work with China.

“We have seen and understand Trump's style,” Wei said. “If he thinks he can secure an advantage for the U.S. and wear China down by exerting various kinds of extreme pressure, he's dreaming. It's impossible.”

The longer this pattern continues, the more China becomes concerned that any deal won't stick.

“Now China understands him thoroughly and knows that inconsistency is his nature,” said Wang, of Renmin University. “Even if an agreement is signed, he may not implement it well. But, without an agreement, he does this over and over again, which is also very annoying.”

Many analysts expect the dispute to continue to at least November, when the two leaders are likely to meet at a summit of Pacific Rim nations in Chile.

Xi, meanwhile, confronts domestic political challenges that likely reduce his willingness to make concessions under foreign pressure. The authorities in Beijing face a growing crisis in Hong Kong, where protests aimed at preserving the city's special status continue, and are preoccupied by preparations to celebrate in early October the politically charged 70th anniversary of the Communist Party's takeover of China.

__________________________________________________________________________

• Liu Yang, Wang Yuan and Lyric Li contributed to this report.

• Anna Fifield (https://www.washingtonpost.com/people/anna-fifield) is the Beijing bureau chief for The Washington Post, covering all aspects of greater China. She was The Post's bureau chief in Tokyo between 2014 and 2018, focusing on Japan and the Koreas but periodically reporting from other parts of the region. She particularly concentrated on North Korea, trying to shed light on the lives of ordinary people there and also on how the regime managed to stay in power. She is the author of “The Great Successor: The Divinely Perfect Destiny of Brilliant Comrade Kim Jong Un” (https://www.thegreatsuccessor.com). She started as a journalist in her home country of New Zealand where shed gained a BA from Victoria University of Wellington and a post-graduate diploma in journalism from the University of Canterbury, then worked for the Financial Times for 13 years. During her time there, she reported from almost 20 countries, from Iran and Libya to North Korea and Australia. During the 2013-2014 academic year, she was a Nieman journalism fellow at Harvard, studying how change happens in closed societies.

• David J. Lynch (https://www.washingtonpost.com/people/david-j-lynch) joined The Washington Post in November 2017 from the Financial Times, where he covered white-collar crime. He was previously the cybersecurity editor at Politico and a senior writer with Bloomberg News, focusing on the intersection of politics and economics. Earlier, he followed the global economy for USA Today, where he was the founding bureau chief in both London and Beijing. He covered the wars in Kosovo and Iraq, the latter as an embedded reporter with the U.S. Marines, and was the paper's first recipient of a Nieman fellowship at Harvard University. He has reported from more than 60 countries.

__________________________________________________________________________

Related to this topic:

• REUTERS VIDEO: Trump says China wants to restart trade talks (https://www.reuters.com/video/2019/08/26/trump-china-wants-to-make-a-trade-deal-v?videoId=592401498)

• VIDEO: Trump once said he never has second thoughts. Now he has some. (https://www.washingtonpost.com/video/politics/trump-once-said-he-never-has-second-thoughts-now-he-has-some/2019/08/26/a97c7bcc-3cf3-4683-89d4-daa356d7aa74_video.html)

• Trump insists trade talks have restarted with China, but details are elusive (https://www.washingtonpost.com/business/economy/trump-insists-tough-trade-tactics-working-but-time-is-running-out/2019/08/26/1fe28ec6-c7d7-11e9-a1fe-ca46e8d573c0_story.html)

• Mixed signals, reversals cloud second day of G-7 summit (https://www.washingtonpost.com/politics/trump-for-first-time-signals-regret-china-trade-war-has-escalated/2019/08/25/c942ea78-c67a-11e9-b5e4-54aa56d5b7ce_story.html)

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• ‘Protectionist bullying’: China denounces Trump administration's latest tariff hikes (https://www.washingtonpost.com/national/protectionist-bullying-china-denounces-trump-administrations-latest-tariff-hikes/2019/08/24/aa3011c0-c683-11e9-b72f-b31dfaa77212_story.html)

• Trump retaliates in trade war by demanding companies cut ties with China (https://www.washingtonpost.com/business/2019/08/23/china-hits-us-with-tariffs-billion-worth-goods-reinstates-auto-levies-state-media-report)

• With the U.S.-China trade war escalating, Trump arrives at G-7 with a list of grievances (https://www.washingtonpost.com/politics/with-the-global-economy-slowing-and-the-us-china-trade-war-escalating-trump-arrives-at-g-7-with-a-list-grievances/2019/08/23/54324914-c51b-11e9-850e-c0eef81a5224_story.html)

https://www.washingtonpost.com/world/asia_pacific/a-year-into-the-trade-war-china-learns-to-ride-out-trumps-turbulence/2019/08/27/458be5a8-c84c-11e9-9615-8f1a32962e04_story.html (https://www.washingtonpost.com/world/asia_pacific/a-year-into-the-trade-war-china-learns-to-ride-out-trumps-turbulence/2019/08/27/458be5a8-c84c-11e9-9615-8f1a32962e04_story.html)

from The New York Times…

U.S.-China Trade War Hits a New Phase,
and a Boot Maker Trembles

A new wave of tariffs is about to hit companies, workers and consumers
on both sides of the Pacific. But Beijing thinks it can endure.

By RAYMOND ZHONG and KEITH BRADSHER | 12:14AM EDT — Sunday, September 01, 2019

(https://static01.nyt.com/images/2019/09/01/business/01chinatrade-1/00chinatrade-1-master768.jpg) (https://static01.nyt.com/images/2019/09/01/business/01chinatrade-1/00chinatrade-1-superJumbo.jpg)
Workers at Yong Du Shoes in Dongguan. — Photograph: Giulia Marchi/for The New York Times.

DONGGUAN, CHINA — Bruce Xu's factory in southern China produces just about the most all-American footwear there is: real leather cowboy boots, complete with generous heels and expressive stitching up the sides.

Lately, though, the trade war has made running an all-American business in China “a big headache, a big pain,” Mr. Xu says. And the pain, he acknowledges, is about to get worse.

Fourteen months into their trade war, the United States and China — plus the workers, consumers, factory owners and more who depend on commerce between the two nations — are about to face their biggest test yet.

On Sunday, the United States began charging a 15 percent tax on more than $100 billion (https://www.nytimes.com/2019/08/13/business/economy/china-tariffs.html) worth of Chinese goods, Mr. Xu's boots included. This came in addition to the 25 percent tariffs President Trump had already imposed on $250 billion on everything from cars to aircraft parts from China. Those levies are going up to 30 percent (https://www.nytimes.com/2019/08/23/business/china-tariffs-trump.html) in October.

Beijing retaliated with increased tariffs (https://www.nytimes.com/2019/08/23/business/china-tariffs-trump.html) of its own on Sunday. Both governments have more scheduled for December.

The two sides, in other words, have settled in for a fight that could last beyond next year's American elections, no matter how punishing the consequences might be.

Mr. Trump believes the American economy is stronger than China's, despite hints of a coming recession (https://www.nytimes.com/2019/08/17/upshot/how-the-recession-of-2020-could-happen.html) in the United States, and so Beijing will have to give in.

China's leaders are betting that the Chinese economy, while slowing (https://www.nytimes.com/2019/07/14/business/china-economy-growth-gdp-trade-war.html), is healthy enough to outlast Mr. Trump. They believe their own efforts to curb China's excessive lending (https://www.nytimes.com/2019/04/10/business/china-economy-debt-tianjin.html), not the trade war, are holding the economy back, and if needed, they could suspend recent limits on debt to juice the economy again.

Chinese leaders are also increasingly pessimistic that they can reach a comprehensive deal with Mr. Trump, given his erratic negotiating style (https://www.nytimes.com/2019/08/26/world/asia/trump-g7-meeting.html) and new threats (https://www.nytimes.com/2019/08/23/business/china-tariffs-trump.html) issued just a week ago.

Beijing, therefore, is showing no sign of backing down. It has taken steps to blunt the trade war's impact on consumers and companies, and hinted that it could use the value of its currency as a weapon (https://www.nytimes.com/2019/08/08/business/china-currency-trade-rare-earths.html) to strike back, which could shake markets if it follows through.

(https://static01.nyt.com/images/2019/08/30/business/00chinatrade-2/00chinatrade-2-master768.jpg) (https://static01.nyt.com/images/2019/08/30/business/00chinatrade-2/00chinatrade-2-superJumbo.jpg)
Almost all Yong Du's leather cowboy boots, complete with generous heels and expressive stitching,
are sold to the United States. — Photograph: Giulia Marchi/for The New York Times.

Should the trade war seriously damage the Chinese economy, however, the world would lose its biggest single driver of economic growth in recent years. A lengthy tariff conflict might also force even more American companies to look for other places to set up their factories. That could be a complicated and expensive process that dents their productivity for years to come.

Both sides are considering ways to help businesses endure the fight. Mr. Trump has boosted aid to farmers (https://www.nytimes.com/2019/05/23/us/politics/farm-aid-package.html) and contemplated tax cuts (https://www.nytimes.com/2019/08/20/us/politics/trump-economy-recession-data.html). But thanks to the Chinese government's tight control over the economy, Beijing has more options, including dramatic steps such as flooding the financial system with money or ramping up government spending.

On Tuesday, the central government announced measures aimed at empowering the country's shoppers, including discounts for appliance purchases and a weakening of traffic-related restrictions on the sale of new cars. It is trying to find new markets for China's factories, including by trying to reach a trade deal (https://www.nytimes.com/2019/07/26/business/china-trade-war-us-rcep.html) covering most of eastern and southern Asia before November.

The government has also been trying to directly help small businesses slammed by both the trade war, which has hurt exports to the United States, and the debt reduction campaign, which has pinched lending. In May, Zhejiang Province in eastern China unveiled a $30 billion plan to cut taxes and regulatory costs for small businesses.

Still, signs of strain are not hard to find. In the city of Huzhou, in Zhejiang, local officials in December surveying the impact of the trade war found a company called Tianzhen Bamboo Flooring that was laying off workers and trying to open new markets in Europe and Canada. A person at the company who answered the phone this week as Ms. Zhang confirmed that some workers were cut, and that Tianzhen had not had much luck with new markets so far.

Whether China's strategy works will depend a lot on how business people like Mr. Xu weather the coming months.

(https://static01.nyt.com/images/2019/08/30/business/00chinatrade-3/00chinatrade-3-master768.jpg) (https://static01.nyt.com/images/2019/08/30/business/00chinatrade-3/00chinatrade-3-superJumbo.jpg)
The company has around 700 workers in Dongguan, an industrial city near Shenzhen and Hong Kong.
— Photograph: Giulia Marchi/for The New York Times.

Mr. Xu, 50, is the general manager at Yong Du Shoes, which produces 800,000 to a million pairs of cowboy boots a year. Pretty much all of them are sold to the United States.

The company has around 700 workers in Dongguan, an industrial city near Shenzhen and Hong Kong. Mr. Trump's tariffs are only one of many rising costs, including labor.

“Year after year after year after year, our profits have become thinner and thinner,” said Phillip Lee, 62, a consultant for Yong Du.

Even the weakening Chinese currency is a temporary balm, Mr. Lee said. The dollars that Yong Du earns from its American partners are now worth more in Chinese currency than they were before. But when the exchange rate shifts, overseas buyers quickly come asking to renegotiate their pricing agreements, Mr. Lee said.

“Customers are very fast,” he said. “They figure it out very quickly.”

That has left Yong Du with only a few unappealing options.

Laying off workers or trimming salaries would help. But with inflation in China already eating away at earnings, Mr. Lee said he had not been able to bring himself to that.

The company could try to sell its boots in Europe, but who would buy them? “There isn't that culture around cowboy boots in other countries,” Mr. Xu said.

(https://static01.nyt.com/images/2019/08/30/business/00chinatrade-4/merlin_159821055_0fa93474-f61d-4b5b-87ba-eb64e86e5534-master675.jpg) (https://static01.nyt.com/images/2019/08/30/business/00chinatrade-4/merlin_159821055_0fa93474-f61d-4b5b-87ba-eb64e86e5534-superJumbo.jpg)
Bruce Xu, 50, is the general manager at Yong Du Shoes, which produces 800,000 to a million
pairs of cowboy boots a year. — Photograph: Giulia Marchi/for The New York Times.

Yong Du could try producing more of its shoes outside of China — in Southeast Asia, for instance. Mr. Lee has helped run factories in Vietnam before, though, and the language barrier caused major problems. “Vietnam isn't so simple,” he said.

It would also be tough, Mr. Lee said, to find enough workers in Southeast Asia who are up to snuff. Many of the company's staff in Dongguan have more than a decade of shoe-making experience, he said.

Mostly, therefore, Yong Du Shoes will have to wait.

In half a year or so, when the company's American partners release new models of boots, they might be able charge higher prices to help offset the tariffs, Mr. Lee said. Even then, the companies will not likely want to raise prices on older models that are consistently strong sellers.

Mr. Lee said that Yong Du and its American partners had helped each other through tough times before. “We've worked together long enough that everybody is very familiar with each other,” he said.

“It's only because this problem came up all of a sudden that we're all having a hard time dealing with it,” Mr. Xu said.

Every year, Mr. Xu said, he travels to the United States to see customers. These visits have given him some sense of American cowboy culture, even if the whole thing still puzzles him somewhat.

“It's very strange,” he said, smiling. “They have horse-riding competitions and bull-riding competitions. People of all kinds take part. Foreigners' ways of thinking can be very strange.”

__________________________________________________________________________

• Raymond Zhong reported from Dongguan and Keith Bradsher from Beijing. Ailin Tang contributed research from Dongguan.

• Raymond Zhong (https://www.nytimes.com/by/raymond-zhong) joined The New York Times as a technology reporter in 2017. He was previously based in New Delhi for The Wall Street Journal, where he covered India's fast-moving economy and wrote about life at a busy Indian train station, avalanches and earthquakes in Nepal, the conflict in Kashmir and the surprising number of people in the Maldives who don't know how to swim.

• Keith Bradsher (https://www.nytimes.com/by/keith-bradsher) is the Pulitzer Prize-winning Shanghai bureau chief for The New York Times, having reopened the Shanghai bureau on November 14th, 2016. He has previously served as the Hong Kong bureau chief and the Detroit bureau chief for The Times. Before those postings, he was a Washington correspondent for The Times covering the Federal Reserve and international trade, and a New York-based business reporter covering transportation and telecommunications for The Times. Born in 1964, Mr. Bradsher received a degree in economics from the University of North Carolina at Chapel Hill, where he was a Morehead Scholar. He received a master's degree in public policy with a concentration in economics from the Woodrow Wilson School at Princeton University. Prior to joining The New York Times, Mr. Bradsher wrote for the Los Angeles Times from 1987 until 1989.

• A version of this article appears in The New York Times on September 1, 2019, on page A8 of the New York print edition with the headline: “As New Tariffs Kick In, Not Even Cowboy Boots Made in China Are Safe”.

https://www.nytimes.com/2019/08/31/business/trump-china-tariffs.html (https://www.nytimes.com/2019/08/31/business/trump-china-tariffs.html)

from The Washington Post…

France threatens strong ‘riposte’ to Trump's
proposed tariffs on French goods

The U.S. tariffs would come in response to a French tax on American tech firms.

By JAMES McAULEY | 2:41PM EST — Tuesday, December 03, 2019

(https://www.washingtonpost.com/resizer/72UwbonzU7E240GNiX-G8D1YqSY=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/DEFBXFQV2QI6VJSZPVUWIHDP64.jpg) (https://www.washingtonpost.com/resizer/72UwbonzU7E240GNiX-G8D1YqSY=/1484x0/arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/DEFBXFQV2QI6VJSZPVUWIHDP64.jpg)
A cheesemonger at Paris's Beaufils cuts a large piece of Comte cheese on March 27, 2019. — Photograph: Charles Platiau/Reuters.

PARIS — The French government fired back on Tuesday against the Trump administration's threats to slap hefty tariffs on dozens of popular French products, insisting that the European Union would retaliate if the White House went through with its proposal.

Later in the day, President Trump suggested that some kind of compromise might be achievable, and French President Emmanuel Macron indicated his willingness to work toward one. This came hours after Bruno Le Maire, France's finance minister, vowed what he called a “strong European riposte” to Trump's proposed tariffs.

“This is not the behavior we expect from the United States vis-a-vis one of its principal allies, France, and, in a general manner, Europe,” Le Maire said, speaking on France's Radio Classique. He called the proposed tariffs — as much as 100 percent on about $2.4 billion in imported goods, including wines, cheeses and certain designer clothes — “unacceptable”.

Agnès Pannier-Runacher, a junior economy minister, was even more unflinching in her remarks. “We need to be pugnacious,” she said Tuesday, speaking to France's Sud Radio.

The Trump administration's proposal (https://www.washingtonpost.com/world/europe/trump-calls-french-presidents-criticism-of-nato-as-nasty-and-disrespectful/2019/12/03/12e97730-0fc0-11ea-924c-b34d09bbc948_story.html), announced late on Monday, comes in retaliation to a French tax on certain U.S. tech firms, including Google, Apple, Facebook and Amazon. (Jeff Bezos, Amazon's founder and chief executive, owns The Washington Post).

Known as GAFA, the tax will take 3 percent of the annual revenue that those four behemoths earn in France. It has long been a point of contention between Trump and Macron, who initially enjoyed a relatively drama-free relationship. They have butted heads, however, ever since Macron failed to persuade Trump to preserve the Iran nuclear deal, a signature policy achievement of the Obama administration. Trump pulled the United States out of the deal last year.

“They're our companies, they're American companies,” Trump said on Tuesday. “If anyone is going to take advantage of the American companies, it's going to be us. It's not going to be France.”

He, however, appeared to retreat from his tough stance a little later, suggesting that it would probably be possible to achieve a compromise with France on trade.

“We do a lot of trade with France and we have a minor dispute. I think we'll probably be able to work it out,” Trump said. “But we have a big trade relationship, and I'm sure that within a short period of time, things will be looking very rosy, we hope. That's usually the case with the two of us, we work it out.”

Macron also expressed confidence that both sides would resolve their dispute over the digital tax.

Trump had earlier disparaged controversial remarks about NATO that Macron made last month as “very, very nasty” (https://www.washingtonpost.com/world/europe/trump-calls-french-presidents-criticism-of-nato-as-nasty-and-disrespectful/2019/12/03/12e97730-0fc0-11ea-924c-b34d09bbc948_story.html). In an interview with the Economist, the French president described what he called NATO's “brain death”, which he couched largely as a function of diminished U.S. support for the alliance under Trump.

Macron had struggled to find broad E.U. support for his digital tax, so how France would follow up on its threat of a “strong European riposte” to the United States on its behalf is unclear.

“In this, as in all other trade-related matters, the European Union will act and react as one,” Daniel Rosario, the European Commission's spokesman for trade and agriculture, told reporters in Brussels on Tuesday.

Rosario said the E.U. would “seek immediate discussions with the United States on how to solve this issue amicably.”

The Trump administration's announcement had an immediate effect on the markets on Tuesday morning. Shares in Hermès, the French luxury brand known for handbags and silks, dropped by roughly 2 percent; those of the luxury goods conglomerate LVMH fell by 1.5 percent.

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• James McAuley (https://www.washingtonpost.com/people/james-mcauley) is Paris correspondent for The Washington Post. He holds a PhD in French history from the University of Oxford, where he was a Marshall Scholar and is a fluent French speaker.

https://www.washingtonpost.com/world/europe/france-threatens-strong-riposte-to-trumps-proposed-tariffs-on-french-goods/2019/12/03/16aa5310-15d0-11ea-80d6-d0ca7007273f_story.html (https://www.washingtonpost.com/world/europe/france-threatens-strong-riposte-to-trumps-proposed-tariffs-on-french-goods/2019/12/03/16aa5310-15d0-11ea-80d6-d0ca7007273f_story.html)

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