China Prepares For Trade War With Trump

Tyler Durden's picture

Having warned U.S. President-elect Donald Trump yesterday, through Chinese state media, that he’ll be met with "big sticks" if he tries to ignite a trade war or further strain ties, China’s central government has reportedly "compiled possible countermeasures" against "well-known U.S. companies or ones that have large Chinese operations."

As Bloomberg reports, China is prepared to step up its scrutiny of U.S. companies in the event President-elect Donald Trump takes punitive measures against Chinese goods and triggers a trade war between the world’s two biggest economies after he takes office, according to people familiar with the matter.

The options include subjecting well-known U.S. companies or ones that have large Chinese operations to tax or antitrust probes, the people said, asking not to be identified because the matter isn’t public. Other possible measures include the launch of anti-dumping investigations and scaling back government purchases of American products, according to the people.

 

The move illustrates how the fallout from escalating tensions between the two nations could spread to companies. Trump has made China a frequent target of his attacks and nominated trade-related officials that the Communist Party’s Global Times newspaper said would form an "iron curtain" of protectionism.

 

While specific details of China’s options weren’t immediately clear, the retaliatory measures could affect companies related to agriculture, pharmaceuticals, technology and consumer industries, according to the people.

 

China’s central government compiled the possible countermeasures after collecting opinions from various departments, the people said. The punitive steps would only be carried out if the U.S. acts first and after senior Chinese leaders sign off on them, they said.

 

Representatives at China’s Ministry of Commerce, National Development and Reform Commission, State Administration of Taxation and General Administration of Customs either didn’t respond or couldn’t immediately comment to Bloomberg queries.

 

Representatives at Trump’s transition team didn’t respond to a request for comment.

Today's comments were much more directly aimed than yesterday's more prosaic langauge...

"There are flowers around the gate of China’s Ministry of Commerce, but there are also big sticks hidden inside the door -- they both await Americans," the Communist Party’s Global Times newspaper wrote in an editorial Thursday in response to Trump’s plans to nominate lawyer Robert Lighthizer, who has criticized Beijing’s trade practices, as U.S. trade representative.

For now China appears to have fallen off Trump's radar (as maybe he is letting them blow themselves up with massive spikes in Yuan and overnight depoist rates as liquidity freezes), and instead over the past few days the president-elect has been focusing on the ongoing Russian hacking fiasco, crashing the Mexican peso, and slamming "head clown" Chuck Schumer for the mess that is Obamacare.

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flaminratzazz's picture

has shtf yet?

Mexico seems to be going full Venezuela

CIA has fallen back and is regrouping

 

McCain Says Russian Cyberattacks Against US An ‘Act Of War’
HRH Feant's picture
HRH Feant (not verified) flaminratzazz Jan 5, 2017 9:27 PM

Soon.

flaminratzazz's picture

cannibals from the south and dindus from the ghetto. its a squeese play

tazs's picture

In that trade war Trump will lose. America produces almost nothing, hence Trump's in a position of weakness.

flaminratzazz's picture

unless you consider food.. we need their plastic shit worse than they need our grain?

The Saint's picture
The Saint (not verified) wee-weed up Jan 5, 2017 10:56 PM

China will cut their own throat if they aren't careful.

In a trade war, it's not the producer of goods who has the leverage.

 

philipat's picture

You mean like Boeing, Apple, Microsoft, GM, Merck etc?

Parrotile's picture

A LOT of commentators here (and elsewhere) still live in "their" dreamworld where "all that comes out of China is Chinese 'crap' ". Hate to be the bringer of bad news but a LOT of "US Big-Name" technology Companies contract Chinese Companies to produce their "lower-specification but still expensive" goods, and of course charge the customer the "American Big-Name Brand" markup. Companies such as Agilent, LeCroy, and a few others . . . . .

 

Apart from the obvious quick and easy solution for China to set up shell Companies overseas and continue to trade through them (following the good examples established by the US Financial sector I note ), any "Trade War" will only serve to exacerbate damage that has already been done years ago, by US Companies offshoring production to gain a better bottom line (by reducing labour / environmental penalty costs).

 

China now HAS the capability to continue advancement WITHOUT US funding or "investment" (as demonstrated by "their" lunar lander), and of course has the existing factories, manpower, and skilled (current experience) knowledge-base to forge ahead. For example, "they" don't need Apple - "they" have ZTE and Huawei who produce a product with similar utility, better quality (CERTAINLY better durability) for a rather lower price. They can (and do) trade with the rest of the World, and it's America who will have to try to break into this established market.

 

The only way to profitably "play this game" is to play fairly (something the US has not done for many decades). Start a Trade War with the World's No 1 Manufacturing Superpower (who has already been obliged to develop very close ties with the "other Nucclear Superpower next door), and Trump's admionistration will have a lot more to worry about than the "flood" if migrants from the south . .:-)

Buck Johnson's picture

I totally agree with you.

 

mkkby's picture

You talk like the small-minded propagandists on network TV.  Try thinking for yourself, if your pea brain is capable.

How do you start to REVERSE 4 decades of unfair trade that resulted in 90% manufacturing loss?  The threats against US companies in China is actually self defeating.  Make it scary and expensive to be in China, and they will leave.  Like what Illinois and California are doing to business.

Many will choose to come home to their safe haven.  Some will try maneuvers as you suggest, but it's easier to change tariff policy than to move a factory.

Trump is playing chess, just like a certain Russian.  The chinks don't hold the pieces to win.

ramius's picture

erm, you may wana reconsider that statement mate. You can't eat money, you can't quench your thirst with it, altough if hiperinflation hits, you can certainly heat your home with your stipenda. The only things the US produces, are debt and weapons. SO when nobody will want to buy the debt, what is the remaining option?

tazs's picture

They produce 620 million tons of grain.

flaminratzazz's picture

oH mY!! Us Produced  2.316 billion tons of grain in 2007.

tazs's picture

That's what they report in the fake news? The point was China is almost self sufficient.

Zero Point's picture

At the moment it's close though they are net negative. Their soil and water are degrading at a rate which should terrify the entire planet however. A fact they know all too well, as they scamper to secure arable land around the world to feed their people as their land is destroyed by pollution and desertification.

yellowsub's picture

From today's context yes, but wasn't this the same shit during our industrial revolution where companies just dump shit into the water and soils that hasn't magically disappeared but ignored...

I wouldn't really be bragging considering Monsanto has a strong presence in the US and most of their shit is grown with their seeds and pesticides...   Most of it is overused along with fertilizers run off causing our water and food to toxic as well.  If that's not killing you, I'm sure the EPA has done a great job ensuring your water is free of lead.

If you like your glycophosate, you can keep your glycophosate aka RoundUp...  

 

roddy6667's picture

You have consumed too much of the Doom & Gloom Press. I seriously doubt that you have any real information or first hand knowledge of anything you speak. Have you spent time in rural China? Have you visited the farms and eaten with their families and discussed what they think? Are they optimistic? Is their production better than ever? Is the pollution being cleaned up?

Do they feel that the government is improving the situation of farmers in China?

All you have to go on is what your handlers and the captive Western press feed you.  Why are you so passionate about something you know nothing  about?

beemasters's picture

Why would China import GMO grains from the US??? They should look to Russia for GMO-free grains!

What else is China importing from the US that can't be sourced better elsewhere....well apart from fake news, I mean?

The sad fact is even if Trump bans ALL Chinese goods, a third party will repackage/relabel Chinese goods and sell them to the US at higher prices. It's a no-win.

flaminratzazz's picture

telling the factory workers they have to go back to subsistence farming might be a hard sell.

HopefulCynic's picture

They have more than enough people. For China closing up to US business could be beneficial, they still need to develop their internal market more, and they would not care at all about patents, or corporate rights. I want to see how does the US internal market handle not having products to sell, just grain. The US would be on it's knees in a matter of months. Just building the infrastructure needed for internal production would have all of Trumps economic plans go up in smoke, then you would have very expensive products that not even in the US / Canadian and EU markets would be able to be unloaded, complete stagnation of the economy at the very least.

I personally believe that what Trump is doing will benefit more other countries in the long run and hurt the US, by forcing those countries to develop their technologies or stealing them, and to develop their internal markets outside of the scope of the US. It will probably also be an end to the WTO, many international trade treaties, that have benefitted the US. The only solution will be more US invasions, or dramatically lowering the US standard of living. Turning back the clock on globalisation sounds nice but not possible, I wonder how the US will be able to sell so expensive products manufactured in the US elsewhere.

I Feel a little Qeasy's picture

And they have a friend next door with a growing grain surplus.

HowdyDoody's picture

And cheap reliable energy supplies - reliable providing there is no US/Tribal middleman trying to extort both sides of the trade.

ramius's picture

well, being a backwater echonomy has it's benefits. As many russian factories were closed, polutuin dropped, so the quality of the soil and air improved. ( In my country as well, former soviet satelite country near the black sea ;) ) Also, GMO's are forbiden in the Eu and russia, crops and seed alike, so the crops are healthier and more nutricious. the US is killing and depleting it's arable land like there is no tomorrow. Draining the aquifers and saturating the soil with round up ( gliphosate) and various pesticides , besides nitrates, is not the best long term policy. Unfortunatley, unlike fiat curency, you can't just create land from thin air, there is a finite suply of it, and you can't realy swing by and take other people's lands to replace your own ( altough arab states made large purchases in the former soviet republics , as did the chinese in afrika and SA ). 

ramius's picture

man, check that math again. That amount would be 2.931.645.569,62 cubic meters. Or 302 cubik meter on every square Km of USA landmass, including mountains, rivers , cities, deserts etc. Oh, and given that total arable land in the US comprises 411.300.000 ha , that gives 5630,93 tones/ha of yield. Man, unless you grow giant beans and leadlined corn, THAT IS FREEKIN IMPOSSIBLE. The best yeald gathered from the best , watered farmland is 18-20 tones/ha, if all weather conditions are perfect, the seed is 95% pure and you somehow manage to give the plant the perfect amount of microelements, nitrates and water, root out all weeds and keep all mice and rodents away, AND manage to harvest every bean, with 0,1% loss ( which is doable but barely, with 1km/h speeds on the combine, and then harvest would take 10 times more than it usualy does). Oh, and that is for corn, for wheat subtract 20% to get the max yield, and soy rarely yields aboe 5 to/ha, tops. Same for sunflower, rape seed and barley. 

  So, I CALL YOUR BULLSHIT, and ask you to kindly revise your numbers to real world figures, because you can't feed people with pixy dust, like the wallstreet fatcats feed them with fiat. 

  Sincerely yours, Ram ( Agricultural engineer in real life, and fisherman in my spare time, so I know about telling tall tales, but you man, you just set the bar stratosphere high....)

Duc888's picture

 

 

Thier plastic rice is awesome.  No silly GMO expenses needed.  Incredible shelf life and quite tasty too.

http://www.morningnewsusa.com/americans-eating-plastic-rice-china-bought...

 

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) Duc888 Jan 5, 2017 10:03 PM

Even better when it's chrome plated plastic rice.

Zero Point's picture

And yet have set targets to import 50 million tons of grain by 2020. Almost half the US sorghum crop went there last year. Seems strange as you are implying they don't need to do this.

Archibald Buttle's picture

going out on a limb here, but maybe a bunch of that gets processed in china, with no regulation, and reimported? bunch of middlemen make it happen cheaper than doing it all in the US?

Zero Point's picture

Much of the sorghum went to alcohol manufacture. I doubt much baijiu ends up in the US. Can't answer for the rest but I very much doubt it. Maybe into markets with very lax import standards.

SJEqualizer's picture

Fuck their grain. I'll be happy when the day comes that I don't see a single food item that's made in China or Mexico.

zorba THE GREEK's picture

Actually tazs, it puts Trump in a position of strength because America has little business to lose and China's biggest customer is the US.

tazs's picture

China exports all over the world. Not just the US. Of course, it'll hurt them a bit, but American businesses will hurt worse.

Export to US S500B
Export to the rest of the world $15 Trillion

Facts are facts.

Fantasy just feels good until it hurts.

flaminratzazz's picture

The Chinese will starve without exports to the us in less than a month,

who is going to take up the slack? mexico? India? lol think taz

kiwigal's picture

China is in economic turmoil, tariffs from the U.S. will hurt them very badly. Would bet on China  starting a war in the  South China Sea. There is a reason they are befriending the lunatic leading the Philippines.

roddy6667's picture

China is in economic turmoil? Where the fuck do you get these Neocon fantasies?. I have lived here for a few years now, and your statement couldn't be farther from the truth.

ramius's picture

you realy have to ask? WSJ, CNN HP and all the other "real news"powerhouses. So take the info with a sack of salt, only a naive american with a strong sense of wishfull thinking would believe China is in echonomic turmoil. Altough, after the august atack from 2015 it should be, but the fact it isn't proves my point. As long as the worlds factories are located in China, they will not wory. Just remember, how did the Aliies defeat the Axis? They OUTPRODUCED them. Would be hard to do that now, with the remaining industrial capacity. 

flaminratzazz's picture

It exported $2.7 trillion of its production in 2015.

China shipped 16.9 percent of its exports to the United States in 2014

and I bet they got premium prices for that export so my wager is they take a 20% haircut ..ouch

ramius's picture

and they got payed in bonds,with which there is not much to do, except buy oil from the Cartel, or weapons from murica. Well, they just struck a major energy deal with russia in 2015, before the sanctions, and they can produce all the weapons they need themselves. So , maybe, that imagined ( check out last year's figures, you may be surprised by how much they declined) 20% "haircut" would be a blessing in disguise. Not so for the US, who would be even more reliant on Japan and EU banks to buy they're bonds ( just chek out how much the US debt stands today?) in order to keep the fiat afloat. But they're echonomies don't look so sound eighter, with record amount of national debt levels,  so who is more dependent on who realy?

native grunt's picture

The Americans will just target any copycat China companies in third countries. 

Chinese stuff, even their highest tech, are ripoffs. As long as the Americans,

Japanese and Europeans find common interest in protecting their technology

the Chinese will find that they lose.

MEFOBILLS's picture

My blue space alien view of humanity:

The simple thing to do would be call a new Bretton Woods.  

Then, adopt a Bancor system.  Simple.

Bancor's are not money, but an accounting identity.  This identity matches goods and services traded across borders, and forces trade into balance.

So, neither China nor U.S. would be screwing each other.  Using a nations money to remediate trade imbalance is ......craaaazy.  Buying TBills and debt instruments with excess dollars (rather than buying mainstreet goods) IS CRAZY that it is even allowed.

So, you end up with trade wars.  Dumb humans.  Dumb politicians.

ALL FOREIGN TRADE IS ONLY BARTER. All foreign trade is only barter.  Do I need to say it again?

 Floating exchange rate = crazy.  Dollar as reserve = crazy.  Private Banks making dollars as credit = crazy.

Stupid humans.  Go ahead hairless monkeys, and trade war, then go to hot war with nukes.

sovereignmoney.eu

Clowns on Acid's picture

Meh.....way too far down th road for that. A modified gold standard would largely accomplish what you suggest.

MEFOBILLS's picture

MEH.   We did that post bretton woods.  We had the gold trading standard.

But, it fell apart as soon as Nixon deficit spent on Vietnam.

It needs to be more legal and codified, rather than having faith in metal... as if there is something magic.

 

No offense, but more stupid human.

drunkfish's picture

great point mefobills, no chance happening though we humans are far stupider than monkeys

Phillycheesesteak's picture

Where did you learn international economics? First, you're off by a factor of 10. China's exports to the rest of the world are $1.5 Trillion, not $15 Trillion. That makes the U.S. 20% of all their exports. They have a $260 Billion trade surplus with the U.S., which means they depend on our markets a lot more than we depend on theirs, especially as a percentage of GDP. In a trade war, the one with the surplus loses.

HopefulCynic's picture

The US Internal market is pretty much everything, no products from China means no money exchanging hands in the US. The US does not have the capacity to build the infrastructure needed to produce what China produces for the US internal market, and it's development would take decades.

Berspankme's picture

Not true. By far largest market is EU

HowdyDoody's picture

Then comes the Silk Road railway to take the USN out of the equation.