Trump To Launch Trade War With China On Friday, Beijing Vows Retaliation

Tyler Durden's picture

Yesterday, the WSJ reported that the Trump administration is planning to begin a probe of what the U.S. sees as violations of intellectual property by China. Against a backdrop of Trump’s frustrations with domestic policy, sliding approval ratings and disagreement with China over North Korea, the chances of protectionist action are rising, as is the probability of a "hot", retaliatory trade war. This morning ow learn when Trump is set to fire the first shot. Reuters reports, citing White House officials, that President Trump is expected to make a speech and sign a memorandum at the White House on tomorrow, Friday, that will target China's intellectual property and trade practices, effectively firing the first shot in what could escalate into a major US-China trade war.

This will be the opening salvo to several months of trade actions, and is expected to be followed by actions on steel and aluminum dumping — which could include tariffs and quotas — and subsequent measures to protect services, and comes at a time when Trump has become increasingly frustrated with the level of support from Beijing to pressure Pyongyang to give up its nuclear and missile program.

Trump has said in the past that China would get better treatment on trade with the United States if it acted more forcefully against Pyongyang. Beijing has said its influence on North Korea is limited. China has countered that trade between the two nations benefits both sides, and that Beijing is willing to improve trade ties. A senior Chinese official said on Monday there was no link between North Korea's nuclear program and China-U.S. trade.

As Axios adds, administration officials say Trump is doing this because of complaints he's heard from Silicon Valley executives saying Chinese IP theft is one of their biggest challenges. Allegedly, Peter Thiel has been involved in crafting this new step.

In a rare show of bipartisanship, on Wednesday three top Democratic senators urged the president to stand up to Beijing, perhaps in hopes of further deteriorating the US economy and thus shortening Trump's tenure even more. Senate Democratic leader Chuck Schumer pressed the Republican president to skip the investigation and go straight to trade action against China.

"We should certainly go after them," said Schumer in a statement. Senators Ron Wyden of Oregon and Sherrod Brown of Ohio also urged Trump to rein in China.

That's all Trump needed to hear.

So what happens next? About a week after Trump's announcement, the U.S. Trade Representative, Robert Lighthizer, is expected to announce that he's initiating an investigation into unfair Chinese trade practices — using a rarely-used tool, section 301 of the Trade Act of 1974. The investigation paves the path to the U.S. taking potentially aggressive retaliatory actions against China such as tariffs on Chinese imports or rescinding licenses for Chinese companies wanting to do business in the U.S.

U.S. Section 301 investigations have not led to trade sanctions since the WTO was launched in 1995. In the 1980s, Section 301 tariffs were levied against Japanese motorcycles, steel and other products. "This could merely be leverage for bilateral negotiations," James Bacchus, a former WTO chief judge and USTR official, said of a China intellectual property probe.

To be sure, Chinese IP theft is nothing new, and has long been an issue for major US tech companies like Microsoft and prior administrations. It's also a major issue for agriculture and manufacturing - and any sector that has proprietary information related to their production practices. However, in the past, U.S. administrations and companies have been wary about publicly confronting the Chinese government, preferring to do things behind closed doors and in a more diplomatic approach.

Meanwhile, China denied all accusations. Ministry of Commerce spokesman Gao Feng said Thursday that China pays "high attention" to intellectual property and wants to maintain good cooperation with the U.S, Bloomberg reported. Still, China has for some time had countervailing measures at the ready in case a trade spat erupts, including legal constraints on foreign companies and import curbs on specific sectors.

And just to make sure that Beijing's position on trade war is loud and lear, China state media signaled the nation would hit back against any trade measures, as it has done in past episodes. This time around, the need to project strength domestically is compounded by the looming twice-a-decade leadership reshuffle that may further entrench President Xi Jinping’s power.

Chinese officials have mulled stemming U.S. imports should retaliation be necessary. Under a draft plan, soybeans have been singled out as the top product that can be dialed back, according to people familiar with the matter. Autos, aircraft and rare-earth commodities have also been identified as potential categories for restriction, the people said.

Still, Trump's offensive comes at a very sensitive time for Beijing: just weeks ahead of the 19th Party Congress, when Xi Jinping wants everything in his economy to be perfect.

"Ahead of the 19th Party Congress, the last thing that China will want is a trade war," said Callum Henderson, a managing director for Asia-Pacific at Eurasia Group in Singapore. "It is also important that Beijing does not look weak in this context. As such, expect a cautious, proportional response."

Of course, ultimately the big question - as Bloomberg puts it - is whether the Trump administration is willing to risk a trade war as it ups the ante. The International Monetary Fund warned last month that “inward-looking” policies could derail a global recovery that has so far been resilient to raising tensions over trade. The problem, for both the US and China, is that as Trump gets increasingly more focused on distracting from his numerous domestic scandals, he is likely to take ever more drastic action in the foreign arena, whether that means "hot war" with North Korea, or trade war with China.

“So far, it’s all been posturing, with little action,”’ said Scott Kennedy, a U.S.-China expert at the Center for Strategic and International Studies in Washington. “Pressure is building to do something, so the U.S. doesn’t look like a complete paper tiger.”

Finally, as discussed last night, a quick analysis of US winners (few) and losers (many) from any US-China trade war, reveals that most adversely impacted would be the states of Mississippi, Georgia, Illinois and  California, all of which maintain deficits at more than 3% of GDP.

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The central planners's picture

Yeah lets fight all at the same time Russia, Germany, Austria  Iran, Venezuela, Mexico, Canada and now China. Seems like a brilliant strat.

Doom and Dust's picture

I think Trump misinterprets the word 'isolationism'.

ne-tiger's picture

He might just invade NK or Iran

FrozenGoodz's picture

Break out your MAGA caps ... lets rally bitchez!!!

BaBaBouy's picture

Making Yankees Great Again ...

BaBaBouy's picture

Tesla is success story... Musk is genious boy wonder ...

Tesla Model 3: Elon Musk has ‘zero doubt’ about 10,000 units per week in 2018

https://electrek.co/2017/08/03/tesla-model-3-elon-musk-production-reserv...

Déjà view's picture

Beijing...UP YOURS!

May you experience THE difference between pissing on Obama and pissing off Mr. T...

Sleep well...

Perimetr's picture

yes, another wise foreign policy decision by the masters in D.C.

hey, we declared economic war on Russia, why not China, too?

let's have a war against *everyone*!!

kind of reminds me of Gary Oldman

https://www.youtube.com/watch?v=74BzSTQCl_c 

tmosley's picture

>The last thing Xi needs ahead of the next congress is a trade war

Let the negotiations begin!

Crash Overide's picture

Don't know about you folks but I am tired of seeing "Made in China" on almost everything...

China has billions of people, let them buy their own shit.

DingleBarryObummer's picture

Ok, but your DildoMaster9000 is going to cost you like 6x more if it's made in USA.  Good luck.

a Smudge by any other name's picture

Huh? I got mine for $20 on Amazon. Hey wait this isn't a Dildomaster9000 it's a Chinese knockoff!

SON OF A BITCH!

hardmedicine's picture

wISH i COULD upvote you 10 times there Crash 

cheka's picture

tariff that sh-t.  or continue to get bled out by nyc.dc

The Wizard's picture

It's too bad the company has to rely on batteries for its power. Energy, according to Nikola Tesla, is in the magnetic flow of the earth. It is all around us in the aether. Tesla cars are not Nikola Tesla like which is why I believe the name adopted by the company is an insult to Tesla.

mkkby's picture

Got bad news for you, partner.  The mag flux of the earth is TINY.  How do I know?  Because a compass needle stays motionless.

Since you are science illiterate, here is how electricity works.  It is a magnetic CHANGE that creates electricity.  That is why spinning magnets make a generator.  If your compass needle switched from north to south rapidly, you could get *free* energy across any wire.  But that does not happen.

Tesla, the real one, was wrong.

MK13's picture

Let me let you in on a little secret. TSLAs car - while selling for about 100k a pop - still lose 1 billion a quarter for company. In order to break even, cars would have to be selling for $140k a pop. Not winning long term.

GM, Japanese car makers already have reasonably priced hybrid or electric cars. TSLA is giant squid sponsored government boondoggle of subsidies and wealth transfers.

Antifaschistische's picture

"Chinese IP theft is nothing new, and has long been an issue for major US tech companies like Microsoft"

oh, oh....LOLLLL, you're KILLING ME......MICROSOFT never took any ideas from ANYONE outside of it's WALLS!!!   That is REALLY FUNNY!!!   A company (although not as bad as Oracle) that is founded on stolen ideas (using 'stolen' losely), endured for decades by morphing the ideas of others, then claiming them as their own and squashing other companies with their legal armies.  It's not their product that achieved monopoly status....it's their legal armies!!   Their legal armies are irritated that the Chinese don't respect them.

by the way....if I spend a few million dollars on Oracle DB licenses...to BUY THEM!!, and I end up only using 1/2 of them....why can't I SELL THEM to another company?   OH...I get it....because I don't really own them.   THEN WHY DO WE BUY THEM!!!  WHY DON'T WE JUST PAY THE ANNUAL MX FEE for the lease!!   There should be a public exchange that buys/sells these products!!!! 

tmosley's picture

A colleague of mine once said, "If you ever have a lunch meeting with the Chinese, hold onto your sandwich with both hands."

The Chinese steal EVERYTHING. Pointing to a few thefts by American companies (from other American companies) does not justify that.

Countrybunkererd's picture

When speaking to the Chinese they will shake their head "yes" while you speak.  It does not always mean they understand or agree. It may only mean they acknowledge that you are speaking to them.

ALANBEEKMAN's picture

Ha! In my former dealings in Japan, 'Yes' meant 'Maybe', and 'Maybe' meant 'No'.....

a Smudge by any other name's picture

For real. Ordinary Chinese have been running Windows operating systems for years and we figure about 5% of them are licensed. Chinese developers have all the software we have, Photoshop, Illustrator, proprietary databases, server operating systems, it's all pirated. I had a Chinese development contact tell me a few years ago, in a friendly way, that he could get me ANY SOFTWARWE FREE.

But hey, let's take a step back. If you have run anything like a popular website, esp. ones that marketed unique manufactured goods, you have been denying traffic from China and it's proxies for years because your server logs show relenteless, unending 24x7x365 penetration attempts.

Want to argue with my server logs? How about EVERYBODY WHO PRODUCES ANYTHINGS SERVER LOGS FOR ABOUT 20 YEARS? Want to argue with our combined server logs?

veritas semper vinces's picture

Poor American baby who does not steal anything.Jewmerica was founded and grew on stollen lands,then stollen labor(laves),then technology through all the spying agencies that work for the big corporations(like NASA and See Eye Ayy),and bringing here foreign intelligence,like werner von Braun,a Nazi engineer who created the space rocket program.And now ,Jewmerica is sanctioning the rest of the world who got ahead,because it can't compete(see recent sanction against Germany/Russia)or giving big fines to competing foreign corporation.

Can you see this or are you too emerged into your exceptionalism and hypocrisy to be able to do it?

veritas semper vinces's picture

And guess what ?All these spy /intelligence agencies work for the big american corporations stealing from the rest of the world.This was mostly how they gained power.And the distruction of the world with nothing happening to America after WWII .And buying foreign intelligence(remember Werner von Braun,the Nazi engineer  and the space ,rocket program?)

I think there is a lot of hypocrisy around in Jewmerica. But I'm not surprised .

And let's cut to the chase:China did not steal it,it was handed to them by your leaders/corporations.And they make the products these leaders ask for.If they happen to be crapy ones,it's your misfortune.Misfortune you had and have the government you deserve(and I'm including myself here)

Iskiab's picture

While I think the USA does need to do something about intellectual property right in China the issue is complex, I don't know if you can say the us is winning.

Without a long winded post here are all the issues:
- china used to, and still might I'm not up on it, control the worlds supply of rare metals used in most high tech equipment
- the USA uses intellectual property rights as a form of protectionism (looking at you mini mouse, still protected and extensions of the years protected for Disney and us companies
- the chinese trample over property rights and are it as a way to become competitive
- US businesses are against actions against china because they see the potential of the market, and uses china in it's supply chain
- the US consumer market is huge, and denying access is a big stick that can be used for the us to get it's way
- this is a ball that's been punted by prior presidents with inaction, but because of inaction action now will be disruptive
- global protectionism is what made the Great Depression worse

Lots of angles here

hardmedicine's picture

YEAH, the rare minerals are very very significant.  My friend who works in medical imaging (MRI CATSCAN etc) says without china's rare minerals the whole thing goes down. 

Don't blame Trump if every other neocon president before him failed to reign in the globalist corporations that bypassed the worker to get to the (now broke) consumer

 

We need to REPEAL NAFTA AND GATT. 

That's the answer.  no Nafta and Gatt. 

Justin Case's picture

Corporate merica is in it for the money. That is the incentive to move their operations to China. The market there is close to India as well, the second largest consumers on this planet. China and Indian consumers are 10X the size of merica. Chinese buy 10x as many cars as mericans rent.

OBOR will also create access to a whole new world of consumers when it is complete. There are millions of untapped consumers along the silk road that will make products affordable to them. Merica likes to down play this and has chosen not to participate, which is their loss.  Don't expect prosperity in the future of merica. The empire is rotting from the core and losing friends with their retaliation of those that won't be dicktated to by merica. The USD is becoming less and less a trade currency. Options without any strings attached have emerged due to merican arrogance, regulations and harmful sanctions. Germany is moving away from merican dictated foreign policy as did Philippines. Merican policies are hurting their economies. As Putin said, the unipolar world is ending.

CheapBastard's picture

I hope trump slaps a 100% import tax on all those Al Sharpton action figures Hecho en China they fill Walmart shelves with. Yes, the ones that come with the purple Escalade.

 

Those Al Sharpton Hasbro toys replaced where the Confederate flags used to be for sale on my Walmart shelves.

Bes's picture

Trade wars lead to actual wars

(covert, overt, hot, and/or cold)

-----

when things begin to fall apart, the powers that be always take us to war

#maga

Manthong's picture

 

I guess the only good news is that if he was Hillary we would be nuking it out with everybody by now.

Manthong's picture

 

Are Hasbro action figures ball-less?

SethPoor's picture

If so, they don't get much action!

Stuck on Zero's picture

Dudes, we've been in a trade war with China for thirty years. lost all the battles, and have taken all the casualties.

Bes's picture

may I recommend you dig just a tad deeper?

rich fucking american companies won all the battles by making american workers take all the casualties.

with the help of chinese oligarchs and slave labor of course.  

the dems and GOP paved the way

(hey, even trump jumped on the bandwagon, all of his shit is made over there)

-----

the manufacturing jobs will come back when we become the slave labor

MK13's picture

Agree. There is no free or fair trade left. Ag subsidies - just another wealth transfer vehicle - https://www.downsizinggovernment.org/agriculture/subsidies. China of course is running its own version of wealth transfer shitdoogles.

Globalization has allowed for transfer of corruption and subsidy/wealth transfer across the globe - not 'free trade'.

cheka's picture

great scams all

globalist warming = peak oil = free trade

nyc.dc b.s.

Blankone's picture

The workers in the US have been but they were betrayed by politicians who serve those above.

Someone is making profits off of this claimed trade war of Trumps with China. It's easy to get focused on the surface and not wonder the deeper reasons.

clade7's picture

I'm heading out right now to invest in blue tarps and corner the Fall Middleclass Homeless Market!!!

Gonna open a store!... Blue Tarp Blues!

NotApplicable's picture

Purple Escalade, my favorite Prince song.

Justin Case's picture

The National Entertainment Collectibles Association or NECA is an American manufacturer of collectibles typically licensed from films, video-games, sports, music, and television based in New Jersey. The company was founded in 1996 and has over 60 licenses for which it produces products.

Now it's China bashing time. The Russian bashing has been flogged to death. Need sumptin fresh again. TaDing ya dats it, China! China let them open up a plant without mericans permission, ya, dats it! Dem thar Chinese fault.

Bill of Rights's picture

Works for me, but then again your lazy shiftless self would work in a work house..Ya know at one point made the things we need not cheap Chinese scrap

Justin Case's picture

manufactured by merican corporations operating in China and merican people buy the scrap and call it China's fault. Ya need to point the finger at the source not the location which has nothing to do with substandard products coming from merican producers shipping from China. They're merican corporations making that shit you buy.

Justin Case's picture

China’s holds key techno-economic advantages across the REE value chain that has actually led to emerging foreign mines becoming dependent on it for growth, especially at a time when REE prices have fallen dramatically from their 2011 highs. At the moment it is difficult for any single country to challenge China’s advantage in this sphere and the lack of forward movement in India-Japan cooperation hasn’t helped matters.

China set in motion a wave of worry around the globe when it dramatically lowered quotas on its exports of rare earth elements, which are crucial to the making of everything from cellphones to missile systems to hybrid car batteries. China held 95 percent of the world's supply.

lester1's picture

ALL of those countires have been talking advantage of the USA in some shape or form for decades!!

 

Come visit the rust belt states and experience the job destruction and poverty that globalization has caused. I fucking dare you..

CheapBastard's picture

Most financial news outlets detailed how the Obama administration increased the wealth of China's middle class and more then doubled its size, while destroying the American middle class. Left wing hack MSM like CNN and NPR avoided that un-pc story completely.

lester1's picture

Obama's failure at everything is why Trump won the election. Voters are desperate and disgusted with career politicians. This trend will continue in the next few elections until BOTH parties purge their sellout globalists.

Never One Roach's picture

Some of the traitor Republicans need to be replaced also like McCain. They seem to hate Americans as much as the Dems hate America.