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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CJgipper's picture

They only seem to hate Americans as much as the democrats because they do.

cheka's picture

only fools think that the corps aren't already charging as high a price as the market supports.  because its made in china doesnt mean the buyer gets ANY price break

hardmedicine's picture

LORD JESUS I HOPE YOU ARE RIGHT! 

Nexus789's picture

The US contributed to it's own downfall via the globalist policies promoted by wall street and successive administrations. After WW2 the US dominated every industry sector as it focused on technology. Now it dominates none. The move to debt finance, aka globalisation,  destroyed much US manufacturing capacity. I guess that the US elites wanted China to become their passive slave manufacturering operation. The Chinese obviously had other ideas and became a superpower competitor thanks to US policy makers. . 

Déjà view's picture

FOREIGN LOBBYISTS IN D.C.!

Tar & feather $OB'$!

Justin Case's picture

Corporations also prefered the big salaries and bonuses as apposed to investing in productivity and inovation. Preferance to short term gain over long term prosperity. Corporations moved to China b/c the greatest pool on earth for labor force, 3rd world wages, lax regulations, no labor standards, overtime, pensions, safety regulations, holiday pay, MAT leave, no unions, disposable work force, a corporate dream come true. They gave merica the single finger salute.

mkkby's picture

The US would lose NOTHING in a trade war with china.  Other countries make the same products and would love our business.  Prices may go up slightly during the transition, but the competition would eventually bring prices down.

Having said that, lobbyist-owed congress will never let a trade war happen.  Globalist corps rule the world.  They have decided for now that china is the world's slave labor force.  (At least until robots can take over.)  The US is the enforcer and banking hub.  A few mafia dons sit at the top and take a cut of everything.

I hope Trump brings on the chaos.  Shuffle things around a bit and middle class sheeple may get a drop or two of trickle down ball sweat.  It's more than they're getting now.

Project_Engineer's picture

Couldnt agree more, was in Connersville, IN the other day visiting Stant. Drove by some some old plants that were a mile in width just rotting away. Sad!

The Wizard's picture

Low skilled manufacturing left the country because of the cost of labor. The Far East has too many people willing to work at lower wages for longer hours than Americans. American welfare has been living off of the world reserve petrodollar since the early 70's. With the petrodollar going away it will get worse in the rust belt.

On the flip side, US design and manufacturing for high end components in travel, electronics, etc. is growing and with little competition except for European nations. The bottom line is if one wishes to be involved in US manufacturing they better sharpen their skills. Low skill jobs are not coming back home.

A big problem is the theft of IP which is alluded to here.

The only taxes Constitutionally acceptable are tariffs, imposts, duties and excises. Any other tax is unconstitutional. It is easy to see the founders designed a tax system to tax the foreigner/stranger, not one of its own. The reason for this is if a foreign country wished to trade with the US and failed to live up to America's standards a tax would be levied rather than military action being implemented. Our cultural standards have diminished and which is why it is difficult to live up to the founders ideology.

Justin Case's picture

"people willing to work at lower wages for longer hours than Americans."

Don't worry, unions have been demonized enought to get the majority of working poor to support the corporatocracy and Gov't initiative to dismantle collective bargaining. Once the unions are gone the corporatocracy will be in full control of what they will pay and what benefits they ill offer. Paid lunches, sick days, vacation, work safety, medical, pension, overtime, stat holiday pay, MAT leave, 40 hr. work week will be gone. The unions got all those benefits for working class. That costs the corporations alot of money, so they can get rid of all that when they get rid of unions.

The Wizard's picture

Unions or no unions. The unions embraced working and benefiting from the petrodollar along with feeding the corporatocracy. Had the unions taken a different approach in recognizing the destruction of the general economy from a bogus fiat currency there may have been a different outcome.

The war that is taking place is a currency war, the petrodollar vs. a revised monetary system. The controllers of the petrodollar know its days are numbered and are fighting to control any other form of system that will take its place.

Justin Case's picture

"recognizing the destruction of the general economy from a bogus fiat currency"

They have as much power as you do and did the same as you. Even all the POTUS were powerless to stop it. That's why all the previous regimes helped the corporatocracy screw the merican workforce, over the last 30 years. People are tools for the corporations, they found cheaper tools else where and shit on merica. Moar money for the upper echelon, not the debt serfs. Merican corporations invest next to nothing in productivity. Cheaper to move to China then spend money on productivity and inovation.

USA Inc. is a business not a country.

NEOSERF's picture

I believe Hitler made that same mistake

Kayman's picture

Yeh. Things went all to hell for Hitler when he cut off Chinese trinkets.

Justin Case's picture

Hitler made no mistakes. Germany was the only country that emerged from the global depression and the most prosperous in just 5 yrs. What Hitler did for Germany was nothing short of amazing. True history, not written by a "stein" will show you. When Hitler entered Austria they welcomed him with both arms waving. He returned to his birth country and was very welcomed by all.

What did Hitler do to accomplish this? He took away the right of the banks to print the countries currency. From that day on, only the Gov't of Germany would create money. That is when Judea Declares War on Germany March 24, 1933. Front page news in The Daily Express Friday March 24th,1933. Kennedy died for trying. 

I have 6 million jokes about WWII, but you've probably heard them all.

jimmy12345's picture

The USA needs to get rid of the Russian puppet, Trump.   Impeachment time is right around the corner for fatty.

MK13's picture

Better check your paymasters - Soros and DNC may be out of spending money soon.

jimmy12345's picture

How is Russia this time of year, comrade? 

Countrybunkererd's picture

You are decades behind.  The USSR became Russia and the USA became the USSA.

peddling-fiction's picture

Jimmy can only count to 5, and has the creativity of a rock.

Raging Debate's picture

Country - Yep Russia is still cleaning up the mess from its prior empire building. We in America that ha e powerful positions are just beginning to realize our emipire is  ustainable. Fortunately, Russia didnt go full retard at the end of its empire. Hopefully, we dont either. 

oncemore's picture

U, jews, see the problem quite simple.

Justin Case's picture

Poor jimmy. Now you know why merica is in decay.

HRClinton's picture

IP protection simply means protecting the financial revenue streams for Hollywood and Big Biz.

Not the ones who hire too many people from Flyover States. 

lucitanian's picture

Hey, you forgot that he's indirectly attacking Europe with his trade war against Iran and Russia.

Maybe he needs a few advisers to let him know what will happen to his weak economy when the rest of the world hits back, or as the article points out, is this a preliminary to "hot war", if so who does he expect to finance let alone support his agression.

Quite franckly, the US foreign policy and trade policy, has not been thought through. It all shows up as moves of desperation from a government living in a delusional bubble, lots of noise and fireworks to impress the brainless but saticfy their powerbase, essencially the MIC.

And at the end of the day it will end baddly, principally for the US citizen. It's high time they wake up.

Mustafa Kemal's picture

"Yeah lets fight all at the same time Russia, Germany, Austria  Iran, Venezuela, Mexico, Canada and now China. "

I think they call it Shock and Awe

DaBears's picture

Russia will be fine with oceans of oil even if US sanctions Russian banks, Same thing can't be said for Chinese banks and their "great ponzi" scheme, sanction one of their big 4 would expose their whole con, and watchout for the chain reaction afterwards. US should move some consumer factory from China to South American border jumper countries ie Mexico to keep them there with jobs and have them pay for the wallsince they are going to be stinking rich. win win.

DaBears's picture

Russia will be fine with oceans of oil even if US sanctions Russian banks, Same thing can't be said for Chinese banks and their "great ponzi" scheme, sanction one of their big 4 would expose their whole con, and watchout for the chain reaction afterwards. US should move some consumer factory from China to South American border jumper countries ie Mexico to keep them there with jobs and have them pay for the wallsince they are going to be stinking rich. win win.

cherry picker's picture

I remember when it used to be a pleasure driving across the border and spending a weekend in Minnesota or north Dakota.  no passport required.   no 3rd degree.  just a 'welcome'

Now?

Forget it.

pc_babe's picture

Shave your wife's beard and leave the Koran at home. You'll be fine

cherry picker's picture

It's attitudes like yours which make the USA an unpleasant destination versus Latin America, which many Canadians have shifted to.

I am a non muslim white guy.  I can imagine the bullshit that non whites have to put up with crossing that line.

 

salvadordaly's picture

Ok, that kind of explains the hassle then.
If you were anything but white and male you would get the "welcome, just come on in" you were looking for.

ne-tiger's picture

It's always the same fucking story, start trade/real wars overseas to distract idiot Americans when it's not going well.

lester1's picture

1. When was the last trade war

2. Have we ever fully been in a trade war?

 

Our trade deficits are massive. Other countries need us more than we need them. The USA has been blessed with natural resources and intelligent people.

 

We could bring those jobs back easily with tax reform and import tariffs. Let's give it a try. Can't get any worse than it is right now. Globalism has failed American workers. No one is happy right now accept for banksters and the wealthy .01% 

 

Take notes Peter Schiff and Andy Hoffman. I know you globalist clowns are lurking here..

Never One Roach's picture

Much of the stuff made in China can be made in central america like clothing for example. that would help restore CA economies and maybe not so many latinos would want to come to the USA if places like Honduras created jobs there instead of AAPL and others creating jobs in China.

PorscheNoSub's picture

I agree in principle, but want to point out most of the textile (apparel specifically) industry, in general, did not end up in China but rather in Pakistan, Bangladesh, Indonesia, Vietnam, etc. My point is China isn't the only party we should be focusing on although at times I think they are the disproportionately blamed for certain sectors i.e. we aren't really importing heavy equipment on a large scale from China. 

 

To me, the H1B assault is equally as important to curb the outsourcing to India and the Philippines. 

Stef1304's picture

Since the USA exist, it almost always was at WAR. And since 9/11, it's been an ongoing multiple war.

That's a major non sense, if you consider the interest of american citizens.

And if u believe, that in the past, there was no trade war going on, at the same time; then u are really naive... 

LOL

For example, product from the much larger US market, compared to the french, or german market were already cheaper and the companies bigger and stronger.

Now, what did change in those more recent trade wars?

Various decisions made by american oligarchy to destroy their own country's industrial assets, for example, by dropping the gold standard, using dollars instead of gold in the world economy, over deregulating their own financial "industry", transferring their own industries to foreign countries, etc.

In short, destroying their own economy through their moron short sighted and fake money policies.

It always was and still is a very dumb and suicidal approach to economy. 

Obviously, the winners are those "third wolrd" countries oligarchies who got their own benefit out of it, lucky for them.

The looser obviously are the US citizen.

And of course, all other europeans citizens too.

And it's a heavy price to pay for some cell phones, junk food, dumb tv program and other cheap clothing...  

Now, you cannot blame the chinese, the japanese or anyone else for that.

But, you CAN blame US dummy/perverted/unwise leadership, driven by Wall street, the fat and short seeing industrial military complex, and the Hollywood media industry.

Also, guess what will happen next ?  

The Empire will fall, as the USSR did.

Even if those so called "elite" takes over the rest of the world (which already did happen, through the copy paste of their way of living & thinking, all over the world), truth is they are doomed to fail/fall. 

Obviously there will be no way around that.

The more overbearing they act, the harder their fall will be.

 

Justin Case's picture

It was really good for the .5%, they ain't complainin. Happend to Germany, Russia, Italy and many other countries throughout history, but the reasons are all the same. The parasites killed the host by letting them into the banking system. Soon they will be feasting on China.

lucitanian's picture

You're an idiot!

You might bring the manufacturing back with billions of investment (from where?) in robots, not people. Who's going to tool up to use expensive manual labour?

So who makes the robots? Principally Japan and China. So, the tariffs insure the robots will cost more and as your economy will decline further anyway, who is going to buy the now more expensive products made in the USA. The robots won't!

Your opening presumption "Other countries need us more than we need them. " is total hyperbolic BS and not backed by statistics on trade.

I've read your stupid comments for the last couple of days and can suggest that you should stop and first read a little on the matters of global trade and the interdependence of economies and investment.

Terms like "globalist" and "isolationist" are loaded and should be qualified by those who know what they are talking about. North Korea is "isolationist". Is that how you see the US in a couple of years, cus that's where your heading (a country totally dependent on the authority of the central government and a military).

Anon2017's picture

Smoot-Hawley Tariff 1930, which led to a major bank collapse in Austria in 1931 and massive unemployment in Germany in 1932, leading to the rise in popularity of the German Nazi party.

Oil embargo on Japan 1941, preceded by a number of anti-Japanese trade measures from 1938-41.

Justin Case's picture

Banking collapses are orchestrated events by the banks. They did it Germany twice before Hitler came to power and took away the authority of the banks to print the country's money. oooh that pissed off the bankers so much so, they went to woar on Germany, no matter how hard Hitler tries to avert it. Churchill encouraged Polad to attack Germany to start the conflict. Rudolph Hess even flew to GB to meet with Churchill with a peace proposal to avert any woars. They shot his plane down and locked up Hess without a trial or access to lawyers. He never talked. The deal was if he did they would kill his family. So he died with the truth, for his family.

JailBanksters's picture

China just has to stop making eye phones and mops, and we bwing uhmewika to dare knees.

 

Kayman's picture

China talks pretty brave while hiding behind the Yuan peg to the USD.

And that freely traded gold bars for Yuan sounds like a heck of a good idea. Let's get on with it. Charles DeGaulle is smiling in his tomb.

Toxicosis's picture

And North America talks pretty big when most of our everyday products come from China.  Fuck with China like this and cut off the hand that feeds you.  But if you can do without most products now on store shelves than good for you.

Justin Case's picture

Sounds pretty ignorant to blame China for merica's loss of manufacturing. The thousands of corporations suppling goods for export are non-other than merican corporations that left merica. They relocated to the largest market in the world for their products. They are also closer to the second largest market in the world, India. Merica would only be cutting off their nose to save face with a trade woar. China has a population of 1.41 billion people and India has 1.35 billion people. That is about 10 times the size of merica. The merican corporations operating in China will suffer losses.

OBOR will keep those corporations there as the project is worth billions and will open markets to millions of isolated people when completed. Unfortunately merica thumbed it's nose at participating, prefering woar mongering for the MIC.

blindfaith's picture

 

 

Does this mean the Dollar Store will now be Two Dollar Store?

Never One Roach's picture

It may mean those $10 million seattle homes are gonna be $5 million (or lower) real soon.