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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Whoa Dammit's picture

It's time to find out where your toilet paper is made. Looks like we could go full Venezuela since pretty much nothing is made here except Round-up, GMO seeds, and weapons.

CJgipper's picture

You're afraid because China makes shirty cheap electronics and all the US makes is the world's supply of food, weapons, ammunition, and heavy equipment?

 

You're a spineless yellow retard, and the reason our country is in such fire straights.  Come to flyover territory sometime.  We can tour shuttered plants, mines, and restaurants together.  You just might figure out what's going on inn the real world

Déjà view's picture

Potholed streets in dying cities such as Detroit...Youngstown...et al...pathetic!
Syrians would feel right at home...only thing missing IED's...

Check it out on YouTube...almost certain Chicom does not have such roads...

Whoa Dammit's picture

Look dude, factories don't just spring up overnight like mushrooms in a cow patty. Meanwhile all of the electronic components for those big ag machines out in our fields that you seem to be so proud of come from China. And it's the same for everything else. So no, if it gets bad you will not be eating or driving or wiping your butt for very long. 

Toxicosis's picture

People don't get this.  Bringing any sort of meaningful manufacturing back would take a decade or more if we started today and the energy input costs would be prohibitive not to mention that most corporations that make products would want to robotize everything in site to keep their labor costs low.  That in turn would put them out of business since hardly anyone is working to afford their products anyway.  Once we tell China to go fuck themselves we get nothing from them and our population becomes desperate and more destructive.  China has us by the balls, not the other way around.  But then again don't tell these uneducated and unobserving idiots none of that stuff.  They just won't accept it.  Critical thinking is done in North America by a long shot.

Justin Case's picture

China,China this, China  that.

It's not China. It's the merican corporations shipping their shitty products to merica. Just google merican corporations operating in China. hundreds pop up. They abandoned merican people for profit. The population of Asia dwarfs merica. Just China and India are ten times the US population. The corporations moved to the centre of the market which they supply. Chinese buy 10 times the number of cars the mericans buy (or should I say rent). Trade woar? Merica will be the loser, and their corporations operating in China will feel it. GREED and the unforseen concequences.

Ignorance is bliss's picture

On this path the U.S. Is going to be a low energy economy. We don't have sustainable energy, manufacturing, infrastructure, or demographics to grow out of this mess. Our world is built on ever available cheap oil..which we don't produce. Shale and tar sands are not long term economically viable. Just look at the balance sheets of the oil majors for proof. Mexico only has 10 years of proven reserves. Once we fall there is no getting back up.

Toxicosis's picture

You are right, but too many people on this site and the world in general have no concept of the limits to hydrocarbon reserves on this planet.  Normalcy bias is a dangerous thing to be stuck with.  But let em go I say, because most people have no idea what it will take just to save themselves once this realization sets in.  However, I don't feel realization will be realized, just persistent denial, right up until the point of death.

NickPeeMe's picture

Are we winning yet?

CJgipper's picture

No, we're against the ropes, but at least we finally noticed we are getting the shit beat out of us and put our gloves up to maybe block a shot or two.

Never One Roach's picture

I'm looking forward to that Clown Acosta asking Miller about China and laugh as Miller educates the CNN buffoon on that country also.

Kayman's picture

Acosta couldn't find China on a map. 

Question(s).  Is the Clinton Foundation still sucking in dirty Chinese money thru their Clinton-Giustra anonymous charity conduit set up in Canada to avoid U.S. law?  And why isn't the Department of Justice/FBI leaning on Canada to disclose the dirty donors?

Solio's picture

Families, children, fathers, water, air, and food quality are certainly not winning.

Mustafa Kemal's picture

"Families, children, fathers, water, air, and food quality are certainly not winning."

The MIC is definitely winning

So is AIPAC

GlassHouse101's picture

I think it's all starting to become clear. Trump, and his policies were put into place to be the fall guy.

"isolationism" is the reason why the United States failed. "We need to be united as one world! Globalism is the path forward!". .  We shouldn't be building walls! We should have NO BORDERS!!!

All this, of course will usher in the one world currency, one world government, one world leader.

RagnarRedux's picture

Not even N. Korea is wholly "isolationist," we could however endeavor to be noninterventionist.

Kayman's picture

"Not even N. Korea is wholly "isolationist," "

Perversely, you are correct. N. Korea is China's lap dog to provide diversion.

Son of Captain Nemo's picture

Chinaman not handing over his Gold for worthless ass paper to "round-eye" thief!

red1chief's picture

Peter Thiel has quite the intellect!

lester1's picture

We sell China food.

They sell us cheap plastic goods.

 

Fucking bring on the trade war!!.. Communist China will starve and collapse!

Tienenmen 2.0 is coming!!

GlassHouse101's picture

What's it like being born yesterday? We sell them DOLLARS, we get all their products. . . China is the biggest agriculture producer in the world.

CJgipper's picture

Yeah, and my neighbor and I both quit farming because there's no money in it since US doesn't subsidise like outer Chinese competitors do.

 

Seriously, some of you should talk to real people in these industries at least once in your lives instead of acting like you know everything 

bshirley1968's picture

"since US doesn't subsidise like outer Chinese competitors do."

I couldn't let that shit pass.  The farmers of this country are some of the biggest subsidized welfare recipients on the plant.  And I know......first hand.

One word for your crybaby ass.....Ethanol! 

Xena fobe's picture

Something here recently about sperm count in western nations declining by half.  No one can figure out why.  But we are eating Chinese grown soy. 

LOL123's picture

"After this investment, the controlling shareholder, Benjamin de Rothschild, held74.19% of LCFR, and BOC ( Bank of China) became the second largest shareholder. This was the first strategic investment by a leading Chinese bank in a Eurozone bank. According to the press note it put out  LCFR aimed  to accelerate its international development, notably in China, byleveraging the extensive distribution capabilities and substantial customer base of BOC , the 5th largest bank in the world Source Bank of China website

Bank of China is a Govt of China owned Public Bank Thus the Chinese Govt and the Rothschildshave in a sense become partners."

https://wideawakegentile.wordpress.com/2015/07/23/rothschilds-boc-and-40...

"We have recently become aware of an unregulated fundraising scheme in China calling itself “Rothschild Family LCF Project”. This scheme purports to be a fund for investment in relation to virtual currencies and the 'Internet of Things'. The fundraising scheme's online advertisement links to a website at www.hlcf586cn.com. The investors should be aware that the Rothschild Family LCF Project has falsely associated this financial scheme with the Rothschild name without authorisation. Rothschild & Co has no connection with this fundraising scheme. "- Rothschild.com 2017

Where there's a bank .... There is a Rothschild. Long term agreement.

Of course the ceiling debt is coming round in Sept. 29, 2017... What do Rothschild Federal Reserve majority shareholder care, they are investing in China....

 

Mustafa Kemal's picture

Thanks LOL,

I was wondering about that

soyungato's picture

Should the trade war comes to pass, people are going to cry uncle when the price of everything goes up. Got gold ?

Mike Masr's picture

Yes when Walmarts prices rise by 25%, 50% poor people will riot!

Xena fobe's picture

Prices are already high at Walmart and Amazon.

Anon2017's picture

Walmart stock has done well in the past 2+ years.

CJgipper's picture

Trade war started 20 years ago, we just have never fought back.

Déjà view's picture

42 years....last trade surplus...1975...

Xena fobe's picture

I doubt prices can be raised by much.  Consumers are stretched as it is. 

But other adjustments will occur.  Hopefully with less USD, Chinese demand for housing will decline, making housing more affordable.

China is starting to squeeze it's customers on price because it can.   Companies are going elsewhere anyway.

pc_babe's picture

Easier to start a TRADE war, than to expect Congress/Senate to get off their ass and enact legislation that:

cuts Corp Tax
cuts Income Tax
eliminates EPA, FDA, Dept of Commerce, Energy & Agriculture

zebra77a's picture

In a world that sees the middle class dissolve and economy stagnant due to explosive fiat debt - how much intellectual property can they participate in?.. Its like trying to sell Space Shuttle parts to an Amazon Tribe.. 

Thus all IP is self-limitig if it is not public anyways as Company A develops leading edge product that destroys Company B that closes down further makes  a small cut to gdp reducing eventually Companies A marke to operate in. 

Eventually all failed state fiat is so worthless the countries population ceases to accpet it, and at that point the society collapses.

Its like trying to sell advanced routers in Libya that only wants Toyota's with the heavy mahine gun mounts.. They dom't give a shit about a companies new vpn 2.0 on the router...

Guess everyone missed that part?

Zepper's picture

The Chinese bought the fucking Clintons... Obama wanted to open up Vietnam.. fuck these Bozos destroying peoples lives. They should all be in jail along with their RNC friends and partners in fucking crime.

 

I hope Trump drives the screws so far into china that they fucking meet in the middle!

Blanco Diablo's picture

Jihad John MexiCain is heavily "invested" in Vietnam also.

soyungato's picture

Schumer: " Jump."

Trump: " How high, sir ? " 

What is more pathetic than this ? People will vote for Schumer and the like again and again. 

Midnight Hour's picture

Well, China has taken the US for a ride for years now and the US has done nothing about it but just bend over and taking it up their Backside. Isnd it time to fight back! If Trump can get the EU to stand with him on China watch them go under quick smart.

Common_Cents22's picture

we are a net importer so we'll just buy less from China.   they lose.

CJgipper's picture

Fake news.

 

Real headline:  "US finally responds in 20 year old trade war with China"

Bai Suzhen's picture

Does this mean that an Epiphone will soon cost as much as a Gibson?  Or does it mean that Epiphones will be made in Mexico,  like Fenders?

CJgipper's picture

Mexico I hope.  Lots of normal Mexicans would probably prefer working for epiphone than the cartels.

Davidduke2000's picture

trump hates mexico he will make a deal like Foxcon, make the parts and assemble them in China, then put them in the boxes in the us which earn them the label of made in the usa

Sandmann's picture

That's the way to boost US inflation and raise interest rates. The Fed can start unwinding this Consumer Subsidy and start to pay real returns to lenders

lester1's picture

Has anyone been to Wal Mart lately? I have and bought just household essentials. I looked at the back labels and guess what?? Most of those essentials like soap, shampoo, dish soap, toilet paper, etc is all still made in the USA. Then the wife and I went over to whole foods and almost all the food is made in USA.. Yep that's right. EVERYTHING that we actually NEED is still made here. We don't need China at all.

So if a trade war we're to happen, American corporations could simply shift production of cheap Chinese made plastic goods over to Vietnam, or better yet Congress does tax reform and import tariffs and we see a tidal wave of jobs and production return to America.

 

How about it ?