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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SybilDefense's picture

How will this affect Chinese internet stocks like BZUN, Baba, Bauidu, Momo, YY. 

Bzun= shopify (us intellectual property?)

Baba owns %30 BZUN, sell lots of cheap Chinese crap

Baidu = Google

Momo = tinder

My Chinese holdings have been propping up my mining shares when they get hammered. Now with both getting beat up, time to sideline and sit on the stack, with a daily look at YANG 3x china bear?

 

 

Maestro Maestro's picture

The stock market is only a gauge of the stupidity and criminality of mankind. Miners only strive to supply gold at below cost to markets to prop up the bankers' fiat. Putting money into miners is the same as putting a bullet in your head.

Don't do that. Sell all your miners and buy gold coins. I like platinum myself.

Anteater's picture

Modi has 10,000,000 ounces of 24KT India(n) gold to sell for every 1 ounce bullion you want to buy.

China has 10,000,000 ounces of 18KT gold plated tungsten coins for every 1 coin you want to buy.

Phyz stopped being 'the only real store of value' the moment Goldman launched GLD/SLV Scheme.

You're paying a 35% buy:sell premium on coinage, then selling into a market flooded with old 24KT.

The WORST investment returns of the past five years. Phyz, ladies and gentlemen. The bright stuff.

Maestro Maestro's picture

Even in the US, you can buy and sell gold with a 1% cost each way, if you make an effort to find a non-Jew coin and bullion seller. 1 percent is the international norm in exchanging Jewish fiat for real money.

FU in Advance's picture

Dig up Slick Willie and ask him why he publicly sold out the U.S. to the Chicoms, and why he privately sold intel to build up the Clinton slush fund. Oh, wait, he is still above ground. Maybe we can ask Ron Brown.

idontcare's picture

.... and yet, on August 3, 2017, Obamacare still exists......

Let's get on with this shitshow and nuke D.C. already!

 

 

Pullmyfinger's picture

Trump is at war with the Deep State, not the Chinese, nor the Russians. This is why he signed off on the idiotic congressional sanctions bill: in order to initiate a full-on trade war with Russia, which will, in turn, dramatically weaken the current US currency. The same will occur in the case of any trade war with China. But this is to be viewed as a good thing in spite of the enormous pain this will cause, because the whole point of a simultaneous trade war with both Russia and China is, of course, to set up the destruction of the FRN "petrodollar" in such a way as to ensure that the blame falls directly on the banks themselves while, at the same time, utterly castrating the deep state neocons and their congressional neoliberal lackeys, whose agendas are utterly dependent on mountains of illicit cash. 

Knowing that he would have to take the country through the eye of a storm that is actually being deliberately generated by those behind the Central Banking system, this is why Trump repeatedly asserted during his election campaign that he was the "King of Bankruptcy." Trump is taking this country back to a gold standard in the only way he has available: by ramping-up a war against the Khazarian/Rothschild mafia in such a way as to ensure the bankruptcy not of the United States itself, but of the entire organizational pyramid of the Deep State banking system.

Ironically, it's a government conspiracy! ; )

Maestro Maestro's picture

Trump is an evil and stupid creature. He's no champion of truth and justice.

He's just an average piece of shit of an American.

And the only good Americans can achieve is mass suicide.

And you,

You are a liar.

Dr. Acula's picture

"ramping-up a war against the Khazarian/Rothschild mafia"

It's true, he's warring against his own cabinet and children. Tri-dimenchess.

Pullmyfinger's picture

A beautifully played, strategic Kubuki theatre of distraction... 

PrivetHedge's picture

You think Trump is being smart.

I think he's been overwhelmed with the reckless abandon the dual-nationals have for the US and has been totally neutralised apart from the odd feeble tweet.

He's like a bird that's just flown into a window and is still quite dazed and confused, with the cat pushing him about from curiosity.

Savvy's picture

No one put a gun to Americans' heads and forced them to buy Chinese crap. You did this to yourselves. I'll add no one in NAFTA benefitted in any country except the top 1% quit acting like others that got screwed over as much as you are your enemies.

Blanco Diablo's picture

That is the same as No one put a gun to Americans' heads and forced them to buy Monsanto GMO crap.

Try to find a food product that doesn't contain this crap, unless you grow it your self.

Pullmyfinger's picture

I gave you a thumbs up, though I partially disagree. The masses are easily manipulated and have little recourse when faced with a united front of corruption involving the mainstream media, corporate-owned politicians, and bank controlled "national security" organizations, who have progressively worked towards the impovershment of the general citizenry, because they are then much more easily controlled. The gun is nevertheless there, invisible as it may. 

Lost in translation's picture

Trade wars beget shooting wars.

Dr. Acula's picture

USSA is like Master Blaster from Beyond Thunderdome, except in this timeline, Master (Israel) is also retarded.

Bill of Rights's picture

http://www.foxnews.com/politics/2017/08/03/5th-trump-judicial-nominee-confirmed-outpacing-obama-bush.html

 

President Trump has outpaced his immediate predecessors when it comes to having his choices for federal judgeships confirmed.

The Senate this week approved a fifth Trump nominee, placing Trump on a faster pace for approvals than either President Barack Obama or President George W. Bush.

Most recently, Alabama lawyer Kevin Christopher Newsom was confirmed to a seat on the 11th U.S. Circuit Court of Appeals, on a 66-31 vote, with 16 Democrats joining the GOP on the affirmative side, the Washington Times reported.

 

wining!

bshirley1968's picture

More like........Grasping at straws! 

Judges, lawyers, congress......sharks taking care of sharks.......no matter their party affiliation.   Oh, yeah!  I take a lot of comfort from that.  Lmao!

Grandad Grumps's picture

So, Trump is planning on shutting down consumerism, WalMart, Cell Phones, etc. in the US?

That does not seem smart.

Dr. Acula's picture

For us, he wants the opposite of Consumerism: Starverism,  AKA death.

Pullmyfinger's picture

All of the same products that American corporations manufacture in China, are actually available from a variety of other countries, Grump: india, Japan, Sweden...

Dr. Acula's picture

Yeah, the Ricardian Law of Comparative Advantage continues operating even for arbitrarily small parcels of land.

Pullmyfinger's picture

Sorry, but I don't understqnd how that principle applies to "small parcels of land"? Pretty funny though. Might make a good basis for a SNL skit.

J J Pettigrew's picture

You want to see inflation?  

Cut off the importation of Chinese cheap labor produced items.....

that includes just about everything....

El_Puerco's picture

GOOD ONE!...Sir

 

Saludos...

 

markar's picture

You want to see hyper inflation?

Watch all the USD no one around the world wants anymore come rushing back to our shores.

sparkadore's picture

In Brazil, import tariffs basically block importation of most anything.  Therefore one must rely upon Brazilian products, made of weak materials, engineered badly, distributed inefficiently.  China sends the bad quality stuff to Brazil.  I swear, anything you buy, any service performed, check the bolts.  It must be illegal to actually tighten bolts in brazil...or are they lazy...everything brazilian made breaks down in three months.  The frig, the washing maching, the hot water kettle, everything is shoddy.  But I love the language and the people.

What about fair trade?  Figure out how much a chinese producer saves not complying with USA regs, add that onto their cost, and level the playing field.

Maestro Maestro's picture

I drove a made in Brazil VW Fox for a couple of years in Los Angeles without any issues, except not getting any pussy for a couple of years.

Raging Debate's picture

JJ - Yes, 30% inflation in the shor term followed by 50% wage inflation over several years. Ill take that deal. 

attila404's picture

Trump's entire presidency should be about one thing and one thing only. The list I posted above replaced with this: Do away with the 19th Amendment. Only Net Taxpayers (i.e. most women should not), and veterans be alowed to vote. This will fix the Welfare state, and all the problems deriving from it.

 

Note: I see I'm being downvoted by the freeloaders. 

Pullmyfinger's picture

Zerohedge has a high profile among the alt-media; consequently, it's infested by paid trolls. Pay no attention to the downvotes. If they could actually muster a moderately intelligent reply, they would. 

El_Puerco's picture

" Listen Steve, Jared was telling me about a special place he has
for you, it is called the fatted calf......"

" The Real Reason Anthony Scaramucci Was Fired"

" The Solution to Lost Afghanistan Mr. President"

{ I love nuclear bombs Mr. President, love nuclear war and love to 
start multiple theater nuclear wars. }

https://youtu.be/wbQ4m-NqeF8

Every thing is in The MATRIX...

Saludos...

 

 

 

 

 

https://youtu.be/wbQ4m-NqeF8

goldenbuddha454's picture

All this could have been avoided had China dumped N. Korea, but nooooooo they just had to have that cheap cheap cheap N Korean labor.  None of this is due to stealing of trade secrets from US companies.  They've been doing that since Clinton.

historian40's picture

China has all the labor force they need.  It's more about not wanting the zionist empire parked right on their border, as they have Russia when the Council on Foreign Relations- US State Dept overthrew Ukraine and installed a puppet regime.

PrivetHedge's picture

Why should China 'dump' NK?

They are not our vassals.

They view our hopping up and down for a conflict with NK in the same way the rest of the world does, with cynicism, dismay and irritation.

historian40's picture

Trade war for microsoft and hollywood?  "Intellectual property".

Blanco Diablo's picture

Tesla in the news: is Elon Musk looking for refugee laborers?

Frankly, hiring refugees is a great business model. First, salaries can be kept low because refugee families are subsidized by US taxpayers (housing, food stamps, medicaid) and refugees can hardly complain because they are captive workers who can’t easily go home or easily move elsewhere (Somalis are the exception).

Nevada where refugee contractor, USCRI, cited Elon Musk’s nearby soon-to-be-built battery factory as a source of employment for refugees to be placed in their new resettlement site—Reno.

https://refugeeresettlementwatch.wordpress.com/2017/08/01/tesla-in-the-n...

wobblie's picture

Suicide by Success: When a superpower destroys itself due to the blatantly stupidity of the masses, and their subsequent inability to protect the system against ruling class excesses.

https://therulingclassobserver.com/the-ruling-class-preservation-society...

Anteater's picture

Tennessee, I love it. They're importing Chinese whiskey aged in kimchee barrels

and selling it to Americans as 'Bottled in Tennessee' for 1200% mark-up, which is

the retail markup of all Chinese goods, 600% to 1200%, already packaged and

bar-coded and custom labeled in six-packs or twelve-packs, the US retailer just

rips the bag open, racks the crap, and sells it to you, per item, what they paid for

the entire bag. But they still can't make a profit, because some other retail has

cut the markup, and has an even cheaper China supplier that uses Vietnamese.

So we have a billion slaves making gew-gaws for 350,000,000 slaves, and One

Ring to rule them all, the Fed Khazars who control the flow of fiat paper money.

Meanwhile the private Trump:Kushner $4B hotel:casino deal with China rolls on.

They're just controlling dissent and managing expectation from this point on.

WINNING!

Joe A's picture

What would be a worse situation, the masses in the US without cheap stuff or the masses in China without food?

gunzeon's picture

you serious ? cold rice and a little rat meat's all they'll want

 

Joe A's picture

Bejing fears one thing only, that the hungry masses with nothing left to lose march on it.

Laughing.Man's picture

Washington fears one thing only, that the hungry armed masses with nothing left to lose march on it.

Maestro Maestro's picture

So the Chinese can't eat if they don't give away their goods and services for free? (FYI, dollars are illegal quantum particles with zero nutritional value.)

Fuck the CIA for coming up with offensive drivel like this.

silverer's picture

At this point, I think Trump should stick to more mundane things for the next six months. Focus on getting trustworthy non-leakers into the circle. ZH'ers should apply for those positions, because everyone in DC is a connected crook.

El_Puerco's picture

This happened because she was a crypto Jew, masquarading as a Christian, to damage Christianity and infiltrate prominent Christians, and she did that job VERY WELL.

 

WH

 

Saludos...

Maestro Maestro's picture

I didn't know Trump was a she. Thanks, I'll sell that info to the NSA for $5 a pound.

ToSoft4Truth's picture

Americans will get jobs....  working for Chinese labor wages.  LOL