Trump Warns Xi: Trade War With China Begins Monday

Tyler Durden's picture

As if there weren't enough geopolitical and social stress points in the world to fill a lifetime of "sleepy, vacationy" Augusts, late on Friday night President Trump spoke to Chinese President Xi Jinping and told him that he's preparing to order an investigation into Chinese trade practices next week, according to NBC. Politico confirms that Trump is ready to launch a new trade crackdown on China next week, citing an administration official, a step that Trump delayed two weeks ago under the guidance of his new Chief of Staff Gen. Kelly, but now appears imminent. It is also an escalation which most analysts agree will launch a trade war between Washington and Beijing.

As Politico details, Trump on Monday will call for an investigation into China over allegations that the nation violated U.S. intellectual property rights and forced technology transfers, the official said. While it's unclear how much detail Trump will get into in the announcement, administration officials expect U.S. Trade Representative Robert Lighthizer to open an investigation against China under Section 301 of the Trade Act of 1974. The ordering of the investigation will not immediately impose sanctions but could lead to steep tariffs on Chinese goods. Trump has expressed frustration in recent months over what he sees as China's unfair trade policies.

As we discussed two weeks ago, Trump had planned to launch the trade investigation more than a week ago, but he delayed the move in favor of securing China's support for expanded U.N. sanctions against North Korea, the senior administration official said.

The pending announcement also comes amid heightened tension between the United States and China, even after the Trump administration scored a victory in persuading Beijing to sign onto new United Nations sanctions on North Korea. Still, Trump has delayed trade action before, amid pressure from business groups and major trading partners:

Two Commerce Department reports examining whether to restrict steel and aluminum imports on national security grounds were expected by the end of June but have been bottled up in an internal review. Trading partners raised threats of retaliation and domestic steel users complained of being hurt by price increases and restricted supply.

The trade investigation will immediately strain relations between the U.S. and China as the two countries wrestle with the unpredictable situation over North Korea.  Should Trump follow through, the move will lay the groundwork for Trump to impose tariffs against Chinese imports, which will mark a significant escalation in his efforts to reshape the trade relationship between the world's two largest economies. In other words, even if there is now conventional war announced with either North Korea or Venezuela, Trump's next step is to launch a trade war against China.

"The United States government can, and does, work with countries to address serious concerns such as North Korea while also pursuing measures to address economic concerns, such as the theft of U.S. intellectual property," a U.S. National Security Council official said.

It wasn't immediately clear how China would react to the move.

When reports of the potential trade investigation first emerged more than a week ago, China's Commerce Ministry stressed the importance of U.S.-China trade ties and of resolving differences "through dialogue and consultation."

 

"We would like to emphasize that the Chinese government has always attached importance to intellectual property protection," a spokesman said. "The results are there for all to see."

Trump, who has been residing at his golf club in Bedminster, New Jersey, for the past week, plans to return to Washington on Monday to officially announce the trade investigation. The decision will not only take action against alleged Chinese violations of U.S. companies' intellectual property rights, but could also be perceived as an attempt by the U.S. government to crank up the pressure on Beijing to rein in North Korea. "I think China can do a lot more," Trump told reporters on Thursday. "And I think China will do a lot more."

As CNN adds, the trade investigation is expected to be only one part of a multi-pronged push by the Trump administration to counter perceived Chinese trade abuses.  The administration has been eyeing other moves to rebalance the U.S.-China trading relationship. But analysts have cautioned that Trump faces a huge challenge in his desire to significantly reduce the U.S. trade deficit with China, which last year stood at more than $300 billion. "Protection measures against some specific items, such as steel and aluminum, may gain political favors, but are not likely to be of much help to rebalance trade," economists at the Institute of International Finance wrote in a research note this week.

* * *

Meanwhile, as we reported previously, China state media signaled the nation would hit back immediately 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 IMF 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.”

And while we await the formal announcement on Monday and China's retaliation, below again is a breakdown of the biggest US state winners and losers if and when trade war with China breaks out, from "Winners And Losers When Trade War Breaks Out Between The US And China"

* * *

Who stands to lose - and win - if the U.S. takes aim at the unbalanced trade relationship with China? With total bilateral trade of more than half a trillion dollars a year, the list of potential losers is very long as Bloomberg analyzed recently. The most notable examples include:

  • U.S. companies such as Apple Inc., which assemble their products in China for sale in the U.S., and those tapping demand in China’s expanding consumer market.
  • U.S. agricultural and transport-equipment firms, which meet China’s demand for soy beans and aircraft.
  • Manufacturing firms from the U.S. that import intermediate products from China as an input into their production process.
  • Retailers including Wal-Mart Stores Inc. and the U.S. consumers that benefit from low-price imported consumer electronics, clothes and furniture.
  • Other trade partners caught in the crossfire of poorly-targeted tariffs. On steel, for example, U.S. direct imports from China account for less than 3% of the total -- below Vietnam.

And while conventional wisdom is that the US has a chronic trade deficit with China - it does - the U.S. also runs a nearly $17 billion trade surplus with China for agricultural products. China consumes about half of U.S. soybean exports, America’s second largest planted field crop. Soybean farms are mostly located in the the upper Midwest (Illinois, Iowa, Indiana, Minnesota and Nebraska). The volumes are so significant that a spike in soybean exports was a noticeable contributor to GDP growth in the second half of last year as readers may recall. China is also a major buyer of U.S. aircraft, perhaps the only areas of manufacturing where the U.S. retains a competitive edge (though not for much longer). The U.S. also has an $8 billion dollar trade surplus with China in the transportation equipment category.

U.S. Trade Balance With China by Product

How about geographically?

It may come as a surprise that on a state-by-state basis, eight U.S. states are running surpluses with China, six of which supported Trump in last year’s presidential election, including West Virginia. In 2016, Louisiana registered the largest surplus, at 2.9% of the state’s GDP. Louisiana’s exports to China are likely inflated given that 60% of U.S. soybean exports are shipped through the Gulf coast. Washington state was second at 1.6% of GDP, largely due to aerospace exports.

Tennessee maintains the largest trade deficit with China at 6.5% of GDP, meaning tariff-induced increases in the price of imports could have the biggest impact on this state.

The biggest losers? Mississippi, Georgia, Illinois and  California, all of which maintain deficits at more than 3% of GDP.

For the sake of brevity, we will not discuss another, more troubling, aspect of conventional wisdom, namely that trade wars almost inevitably lead to real wars. Aside for the US military industrial complex, there are no winners there.

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ElTerco's picture

I find it curious that the Trump supporters are awfully quiet. Where are all those #MAGA and "Trump is playing 10 dimensional chess" comments we usually see?

Ace006's picture

I'm betting that you find a lot of things curious. 

NobodyNowhere's picture

China declared that it will not follow any international manadate with regard to the islands it is illegally building in the SCS.

The West should return the favor in all trade deals and impose 50 per cent tarriffs on Chinese goods.

But that would need a Congress that isn't corrupt, or compromised.

oobilly's picture

illegally? You only own what you can protect.  USA is weak.

rwmctrofholz's picture

So long as we can keep exporting worthless piece of paper in exchange for tangible goods, let's keep on, keeping on.

DemandSider's picture

Those "worthless pieces of paper" are debt which that Orwellian communist dictatorship can use to buy up the U.S., or at least make real estate too expensive for most Americans too afford without even more debt.

Ace006's picture

How rude you are to point this out.

jomama's picture

Is NBC and Politico real news again?

HoyeruNew's picture

haha expect a VERY VERY VERY BAD x-Mas if The Orange Buffoon starts shit with China right now. The x-mas orders are just stareting to be packged and shopped. But don't tell the Orange idiot that, keep it a surprise for next January. Whatta maroon! as Bugs Bunny used to say! LOVE  the Orange Buffoon to fux up all the retails! Go for it!!!!!!!!!!

DemandSider's picture

A 1/2 $trillion trade deficit here, a 1/2 $trillion trade defict there, pretty soon we're talking real money. But, seriously, I voted for Trump, and I know he's in too deep to pull off a real trade war. I wish he would, but, he won't, because he can't. At least he gives it lip service.

Ace006's picture

The word "orange" seems to strike morons as the epitome of witty insight. Why is that?

Man-Bear-Pig's picture

We have been in a trade war for over a decade!

We are always taking it up the ass from the chinks.  It is about time a president did something.  This is why I voted for him!

What would Hillary do to close the gap in trade?  What would she do to protect American companies from the predatory chinks?

Answer: NOTHING.

platyops's picture

It is about time. China has been making a fool of Americans for too long! Now they will not help with Kim Jong "Crazy". Then we stop buying their tennis shoes. See how long old Kim lasts if we start making our own toys and games and washers and dryers and etc.!

Ace006's picture

Surely you're not suggesting we make our own doggie toys again!

Fake Trump's picture

Doggy style using vibrators made in China. 

tuetenueggel's picture

Americans are fools. Entire world knows besides Americans themselves ?

Wake up.

DemandSider's picture

Yet, so many keep coming, and so few want to leave, even PRC residents.

Silver Savior's picture

Don't piss China off Trump!

Ace006's picture

Wrong. It's time for foreigners to say "Don't piss off the Americans."

But of late we've been enganging in dumbass, murderous nation-building and hideously expensive pointless wars of choice because Israel wants us to do the fighting for them.

We're not a serious people. Solzhenitsyn said, "Live not by lies." But we do.

tuetenueggel's picture

China will piss on US if they want.

massbytes's picture

They could bring out their one aircraft carrier. Pretty scary.

Fake Trump's picture

Unload their treasuries holdings. America will be in trouble for sure.

Fake Trump's picture

Trump is pissing off the whole world including many Americans.

CJgipper's picture

I'm glad that the assholes that hate america are pissed off.

Lost in translation's picture

China is being scapegoated.

Is the government there, ethical? No.

Honest? No.

Run by psychopaths? Yes.

SAME AS THE U.S.

China was Made in the US if ever any country was, anywhere. It was Western policy makers, Western industrialists, and Western bankers who SOLD OUT THEIR OWN FELLOW CITIZENS, and created the behemoth that China is, today.

Yet now, that same, treasonous pack of money changers - the very same lying filth that created China as a modern power - expects us to embrace the hate being promoted through their corporate MSM agitprop machine?

Nope. They can shove it up their behind with broken glass.

The real enemy is not found in Beijing or Shanghai; they are found in Washington, D.C. and New York City.

Ace006's picture

America was indeed sold out.

Nothing was done to ease the tax and regulatory burdens on U.S. business. No. The decision was msde to move tens of thousands of our factories to a communist dictatorship and strategic competitor with an impossible language and gouging by the national government.

Cheap foreign labor was encouraged - encouraged - to enter our country to steal jobs from Americans suffering from dreadful unemployment. Foreigners took choice university dlots and Silicon Valley scum lapped up H1-B labor.

tuetenueggel's picture

Whose mistake it was ? Those who offered cheap work to keep their population feeding ?

Or those, who only wanted to maximise profits, but knowing what could happen.

Japan was an example long ago.

DemandSider's picture

No, it was the combination of non profit state ownership, the over valued dollar, Wall Street selling of democratically funded technology to the PRC, total lack of regulation, free speech, and democracy, and, lastly, low wages.

tuetenueggel's picture

China was a great nation, when USA-Forfathers still were creeping through european jungles thousands of years ago. Go on joking, guy.

DemandSider's picture

  Absolutely pointless comment. Thousands of civilizations have come and gone. Just say you like The PRC and be done with it.  

wizteknet's picture

I'm all for a trade war, already own enough china crap but 1 more hd, as far as the rest I don't need it, so don't care if the prices skyrocket. 30 dumpsters at apartments dump working crap that even the cleaners don't want anymore at the end of the month if I get really desperate. Learned this years ago when aluminum was actually worth scrapping for.

Manipuflation's picture

I saw one of these Camaros today and I fell in love with it.  SS version.  Government Motors finally figured it out?  That price tag isn't too bad because we already paid for it.

  http://www.chevrolet.com/performance/camaro-sports-car

For that money, I am tempted.  It is just a gorgeous car with attitude.  If you see one you will know what I mean.  If I bought one I would drive it home and then have to rent another garage and I would park it there.  Pretty soon my daughter would want to drive it.  No,it can't be driven, ever.  That one goes to 11 because I bought the ZL1 supercharger package. 

DemandSider's picture

2017 is the 50th anniversary of that car, and it looks more like the first one; not overdone like the 70's and 80's cars, and it's made in Lansing. I hope to God it drives as well as it looks for you.

tuetenueggel's picture

A tin Lizzy with quite a new hood ?

DemandSider's picture

Not unless you can find a tin lizzy with:

  • Driver Air Bag
  • Passenger Air Bag On/Off Switch
  • Passenger Air Bag
  • Rear Air Bag
  • Side Head Air Bag
  • Rear Head Air Bag
  • Side Air Bag
  • Rear Body Air Bag
  • 4-Wheel ABS
  • ABS
  • 4-Wheel Disc Brakes
  • 4-Wheel Drum Brakes
  • Front Disc/Rear Drum Brakes
  • Brake Assist
  • Electronic Stability Control
  • Auto-On Headlights
  • Daytime Running Lights
  • Child Safety Locks
  • Integrated Turn Signal Mirrors
  • Night Vision
  • Adjustable Pedals
  • Rollover Protection System
  • Front Tow Hooks
  • Rear Tow Hooks
  • Traction Control
  • Emergency Trunk Release
  • Blind Spot Monitor
  • Auto-Leveling Headlights
  • Lane Departure Warning
Dump's picture

Trump (US) is outgunned and outmanoevered.

CHina have said pick a fight with NK and you have a fight with China.

Trump (US) has nowhere to go but saves face with call for trade sanctions.

The NK issue is off the table - US will not initiate, and neither will NK.

DemandSider's picture

We're all so tired of the bizarre, hackneyed NK threats to extort more toilet paper, crackers, and feminine napkins from normal countries, it's kind of entertaining to see a president go toe to heightened toe with one of these little sawed off NK psychos. Trump's from Jersey, f'getabout it. That's just the way they talk, sometimes.

tuetenueggel's picture

Trump is no politician but a clown who plays the role of one. He should change into a vaudeville theatre.

DemandSider's picture

Yes, unlike the usual red/blue team's corporate puppets, he tends to telegraph his moves, so he scares me less.

unklemunky's picture

Ok. You bet. Educate yourself retard. The biggest challenge ping pong will have will be not getting murdered by all of those freshly minted unemployed chinks. China is a fucking mess. Makes US look like we know what we are doing. We always have the Europeans..............hahaha. I just kid you. Most of the eurofags are either buttfucking someone, or they are about to. The real difference between America and the rest of the world is that when we go to war, we are fighting for something we love. The rest of the world armies go to war with a bayonet pressed in their backs.

tuetenueggel's picture

The only language US-Morons understand.

BritBob's picture

China – Argentina – the Falklands

In tune with Macri's words, Xi Jinping thanked Argentina "the support they have given us for our claim of a single China as we support theirs for the Falkland Islands."  (Telam 17 May 2017)

How can Argentina claim the Falklands when she has never legally owned them?

Falklands- Never Belonged to Argentina:

https://www.academia.edu/31111843/Falklands_Never_Belonged_to_Argentina

 

 

Truthoutthere's picture

Snore
Britbob,don't you have a hedge to trim or something?

tuetenueggel's picture

He´s on Erdowahn´s trip:

Both cannot forgett that their empires definitely are gone.

Long long ago.

shrimpythai's picture

Brit Bob - I need Shrubberies - we are the Knights who say NING - get me a Shubbery ! 

Truthoutthere's picture

600 years age Da Vinci was a wildcard.70 years ago Nicolai Tesla was a wildcard.Now 2017 Donald Trump is a wildcard.Caaaan yooouu dig it?

Ace006's picture

Trump figured out that it isn't holy writ that the U.S. has to be everybody's bitch. This is the opposite position ro that of the political class.

tuetenueggel's picture

On thing only that they don´t have in common ?

Leonardo da Vici and Nicola Tesla weren´t idiots.

Miss Informed's picture

The value of wildcards are in a real nosedive.