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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3LockBox's picture

He met with China. Told them he would look the other way on their manipulation if they helped with the Norks.

There has been no help. Just empty threats and now they seem to be backing the Norks.

So the deal is off and he is going to take them to task for their maniputlation and theft.


The Mystic Seer's picture

I guess you haven't been paying attention. Trump trashed both Mexico and China on every campaign stop, and they deserve it. Time to screw them.

Lea's picture

China won't "solve" NK, because China is an ally of NK and likes it just the way it is.

BTW, NK is no threat to anyone. Leave her the f... alone and you'll be suprised at how little you hear about her. This mess is entirely the US doing.

Justin Case's picture

Conflict is the MIC favorite pass time.

DarkestbeforeDawn's picture

You couldn't be more wrong.  Leaving NK the fuck alone for the past 25 years has got us where we are.  Jesus-what do you do all day?

attila404's picture

He's fucking with all of them, make their head spin. Best way to deal with this Asian vermin.

Giant Meteor's picture

We are surrounded! 

By bullshit ....

DarkestbeforeDawn's picture

Who else?  Bring corporate tax rates down to zero and continue cutting regulations and drill for oil everywhere and Xi will be over here ball-sucking Trump in less than 1-year.

melodious's picture

After reading Shepwave i think gold will go to 1400 and then maybe reverse. 

radio man's picture

And China is sitting on a bunch of it.

ReturnOfDaMac's picture

Yep, you may be able to buy some shiny cheap!

HRClinton's picture

Nah, we're too dumb to stop subsidizing Chinese bullion purchases, by letting PM realize its true price.

The chicoms got all the right Price Fixers in their pockets. It's how they operate. 

illuminatus's picture

You mean a good opportunity to hammer gold into the dust?

tmosley's picture

Right up there with "how many angels can dance on the head of a pin", I'm sure.

yogibear's picture

Trump's China trade crackdown coming Monday

Better late than never.

Obama bowed to other leaders.

October 2, 2015

Once Again, Obama bows to China

China alway plays the American presidents as weak.

China was right. 

Countries like China only respect the strong.


remain calm's picture

Trump plans on bringing China down without firing one piece of artillery. They have soo much debt and zombie banks he knows to decrease their revenue does them in. Fuck the chinese. The USA consumer has created their wealth and we are about to take it away.GO TRUMP

Justin Case's picture

China doesn't have any external debt. They don't owe anyone.

I'll be happy with this trade woar. Those thousands of merican companies operating in China can go tits up for all I care. They left merica for profits.

remain calm's picture

The Chinese economy is a a mirage. You watch... The chinese know it and they will get their wealth out ASAP.. The only glue holding it together was our US dollar and that ain't worth much, kinda like Elmers glue holding their economy together, once thinks get a little wet, it is all falling apart. Those fuckers stole our jobs, they used our intellectual property and took themselves from a 3rd world economy to a modern one all wilth our stupid blessing and what did we get. QE, low inflation massive job losses and cheap shit at wal mart. It's time we change that path.

Dancing Disraeli's picture

You have nailed it, and with an economy of words, to boot.

Bay of Pigs's picture

Not disagreeing with you in general but I've been there and it isn't a fucking mirage. Shenzen was a town of 30k in 1980 and is now a modern city of well over 10 million. Fastest growing city in the world for a couple of decades. That is reality.

Thinking Trump can flick a switch on this situation and change it quickly is delusional. It isn't going to happen without a lot pain felt on both sides. War is a distinct possibility if it comes to that.

idahobandito's picture

Agree, but sometimes one must do things that are nessessary, but unplesant. 

Justin Case's picture

The Chinese economy is a a mirage.

Ignorance is bliss. No shortage of it here. Just haters from the failing empire.

therover's picture

They 'stole our jobs' ? How does one steal something when it is given to them ? 

Giant Meteor's picture

Global labor arbitrage, it's been what's for dinner ..

No respect for local customs, common culture. A break down of all societies worshipping mammon before all, or paying ultimate price for not doing so, as instructed. Combine the worst aspects of, the end game of crony capitalism, and so called "consumerism." A global system of wage and labor arbitrage, resulting in the spiritual. mental, physical control and the eventual death, just as deadly and destructive as any war, in which it finally must end  ..

Pity, all that was, and that was built as mirage, upon an illusion of "productivity," more resembing a well rehearsed game of three -card- monte, or pied piper circle jerks. No shortage of marks   ..

Cui Bono?

The rising tide that, in the end, had sunk all boats, via unrestrained, unrepentant top down corruption, of mice and men, useful idiots, and to devastating effect, the pernury of the once proud and majestic US "middle class." A faustian bargain struck, every day low low prices! , That ultimately, must once and for all, betray the entirety of the game ...


UselessEater's picture

The Chinese are beneficiaries if Ag21, the loss of WW2 -yes we lost WW2 and the international jew won. Anyone in America who resisted entering WW2 was called an "isolationist". Sound familiar? If you have not researched Ag21, Maurice Stong, Kalergi, et al... then you should. The Chinese have really struggles to dominate in Africa...seriously they are getting a lot of (((help))) the Africans hate them... listen to this for a better idea:

Dancing Disraeli's picture

White Christians lost WW2.

Just look at the History books inflicted on 'students'.

The winners always write 'em.

HRClinton's picture

In an "Alice in Wonderland" world of fiat money, it's a pointless and delusional exercise in comparing financial penis sizes.

In the end, what matters is who owns the Natural Resources, who has the bigger population, and who has enough nukes for the MAD deterrence. The latter ensures that a Conventional war is fought, where bodies matter, a la Genghis Khan style of conquest.

veritas semper vinces's picture

American  economy is a mirage. The only glue holding it together is the petrodollar.

It is an economy based on pushing PAPER.(financialPonzi schemes and rent extract from a disappearing middle class)=FIRE economy. That's all .And war industry.

500 Bil $ trade deficit /year.

20 T $ debt (externally owned,not internally like China)

No manufacturing industry .

96 mil people not in the work force and 50 mil on food stamps(this is almost the population of Germany )

People with no savings and uuuge amount of debt.

A real GDP wich is negative(in a depression).real inflation of 12-13%.Real enemployment 23-24%.

A population that has a huge percentage of fat,brainwashed,with no skills people.

And NO gold(the Chinese have probably 25,ooo-30,000 tones GOLD)

And you call THIS an economy.It is a POTEMKIN VILLAGE.

You make me laugh!

Why do you think they want so much a war? A big,beautiful war?

Justin Case's picture

Those fuckers stole our jobs

Wrong, yoar corporations fucked you over for profits and yoar Gov't helped the corporations by going to China to make trade deals (Nixon started it). China is the beneficiary of yoar stupid Gov't that was bought by the corporations. You are just a corporatocracy. Corporations feed Gov't, they are partners, while the minions believe it's China's fault that they are rich. While while Corporations and Gov't laugh at the ignorant populous like yoar self..

illuminatus's picture

'Those Fuckers' didn't steal anything, our so called representatives and wall street handed it to them, for a nice fee, of course.

Xena fobe's picture

Perhaps whatever advantage China offered is diminishing.  No longer profitable for the global monopolies to manufacture there. 

DaBears's picture

China owes external debts, $1.42 trillion according to China's SAFE. Enough "made in china" communist state run peasant propaganda. Now go back and make my cheap shit, 'cause your creditors don't take mao-noploy money for repayment and interests.

Bay of Pigs's picture

And how many trillions does the US owe?

Biggest debtor nation on Earth by far.

DaBears's picture

As much I despise reality, when US prints a USD note it's traded as if it's real money anywhere in the world, but with countries like China prints their mao-noploy money, no one takes their toilet paper outside of Asia. So therefore their Yuan based valuations are only good as the redeemable foreign currency communist one party holds.

Bay of Pigs's picture

That Is changing though. Russia and China and some other countries are trading in their own currencies now and not using the USD in those transactions.

idahobandito's picture

true, but a lot of other gimmedat nations benifit from it also from our "generous" CONgress giving tons of money away for free....(minus a small fee deposited into a swiss bank account) So other countries (gov) that recive the $, may not want the USA to collapse.

Justin Case's picture

benifit from it also from our "generous" CONgress giving tons of money away for free

Israel is the largest parasite with no benefit. Billions every year. Go cry to the jewish congress.

Justin Case's picture

If we are looking for evidence of communism in China, the first and most important place to look is at the economy. The economy in China is now decidedly capitalistic in nature. Average Chinese citizens can start their own businesses and put their income into private bank accounts. Chinese citizens can buy stocks in companies and enjoy the revenues or suffer the losses. As of just a few years ago, private property rights have been greatly enhanced in China, and Chinese people can now be more secure that their land will not be taken away from them. Let us not forget about the heavy international investment that has been permitted in China which has played a major role in fueling this developing and booming economy. As a result, there are very rich people and very poor people in China as well as an emerging middle class. Chinese citizens, who always carried a good sense for business but were restricted from entrepreneurship in the past have now been more free to take risks and build successful companies. Thus capitalism has transformed the Chinese economy and changed people’s lives forever.

Some people just can't understand that China now employs capitalist and socialist economic policies! Its ridiculous! How can people be so stupid! China has been reforming from communism for 30+ years now. So many people never change their mind, but never over something so stupid! its not like this is up for debate, 10 minitues on google will show anyone that China is no longer 100% communist.

The merican corporations are selling you SHIT that they make in China for you lemmings.

keep the bastards honest's picture

yep, 700 million middle class chinese

Justin Case's picture

how can anyone take you seriously when you use the language of a teen punk?

Bernie Madolf's picture

Hi, thank you for the big red X as your sig.

It allows me to quickly identify your retardation without reading

Wile-E-Coyote's picture

Make sure the flat tops are not in Pearl Harbour just like 1941, wink, wink, nudge, nudge.

BandGap's picture

Just in time for football season!

j0nx's picture

Chinese are used to butt boys like Obama grabbing their ankles when they enter the room. Now that a real man is running the show they don't know what to do or how to react. China better get their yippy chihuhua to their south under control before we do. And that is the new reality of things for them. Like liberals they are finding it hard to accept.

cowdogg's picture

Wow. " China better get their yippy chihuhua to their south under control before we do."

Couldn't find North Korea on a map if you had to. What are you wanting to do, start Vietnam all over again? Man the dumbasses are out in force about the Korea shit.

QQQBall's picture

Good, if Chinks want to throw their lot in with NK, so be it. They could cut NK off and bring them to heel, instead they tell us they will prevent us from attacking NK.


Fuck China. We need them for what exactly? Let then try to keep the peace with 2 billion hungry wogs. 


and Fuck NK too. they wanan shoot a missle over japan to w/in 25 miles of Guam. Fuck that. It was just a few months ago those missiles were exploding on the launch pad. NK should be nternally shunned, yet China wants to play tough. Fuck China. Let them eat their shitty drywall.

idahobandito's picture

I guess you remember when the imported drywall had too much formaldihyde (spelling?) in it and had to be ripped out of thousands of apartments and buildings a few decades back?