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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Justin Case's picture

It's just merican shit built in China instead. There are thousands of merican corporations operating in China, you dim whits, that's why you don't have any good jobs there, just flippin burgers at McD.

You were sold out by yoar Gov't. Nixon made the first trip to China to open the doors.

johnnycanuck's picture

Fire and Fury!  NOW Sound and Fury!!!

JBilyj's picture

Solid article! China devalues their currency and it's obvious they steal every intellectual secret on the planet - I say PROSECUTE them!

historian40's picture

Heh, they steal imagined "intellectual property", while the US has been tearing across the globe for decades stealling real estate and resources.

Justin Case's picture

merica never steals. They take the scientists, like from Germany after WWII. Didn't procecute them boyz.

Wile-E-Coyote's picture

"Trump administration scored a victory in persuading Beijing to sign onto new United Nations sanctions on North Korea."

 

Assuming the Chinese will carry out these sanctions; not holding my breath.

Up to now where has the bankrupt state of NK been getting its materials, machine tools and know how to develop these rocket motors, assuming they weren't just supplied with the gear from you know who. They have come on a long way in a short period of time.

my new username's picture

Good. The Chinese are about to see their fake economy exposed as a paper tiger.

Rebelrebel7's picture

Has the Secret Service been adding PCP to Trump's water?! It causes immediate psychosis. I've seen people on it.

youshallnotkill's picture

He is acting no different than ever. When did the PCP plot start? Ten years ago?

Hkan's picture

Should have been done years ago. US and China under economical pressure worst timing possible. Still it's just a game of chess...but it can easily escalate into actions. 

Again diversion actions playing a game not knowing what will happen until it does. List of countries pissed off is comming to an end.

Isn't representative democracy a wonderful thing!? 

Greed is King's picture

Don`t you mean the list of pissed off countries is increasing ?, how many enemies does Trump want ?.

Hkan's picture

Just about no one left to piss off. List done....deep state done. Now...wait and see....

Xena fobe's picture

Let the international community be pissed off for a change.  Americans have been pissed off for 40 years. 

Justin Case's picture

It'll put a damper on US corporations operating in China, but then US is a small market relative to China, India and EU. That alone is over 3 billion people to merica's diminutive numbers of 300 mil. unemployed peasants.

I am Jobe's picture

Thanksgiving and Christmas is gonna be interesting for the sheeples. Hope they shit down Netflix as well. 

small axe's picture

this ought to really piss off the Deep Staters ... well done

Hkan's picture

This is deep state.

Diversion making US crash a roadbump busy fighting just about everyone. Deep state slipping under the radar....again

Justin Case's picture

it's because the USD is becoming irrelevant in the world. When that happens US will roll over completely.

Xena fobe's picture

Looks like one faction of deep state has a disagreement with another faction. 

BeepBeepRichie's picture

More tariffs, less income tax please

historian40's picture

You're kidding.  The US regime wants it all.

dufferin's picture

Any one who doubt that trump was the bottom of the swamp.may get a better overstanding by now

He is the same piece if rotten zionist turd...

After sending CIWhore to venezuella now he wants military optiin there, 

And this goone wants to go after china...

Can someone tell this cock sucker that china could put the US lower than its knees if it starts dumping their shitty US treasury...

That'll be fun

arby63's picture

We're all awaiting for China to jump whenever they feel froggy. 

Xena fobe's picture

I am shaking in my boots over the threat of dumped treasuries.  Let's all allow the globalists to use that threat to extort any kind of concessions they like.

 

Justin Case's picture

China won't dump the treasuries. They will fuck you up the ass with a lot of lubricant so that you will love it and when they finally pull out you will realize just waht happened.

Ignorance is bliss's picture

I think something big is coming, Maybe the long awaited Chinese oil contract denominated in Yuan. The next step could be removal of the petrodollar. The N.K. thing is a pressure point of contention just as the Indian border dispute is another point of pressure. it looks like the U.S. And allies vs. China and Russia for dominating influence in Asia and possibly Europe. There is a lot at stake. Could lead to a shooting war, especially if the U.S. Is on the short end of the stick.

MuffDiver69's picture

Laughable article. We use the enforcement mechanisms that are international law and author of this shit uses Politico,CNN and whatever bullshit to weave the doom and gloom ...This isn't some game. We are being ripped off and telling folks they have to play by rules is not a crisis..Weaving in some bullshit on agriculture exports is exactly the tactic of bought and paid for media or just plain stupid people..Yeah..There is going to be difficulty when a corrupt system is acted upon...The article should have focused on those who sold us out and not quote the Fake News that's part of it..Idiots..

Justin Case's picture

It wouldn't be politcally correct to point the finger at the enablers of US corporations moving to China to ship back their cheap shit for the merican consumers, that can borrow money to buy it.

US is a corporation, not a country and they will sell out their employees to make things cheaper else where and lend you money to feed those merican corporations in China

nicthstic's picture

Obviously Trump does not take warnings well.  China's fence sitting on NK has exacerbated this matter and the Prez wants no part of that.  So anyway, what's the big deal, we buy all of their stuff, so let's just make it here instead even if it doesn't create a large number of jobs due to robotics and AI.  

nicthstic's picture

Obviously Trump does not take warnings well.  China's fence sitting on NK has exacerbated this matter and the Prez wants no part of that.  So anyway, what's the big deal, we buy all of their stuff, so let's just make it here instead even if it doesn't create a large number of jobs due to robotics and AI.  

CheapBastard's picture

More wars going on all over such as Walmart vs Amazon. However, Amazon stawk is 1,000 while Walmart languishes at below 100 most likely to piss poor management such as:

 

Walmart Just Came Up With an Idea That Will Make Customers Really Miserable

 

http://www.msn.com/en-us/money/companies/walmart-just-came-up-with-an-id...

ToSoft4Truth's picture

The War on Opioids just started too.   The brown doctors are foot soldiers for the Pharmaceuticals companies.

 

sheikurbootie's picture

Everyone is trying to stall Trump, thinking they can delay their cause until someone else is in the WH. 

 

 

Boris Gudonov's picture

This has as much to do with North Korea as it does with any supposed trade abuses by China.  China is propping up an atrocity of a Stalinist slave state for its own reasons, and trade is the main lever we have against them.  China buys most of North Korea's slave-produced coal, which goes into making electricity for China's factories, which make goods that America buys.  America is complicit in the slave state of North Korea, and that must end.  North Korea must go, and China will come to the table and make it so.

arby63's picture

Didn't you know this is bash America month? 

shortonoil's picture

 

Just exactly how is an investigation into trade practices a trade war? This author had better brush up on his New Speak; he appears to be getting some of the terms mixed up. Other wise we may come to believe that it is possible that the Chinese might CHEAT! That would not be PC, and could upset the Snowflakes. Be very careful Mr. President. You could start another run for your Safe Space episode.

Boris Gudonov's picture

The author is correct.  This is the threat of a trade war, and the message will be received.  It is a threat to China to do something about NK, or else.

 

Aristofani's picture

Dont come any closer, or I'll blow my head off with this gun!

ToSoft4Truth's picture

The Chinese are going to piss in the food.  The babies will drink Chinese piss. 

 

"Believe it or not approximately 50% of the apple juice sold in the United States comes from China."

Justin Case's picture

And what merican corporation is selling it to you from China?

arby63's picture

I know the status quo isn't going to work much longer. The existing arrangement of trade with China is illogical at best. 

TheMagician's picture

Let me see how many countries this crazy Asperger struck retard has pissed off and are on a straight collision course with, and perhaps even at war with before Christmas?

Germany (Basically told Merkel to pay more or fuck off)

Venezuela (Threatens with war)

North-Korea (Threatens with war)

China (Threatens with first trade war and later if he can´t hold himself, real war)

Russia (Diplomatic war)

India (Sending his daughter to muscle their prime minister)

Have I forgotten any other countries?

 

Boris Gudonov's picture

Trump makes all the right enemies.  Is that what you hate?  Obama  gave all of our enemies blow jobs, do you miss that?

TheMagician's picture

So this is what you want. A President that only sees and collects enemies. Not one trying to focus on the domestic Infrastructure, like fixing the roads and bridges that have reached almost third world status. Not one that tries to fix the school system, who tries planning 1-2 generations ahead,  instead of back, like this present retard, does in the WH.

Yes, yes, our grandfathers who died in Europe and the Pacific, struggling to defend this nation and its future generations had just a guy like TRUMP in mind when they fell on the battle field so you could live and breathe today. 

 

This fucking asshole is a disgrace to everything United States stand for since it emerged as an independent nation 1776-89. How do you compare this over grown man child, to giants like Lincoln, Roosevelt, Kennedy and even Nixon?

It is simple, you can´t. The Deep State will either eliminate their elected "clown" in chief before years end or keep him till such a moment they deem right,  for a complete takeover and formation of the coming United States of the Bilderberg Group.

There's picture

President Lies-a-lot is not America's president. Is he leader of the free world, the largest economy and the beacon of hope?

He somehow got elected but has accomplished little more than constant ill informed sophomoric babbling. 

Increasingly treated as irrelevant by congress, the media and the world, his own Administration is constantly forced to

try to make sense of his deranged rantings.

Be a patriot.

RESIGN RESIGN RESIGN

Miss Informed's picture

Vladimir Putin is the leader of the free world.

Miss Informed's picture

His "leadership style" is straight out of the WWF.

Anteater's picture

You're insulting Aspergers everywhere. Trump went to a Jesuit

college, then his rich Daddy bought him into Wharton, where

Trump paid smart students to write his papers and dissertations,

while he was back in Queens dodging the draft, and evicting seniors

on fixed income from rent controlled housing in Bronx for his Daddy.

Just a bloviating thug that nobody who went to Wharton remembers,

just like Trump's claimed church pastor said he's never seen him in

their church assembly! Trump is a thief, tax-dodger and bunko artist.

Those are not Asperger traits, high or low spectrum. He's a NYC thug.