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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Fake Trump's picture

Matured woman can be fantastic.

blindfaith's picture

 

Let me guess, you are here today because no one is in the mens room...right?

Phillyguy's picture

At the same time Trump is threatening to attack North Korea, a country 8,000 miles away, with less than 1% the population of the US (population of NK ~ 25 million), and completely destroyed by US bombing between 1950-53, he is now threatening China with a trade war. So the current list of countries Trump/US dislikes/ hates includes- Russia, China, Iran, North Korea, Syria, Cuba and Venezuela.

 

Trump has backed himself into a corner. He is repeatedly threatening to attack North Korea with “fire and fury like the world has never seen” and also threatening China with a trade war (read financial warfare). There is a very fine line between a trade war/economic sanctions and military conflict. Trump is going to financially destroy the US and possibly get us blown up in the process. This will end very badly.

Boris Gudonov's picture

You don't know much history, do you, phillyguy?  Let me guess, education courtesy of unionized government employees?

Trump is making all the right enemies, my friend.  Every one of those countries is run by evil people doing bad things to themselves and other countries - aren't those the places that SHOULD be our enemies?  By the way, you listed Russia as an enemy, don't you liberal assholes still contend that he is Russia's puppet?  Or do you believe two contradictory things at one time, like all brainwashed fools?

 

TheMagician's picture

"Boris Gudanov"? Are you sure you are in the right country?  LOL

SunRise's picture

Isn't the U.S. already financially destroyed? 

blindfaith's picture

 

 

Perhaps your education did not include Bill Clintons 93 speech giving North Korea nuclear reactors "so they can generate electricity"  in exchange for not building missals.  How is that for liberal thinking?

How about Madelyn Albright promoting kissie face with the garden Nome's father and opening trade to his favor?

How about Obama, 'drawing the red line' on North Korea and then going golfing.

Yep...always the Republicans fault, that Democrats set the US up for a war but not out of one.

If TRUMAN had listened to MacArthur, none of this would be happening. Another LIBERAL Democrat, and his legacy will haunt us for another 100 years, just look at the gifts he left us...look familiar?

Harry S. Truman was the 33rd President of the United States, assuming that office upon the death of Franklin D. Roosevelt during the waning months of World War II. He is known for launching the Marshall Plan to rebuild the economy of Western Europe, for leading the Cold War against Soviet and Chinese communism by establishing the Truman Doctrine and NATO, and for intervening in the Korean War.  Gee, I forgot, the Atomic bomb.

KFBR392's picture

winning bitches...

me123me's picture

China has been raping the US for the last 20 years. Time to put an end to it. 

SimmerDown's picture

"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."

Indeed. The Chinese "stealth" fighter built courtesy of Lockheed Martin's intellectual property is a great example.

Miss Informed's picture

Why can't he take on the real enemy?

the French bitch's picture

He is willing to take on the CIA and the FBI, but not the Clintons.  What kind of power do these people have?

Miss Informed's picture

Guess Again, but if you get the answer right you can't say it out loud.

Fake Trump's picture

The Clintons are too powerful. This is only my guess.

CRM114's picture

Softly, softly, catchee monkey.

He has to eliminate or sideline the Clinton supporters in the CIA and FBI before he can act with any hope of success. And there are a heck of a lot of them.

CRM114's picture

Because it's not his enemy, just yours and mine.

Fake Trump's picture

I won't be surprised Kim will strike Guam within the next 48 hours. Be prepared. I hope it won't happen but Trump is on a rampage now declaring war everywhere.

Arrest Hillary's picture

Trump is Breezy World Politik .... very refreshing ?

QuadrupleH's picture

Refreshing like a drunk grandpa at a bar telling everyone what to do?

Byrond's picture

All these liberal CEOs talk so much about how good they are, while they pay people $1 an hour in China which happens to not even be a democracy. Only so they can get rich and stash their cash overseas somewhwere while Americans get stuck serving up coffees for $10 an hour because the economy has been sucked dry. And one reason overseas labor is so cheap is that they totally trash the environment when they're manufacturing stuff. 

the French bitch's picture

Trump is flailing about, Fire and Fury on NK, hasn't ruled out military option in Venezuala, trade war with China.  The walls are closing in.  Repubs closed the door of recess appointments, and no one is cheering his military aggression this time, Mueller empanels grand jury, the end is nigh

TheMagician's picture

When Mueller is ready to go with his Jury, that little shit in the WH will know the game is up. It´s called check mate from which no movement is possible. 

I expect him to cry like a baby on CSPAN telling all his devoted rednecks what an awesome president he was until they discovered he turned everything into crap.

QuadrupleH's picture

You fail to see that he will tell everyone it's the best crap in the history of the world, and his followers will lap it up with joy.

youshallnotkill's picture

In Trump's defense, he really produces some impressive, world class shit. Huge. Unbelievably huge. 

blindfaith's picture

 

Why...WHY doesn't the left want America Great Again?  WHY?

Communism

Fascism

Feudalism

Crybabism

Tribalism

What do you 'people' want instead of America Great Again?

youshallnotkill's picture

"What do you 'people' want instead of America Great Again?"

Common Sense.

Xena fobe's picture

Yes, we know.  Open borders and trade deficits are common sense to liberals.

youshallnotkill's picture

Last time I checked Germany runs one of the world's largest trade surplus, and yet her industries are highly unionized.

And if you think the borders were open under Obama, then you need your head examined.

Mimir's picture

Ofcourse the "left" wants America to be GREAT.

That's why it rejects and combats:

  • Racism
  • Fascism
  • Xenophoby 
  • Inequality in education, healthcare, retirement
  • Environmental destruction
  • Military/industrial complex
  • Money and corruption in politics
  • Police brutality
  • Anti-abortion policies
  • Religion in politics
  • Death penalties 
  • unregulated sales of deadly weapons
  • and never ending wars abroad …..

ThunderStruck's picture

Go Donald go! Trying to make everything in America more expensive again!

wide angle tree's picture

nothing burgers

trade war is bullshit

 

wafm's picture

good, that'll be the end of the US. good riddance.

Herdee's picture

Good choice, Illinois, as if Hussein and Michael didn't screw it up enough.

wafm's picture

trump has no idea what he's up against. clueless idiot

gunzeon's picture

how much shit can we break in the china shop ? ... i'll pay on the way out .. unless i'm chucked out

DJZZ's picture

You're the clueless idiot.  Still stuck on hate.  Dumbassery.

short screwed's picture

Too little, too late. The horse is already out of the barn and closing the door won't help now. The previous four administrations have made sure of that.

DJZZ's picture

I don't think so.  China is behind the shenanigans.  NKorea doesn't take a sit unless China gives the ok.

 

Follow the money.  What is China trying to obtain?  Interest the Russian position...NKorea with nukes is unacceptable to Russia.

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

 

 

novictim's picture

Who called it?  I did.

But this trade war with China should have been kicked off back in 1989 after the Tianannmen Square Massacre.  That was when we knew, beyond a shadow of a doubt, that China was an enemy of Freedom and Liberty and an enemy of the West. But Bill Clinton did not give a crap.  Thank the Gods of Common Sense that we have President Trump!

Boris Gudonov's picture

I doubt Trump would or could have done anything about NK without the provocation.  Our country doesn't have the stomach for unprovoked wars.

novictim's picture

I think that sounds right.  China has maneuvered itself into exactly where Trump would have wanted them.  Trump will now use his Vox Populi to do what needs to be done.  Winning!  MAGA.

Conax's picture

Bill Clinton assumed the office in 1992. Tiananmen Square happened during the GHWB years.

While the perv-liar should have been removed for the Chinese mirv warhead ICBM treason via Bernie Schwartz's ('nother yid) traitorous Loral Corp, he wasn't on the radar in 89, except as the crooked governor of Arkansas.

TheSilentMajority's picture

China should have been kicked out of the WTO many years ago.

Everything they make is copied from others. EVERYTHING.

They bigly restrict foreign conpanies from owning and freely operating businesses in China.

Its been an awful deal for everyone except China.

dirty fingernails's picture

Your blame is misplaced. The guilty are sitting in boardrooms and in gov because they enabled and encouraged the looting of the US

Mimir's picture

"Everything they make is copied from others. EVERYTHING."

It is about time you update your biased smalltalk.

China now produces per year twice as many PhD's than the US and China files 38% of patents in the world whereas the US files 20.5%.  

Hyjinx's picture

LOL! I work with their PH.Ds every day because I  am one. They suck.