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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Mimir's picture

LOL !So do I and so am I. They certainly do not suck. I have worked with PhDs from all over the world and the most impressive I I met were all young Chineses Phds and Phd students. 

Mimir's picture

LOL !   So do I and so am I. They certainly do not suck. I have worked with PhDs from all over the world and the most impressive I I met were all young Chineses Phds and Phd students. 

Dominus Ludificatio's picture

Mexican wall,border tax,travel bans,war to everyone and everything,include family members and banksters in government.kiss Saudi ass........  This moron we call president stupefies the whole world  with limitless bs no one can comprehand. Best to ignore him.

Iskiab's picture

Bah, I was worried about this. I've met lots of people like Trump before. They're great 'negotiators' in the sense that they negotiate from a position of power, always looking to push every advantage possible. Every time you make a concession , that will shut them up but only for a short period, then they'll be back asking for something new in no time.

When China agreed to sanctions against NK it was a win, it should have been left at that. This is obviously because trump wants another concession on NK from china. Usually the best way to deal with this kind of person is to walk away from the table, but that'll be difficult do against the US.

Expect that China sees through it too, and plans to trade around the US will continue, with no concessions and tit for tat tariffs all over the place. The wildcard in this is the US military... but with the voice of reason in the White House being a general expect a military conflict of some kind. Either way, similar to Iraq as soon as the US is engaged in one area, in other parts of the world shit will go crazy without fear of US retaliation.

DEMIZEN's picture

It's impossible to negotiate tet a tet in politics. all deals are multilateral. let's say trump gets his trade war on Monday by some fucking miracle.  the next minute, the Mexicans take comparative advantage of cheaper raws and US companies move to Mexico under NAFTA deal to bypass the barrier. But hey, now mexico has the monies to pay for the wall:)

the consumer and labor continue to get fucked in the ass. its a fucking circus with a retarded audience that can't count to 10 and doesn't know when to laugh. USA!

novictim's picture

What you don't grasp: China is incredibly vulnerable.  It has massive debt, much bigger than that of the USA and even greater than that of Japan.  Add to that its suicidal reliance on being a 60%-export economy and using global trade as its near-total source of economic oxygen. 

And then heap on the fact that, like a Silicon Valley IPO, the Chinese are dependent on fresh investment dollars to keep their malfeasance and malinvestments afloat, not unlike a Ponzi scheme. 

And then add to that a population that wants democracy and control over their government, wants accountability, but is kept at bay by guns in their faces.  The Chinese people love China, not the corrupt communist Inner Party who currently are using investment dollars to buy Western real estate.  You think that the Chinese public does not hear of this?

Finally, understand that a nuclear ICBM force for N. Korea is not the end game.  It is the beginning by which N. Korea ships such technology all over the world to the highest bidders, one auction at a time. 

N. Korea is not a case of there being a choice as to what needs to be done.  The Chinese Leadership have created a monster that needs to be put down, not tomorrow but today, and they will have to answer for what they have created.  The Trade War -against- China is long overdue, is mandatory, and is the least bloody option on the table. 

Now let us see how the swamp creatures running the West from behind the scenes react to the charade of China being a tame beast being called for what it is: 

Suicidal appeasement that MUST now stop.

DEMIZEN's picture

one thing i know for sure. this monday is going to be an interesting day.

novictim's picture

Our trade policies to this date have impoverished the USA, shipped out its factories with a loss of some 60k manufacturing plants, and has, in return, made China a rival superpower.

So, why did that policy move forward even after 1989's Tienanmen Square massacre?  The USA and the West have a corrupt Globalist over-class that can't see past the pennies they save by giving it all away to China.

So we don't need some new excuse to place China into a state of revolution and instability.by cutting their economy in half.  We have a closet full of old excuses among all the corpses of Chinese democracy activists.

And China now wants to create a stalemate with N. Korea and the West.  Yet N. Korea plans to build nuclear ICBMs and advance its technology for eventual sale to Iran and anyone else willing to pay, such as anyone of the thousands of Jihadist organizations. 

Do the math.  China is our enemy and always has been.

rwe2late's picture

 You have fallen for the

"humanitarian intervention" bullshit

oblivious to the invasions, bombings, and massacres done by the USA.

Your implied premise that the USA a model and supporter  of morality and democracy

is nonsense.

cherry picker's picture

Decades ago before China or Japan became huge exporters, Elvis made famous a song called "In the Ghetto"

The song was not about Latin America or USSR or China's poor barrios, it was about the ghettos in the USA.

The ghettos are still there and now tent cities and homeless are spreading as well.

You would thing the world's most powerful nation would address these issues first before sending off $1m tomoahawk missiles or bragging about $12 b aircraft carriers of the F-35 money pit never mind those fancy pensions those employed by .gov get to keep.

Before lecturing NK or China, better look in your own house as there are more rats in there than people suspect.

Xena fobe's picture

Inequality is more the result of globalist/corporatist policy than MIC spending.  Globalists and corporate objectives depend on a very low standard of living.  Hordes of uneducated welare seeking immigrants and outsourced manufacturing accomplished that.

Globalist/corporate control is what needs to be addressed.  MIC spending is a side issue.

Horse Pizzle's picture

No amount of welfare money and affirmative action can raise a 70 IQ to an 85 IQ. 

Sweet Cheeks's picture

After Hurricane Katrina, much of New Orleans's "left behind "were bused to other places. Those folks were given debt//gift cards which they used to buy Louis Vuitton and Coach luggage/handbags or other luxury items.

Then they walked to the nearest Walmart to load up what they needed. Bypassing the checkers, they stole their selections, and pushed grocery buggies down the streets to a taxpayer funded hotel room. Walmart management and LEOs just looked on, doing nothing as TV stations recorded the exodus.

No appreciation; no thanks-no planning ahead. After five years of living off the taxpayers, local sheriffs were called to evict them from FEMA trailers or hotel/motel rooms.

You can't change poor decision making among people of any race who have an IQ of 70 and a zero work ethic.

tuetenueggel's picture

So simple but not understood by politicians ?

Able Ape's picture

First we hand over the Golden Goose of manufacturing to China and NOW we want it back - TOO late suckers, here's ANOTHER war the US will LOSE!....

tuetenueggel's picture

.-.-.-and that for sure...

FBaggins's picture

The US appears to have lost the art of international diplomacy mainly because of its overreliance on institutionalized hundreds of billions spent each year on the MIC and the reliance on its ruthless no-moral-limits, law-unto-themselves intelligence agencies. US propositions to foreign nations are invariably backed up with threats beginning with tariffs, sanctions, embargos, the threat of economic and political destabilization, the threat of regime change, and even war, and always backed up by the military threat. It is a diplomacy totally based on the idea that might is right, not good will or fair and balanced trade. Nations which try to advance their own interests competing with US economic foreign policy and which refuse to yield are always somehow vilified, and if they persist they are put on the enemies list, justifying more shekels for the MIC and intervention by insidious intelligence agency operations.  

Trump, in dealing with China, is following the scrip, which goes something like this:  “China is cheating. China is manipulating currencies. China is bad.  Therefore, on Monday we are going to impose tariffs on certain manufactured good from China. At the same time, we have sent another warship into the South China Sea to secure natural gas interests.”  What about the fact that our Western financial institutions and corporations for the past 40 years have invested so heavily in the development of Chinese industry, exploiting that nation’s bottomless pit of low cost labor, to make our elites even richer, at the expense of tens of millions of manufacturing jobs and huge trade deficits and national debts.  

 

The Chinese government has worked in the economic interests of its own people doing the bidding of our Western elites who have sacrificed for their own ends at the expense of the interests of our own Western working and middle classes.  If Trump wants to establish tariffs to try to reset the balance of trade and national debt, then he should simply lay off the vilification and BS and make a proposal to Xi that is based on a matter of economic necessity and balancing, and not on vilification which only leads to a loss of face in China and further hostility.  

TheMagician's picture

Well written and very, very true.

The Gladiator's picture

After reading a lot of the comments on here,I am anxious to see how the people who see Trump through their rose colored glasses respond to yours.

I just don't understand the mentality of some people.You would think Trump is their favorite college football team,and no matter how stupid the play is and how badly it is executed,they feel like it was a great move because,well, Trump.

I will be the first to say he was a better choice than Clinton. No arguement there. But what I don't get,is how the people he convinced his campaign promoses were some how different that anybody that ran for office, ever,still can't see that the ones in charge give us two extremely poor choice for the office that holds the entire nation by the balls.

Face it, America.We got fucked.Not because of anything Trump did or will do,but because we were forced to choose between two of the worst options any nation ever had for the office of head honcho.

All that being said,(typed) your comment was as close to reality as any I have seen on this article.Well put.

slobbermut's picture

No one was 'forced' mate....there were numerous candidates in the running on the Republican ticket - you could have had Rand Paul who likely would have attempted to dismantle the American military empire with more vigor; numerous 'other' choices but Trump came out on top - and as you admit Trump is better than Hillary.

William Dorritt's picture

IF Trump continues to dismantle the Globalists and the Political Class, he will be one of the best Presidents ever.

Xena fobe's picture

It has to be handled this way to get public buy in.  If presented as you suggest, Walmart shoppers and monopoly corporations will jump up and down, howling like two year olds.

OTOH, the public will easily get behind "defense" against some alleged threat. 

tuetenueggel's picture

If you ruin your country from inside, an outside enemy always works best.

Besides when he´s stronger then yourself. That could be painfull.

Groucho's picture

Nicely put. The structure of international trade as it exists is a construction of western, primarily US elites. This has been going on for decades built through financial deregulation which vastly increased capital mobility and through the international ``free trade`` agreements. These jokers felt that they could exploit China and their bottomless pit of cheap labour forever. They were too stupid and greedy to see that they were building the very gallows on which they would be hanged. Short term greed - the next quarter`s profits blinded them to the fact that they relocated the world`s economic engine to China. Trump`s hands are tied but he`s not bright enough to figure out that he can`t hurt China without causing more damage at home.

tuetenueggel's picture

US gubermint is full of brainsick McCains.

Fake Trump's picture

War, war nothing but war. Did he promise us war during his campaign? I can't remember. Too busy fucking. Didn't even vote therefore he didn't promise me nothing. I am not disappointed.

Robert A. Heinlein's picture

It's not like Trump did not ask nicely for China's help w/ NoKo.  And how did that go?  A little more pressure now. But in the end, and it's very close now imo, the game gets hot.  NoKo is going to lightem up and send 3 or more missiles our way.  I look for that anytime after the 21st. They are batshit crazy and think they are strong and can get way with it. When you read what NoKo officials are saying, take it at face value.  They mean it. Pray for cooler heads to prevail.  Probably to late though. Get ready.  I'ts going to go down.  West coast, beware. 

tuetenueggel's picture

NK isn´t crazy at all.

Trump will be blamed. Not Kim.

China´s reputation as the new world leader will be accepted by everybody, after they told USA stop.

Don´t go further or we.............

 

Mcguyver's picture

Nk is and always has been a chinese puppet. Nk conflict is chinas proxy war with the usa.

See Strategy 2 "????" - Surround Wei to rescue Zhao. In relation to guam

 

And 


Strategy 3 "????" - Borrow one's hand to kill. (Kill with a borrowed knife.)

 

 

36 strategies of anchient China

Horse Pizzle's picture

A trade embargo on China would be good for manufacturing jobs in USA.  Special economic zones with $5 minimum wage would help. Cancel all welfare in Baltimore and put those niggers to work making Hanes underwear and Nike shoes. 

Xena fobe's picture

Come on.  We can afford a decent wage for workers.  Did you ever see that break down showing who takes the lion's share from a pair of Nike shoes? 

DemandSider's picture

$5.00/hour is worse than slavery, as this wouldn't even be enough to live on. We need to get back to the 90% tax on anyone over $3.5 million per year that Eisenhower had when The U.S. had the lowest debt and fastest growing middle class in history.

loveyajimbo's picture

Libturd logic::  All investigations into known criminal activity are bad... just ask the sewer roach Hillary or Pedo Podesta, another vile shitbag of a "human"...  But "investigations" into anything GOP related, despite having ZERO PROOF... those are dandy.

"The trade investigation will immediately strain relations between the U.S. and China"... sort of like investigating Goldman Sachs and JP Morgan is a bad thing too, right?  Libturds don't like investigations into known criminals.

BTW:  If Trump is trying to correct or punish massive trade imbalances or illegal activity, that is "bad foreign policy'?!?!!?  Wisdom direct from Barry Obongo's bunghole.  Fuck you, Snowflakes and fuck you too, China!

Downrange's picture

Pack up all the unsold china crap sitting on the shelves in the dead malls in the US and ship it all back for refund.  That alone would likely impact the trade deficit even if they charged us a 15% restock fee.

Eddielaidler's picture

Imagine the luxury of a 325.00 per month minimum wage. Salaries at 8,600.00 per month. Unlimited human batteries. Manufacturing with no pollution costs attached. No copyright concerns. Substitution of materials and ingredients that fail or are poisonous. Great pressure should be put on China to raise the standard of living internally. Yes we gave it away. Yet our standard of living even for our poor is a miracle. Maybe a build it and they will come attitude is needed. Let corporations bring those profits home while reinvesting in America. Have a damned 15 year plan to strategically reinvigorate our nation. Just seeing the plan in action will change the international tone. What was once a natural talent in America is now a faded dream. It took a war to lasso the world in the 40s. Are there no technicians to fix things and only politicians to ...........As I write this I just give up. We are doomed to be kicked in the ass by the mule of reality or just fade away from ................pick your poison.

directaction's picture

Nice work, Trump. Create tensions, unrest, provoke wars, bomb the weak and defenseless.

What a monumental disappointment.  

jadan's picture

 Trump is a danger to himself & others. It is madness to put a drama queen in the presidency. World leaders are incredulous. The US electoral system is broken. It's too late to avid the iceberg now, you free marketers out there, you Koch suckers. Kiss your passive income good-bye, parasites!

Grandad Grumps's picture

A change from the status quo was needed. Trump seems to be a change at this time. It is insanity to continue doing the same thing and expect different results.

It is said that in the future this time in history is not looked at very favorably.

Grandad Grumps's picture

Bullshit.

In any event, I will arrive in China next Friday and see if there is any indication of the B/S on the ground.

I suspect 10 year visas are still being issued and pretty much everything the US population consumes is made in China. I think China ma has been doing their best to be a good little banker pet, just as Japan played its part 30 plus years ago.

China consumerism seems to be on track. But maybe there is an excuse needed to move production on and include more bodies in the global consumer economy. Production creates monetary wealth, which gives people the means to purchase soul sucking crap.

Gallumhrasha's picture

Lol Blame China, when its the corporations and the entrepreneurs that go to China to manufactuer their shit. Americans dont believe in America. You know what Americans believe in? making money, Americans will sell out eachother anyday China justs happens to be the cheapest bidder, it could have been any other country in the world

William Dorritt's picture

Globalists aren't Americans

 

I am a Citizen of the World..........BKO

cesarsp_us's picture

Good thing we don't buy anything from China

Oh wait nevermind 

tuetenueggel's picture

One calls it perpetuum mobile.

 

US sanctions on chinese goods.

They have to raise prices, so goods become more expensive for whome ?

Right US Customers. They again pay their own sanctions and China rises .............

and will be sanctioned again.........

Winston of Oceania's picture

The only thing china produces are "items of flimsy foreign manufacture", crap to sell at Wallyworld. We can get that shit in any number of places, and as far as rare earths are concerned Japan and India are setting up production. You'll have to soon drop the price on that.