China Warns US Corporations: You Are About To Become Victims Of A Trade War

Now that China has released details on its planned retaliation to President Trump's Section 301 tariffs - a list that contains, predictably, agricultural goods like soybeans, orange juice and beef as well as energy products like crude oil (though surprisingly not yet aircraft, though sanctions could be imposed in the next round) - we get to watch as US corporations who will be negatively impacted by the tariffs ratchet up their lobbying of the Trump administration (that is, if they haven't already given up) practically beginning the president not to let tensions escalate much further.

Foxconn

Of course, the Chinese aren't stupid. They know that one way to pressure Trump into backing off would be aggressively lobby US businesses with threats - both veiled and obvious - that their businesses could come to harm, or perhaps ruin, if the conflict escalates. Already, the Wall Street Journal has published a story about China's efforts to browbeat American businesses, recounting a meeting between a group of executives and Chinese Vice President Wang Qishan that reportedly took place in late March.

When a group of American executives and other global corporate chieftains met with Chinese Vice President Wang Qishan in late March, they received a stern message about the simmering U.S.-China trade conflict: If tensions escalate, buckle up.

"The message was pretty clear," said a person who attended. "A lot of companies would become victims in a U.S.-China trade war."

And some companies say they're already experiencing problems with the customs process as US goods pile up at Chinese ports.

Already, some U.S. companies are facing increased regulatory scrutiny in China, according to Jacob Parker, vice president of China operations at the U.S.-China Business Council. For instance, he said, it takes longer for their products to clear Chinese customs; in other instances, Chinese regulators are putting advertisement slogans by U.S. firms under review. Some automobiles and farm products such as pork from the U.S. have piled up at ports.

"Maintaining a low profile in the China market and ensuring that you’re completely compliant are more important now than in the past," Mr. Parker said.

Others, including Foxconn, a Taiwanese technology company that is best known for assembling Apple's iPhones, have begun reviewing their supply chains.

While multinationals assess the potential impact from the escalation of trade tensions, makers of consumer electronics have been canvassing suppliers and, in the case of at least two personal-computer makers, inquiring about shifting some of production in China to the U.S.

Foxconn Technology Group of Taiwan, the world’s largest contract manufacturer of electronics and known for assembling Apple Inc.’s smartphones in China, conducted a review of its supply chain, said a person familiar with the matter. The review, which assessed the proficiency of Chinese suppliers, could be used to assess the impact of potential tariffs, the person said.

It isn’t clear if Foxconn is taking any action following the review; the company didn’t respond to a request for comment late Friday.

There's also the danger that Trump's tariffs could inadvertently harm foreign firms who have ownership stakes in companies that are producing Chinese electronics and other goods, as the chats below show.

Foreign

Foreign

As a reminder, a few months ago, we published a post citing research from Credit Suisse about which sectors and companies could be harmed by the trade war - highlighting companies that generate a lot of their revenue from their business in China.

To wit, here's a list of the S&P 500 firms with the largest revenue exposure to China.

Companies

And here's a snapshot of key aspects of the US-China trade relationship, which show that A) the US exports soybeans, pharmaceuticals, vehicles and aircraft to China while China B) exports textiles, electronics and toys.

Trade

And as it happens, one of the first firms to face a serious threat thanks to the trade war is mentioned on the above list: Qualcomm's planned $44 billion buyout of Dutch firm NXP Semiconductors - a deal seen as vital to Qualcomm's survival - is now in jeopardy as Chinese authorities, who must sign off on the deal, are expected to withhold their approval.

Also hanging in the balance is Qualcomm’s planned $44 billion purchase of Dutch company NXP Semiconductors NV, a deal widely seen as critical for the U.S. chip maker. Late last month, amid signs of progress in trade talks by Washington and Beijing, Chinese authorities indicated their intention to wrap up the review and clear the transaction.

Momentum, however, stalled following the White House decision to move ahead with tariffs and congressional pushback against Mr. Trump’s decision to save China’s ZTE Corp . from crippling punishment for violating U.S. sanctions.

"The anticipated escalation of trade tensions will complicate China’s ability to approve the Qualcomm-NXP transaction from a face-saving perspective," said Stephen Myrow, a former Treasury official in the George W. Bush administration who is now managing partner of Beacon Policy Advisors LLC., a U.S. research firm.

Unfortunately for these companies, it's unclear how much influence they can have as both sides are determined to maintain the appearance of resilience in the face of their rival's threatening rhetoric. The trade truce called last month by Treasury Secretary Steven Mnuchin has been broken, and three rounds of trade talks have failed. In other words, the die has been cast.

The U.S. is stepping up its trade offensive over what the Trump administration alleges is Beijing’s pressure on U.S. firms to transfer technology to Chinese companies. In doing so, the U.S. is effectively ending a truce called late last month by U.S. Treasury Secretary Steven Mnuchin and China’s chief trade negotiator Liu He, following the second of three rounds of talks.

"Three rounds of negotiations with Beijing have failed to delay or prevent this outcome," said Tai Hui, chief market strategist at J.P. Morgan Asset Management. "The threshold to come to a consensus or a compromise seems high."

In what has become a common complaint (as we have seen in the debate over immigration policy) about how the Trump administration handles its business, Chinese officials reportedly told WSJ that they've found it nearly impossible to negotiate with an administration that's constantly shifting its positions.

Some Chinese officials said they are feeling frustrated by the Trump administration’s shifting positions, which they say have hurt the credibility of the U.S. government. The U.S. is “provoking the trade war,” Chinese Foreign Ministry spokesman Lu Kang said Friday night.

Washington’s latest hard-line approach, Chinese officials said, isn’t going to wring concessions from China.

In addition, Beijing has been left incredulous by the US's insistence that China scale back its Made in China 2025 initiative - a state-directed strategy meant to upgrade the country's industrial sector into higher-value manufacturing like robotics and aerospace. The program - which Trump has targeted to prevent the "unfair transfers of American technology" that his administration has cited all along as the justification for its trade push - is a favorite of President Xi Jinping. "It's wrong for the US to think its pressure tactics are working," said a Beijing official.

But if Trump's ultimate goal is the opening of the Chinese economy, there could be opportunities for both sides to save face in the future, particularly as a wave of destabilizing inflation starts hitting consumers.

President Xi Jinping and Vice Premier Liu He have already slashed passenger car duties and said they would begin to allow foreign manufacturers to operate without Chinese partners. Though car manufacturers have complained that the measures don't go far enough, if history is any guide, if there's an easy resolution to be found, it lies somewhere at the intersection at China's baby-step's toward liberalization, and President Trump's love of taking credit.

Comments

PrayingMantis 4Celts Sat, 06/16/2018 - 13:34 Permalink

 

   ... these Chinese deals with certain corporations owned by a certain family were exempt from the trade wars ... and also excluded from that S&P chart ... hmmmm ...

 

           ...  >>>http://www.scmp.com/news/asia/southeast-asia/article/2145808/trump-indonesia-project-latest-stop-chinas-belt-and-road ...

 

           ...  >>> ... http://www.mcclatchydc.com/news/politics-government/white-house/article172443417.html ...

 

           ...   >>> ... https://qz.com/929553/here-are-all-the-trump-trademarks-the-us-president-owns-in-china-and-some-that-he-doesnt/ ... 

 

           ... >>> ... https://qz.com/1290623/ivanka-trump-received-trademarks-from-china-just-before-donald-trumps-zte-reversal/  ... 

 

           .... let me take a wild guess ... this is where the “exceptional” kicks in under American “exceptionalism” ... 

                   ... US$500 million Chinese government loan to his Indonesian resort and the other corporate deals are only petty cash, perhaps, and only mere drops in the Chinese trade bucket and as such, should be “exempted”? ...

 

          ... charity begins at home ...

 

In reply to by 4Celts

CashMcCall Gaius Frakkin'… Sat, 06/16/2018 - 14:15 Permalink

Trump started it. China has every right to defend itself and punish the Orange Ceasar and his flock of nitwits. Oh Oh Oh I forgot, just before Larry Kudlow had the big one, he said Trump was just being deceptive and was using this Trump Tariffs as a "Negotiation Tool"...  That keeps you MERICAN dopes hanging on and allowing Trump to push the US Economy off the cliff. 

Meanwhile, your RINO congress is now pushing through Mexican Amnesty while everyone is distracted. Meanwhile, US Farmers have lost 1.2 Trillion in revenues and stand to lose another 1 Trillion in hogs, but but but this is just a NEGOTIATION TOOL... 

 

Name one so-called negotiation where Trump has shown he has any skill at all? Is it his bad pay of subcontractors? The NY Courts are full of Trump being sued for bad pay. Is breaching contracts a "NEGOTIATION STRATEGY?" Trump can only cheat on these personal services contracts. If he dealt in Goods rather than sleazy services, the Universal Commerical Code would have jurisdiction and it has its own built-in remedies preventing sleazeballs like Trump from abusing every person he deals with. Don't worry, the Chinese read that Orange Tumor perfectly. US Agricultural receipts down 25% and falling. All contracts terminated legally by Force Majeure. Trump is a moron. 

In reply to by Gaius Frakkin'…

Scipio Africanuz CashMcCall Sat, 06/16/2018 - 14:54 Permalink

Don't blame Trump, blame congress! They revoked his ZTE deal, so he's giving them want they want. If Americans complain, he can always point at congress.

In other news, I heard Secretary Mattis is accusing Russia of undermining US moral authority. Well sir, in your younger days, the USA had massive reserves of moral authority, but now, not so. Perhaps you should get out of the echo chamber of USA USA chanting yes men, and consult with folks willing, and courageous enough to tell you truth.

The reason we're fighting to restore the American Republic, is to recover that moral authority that was seriously squandered in the service of PNAC (Project for A New American Century)...

In reply to by CashMcCall

PrayingMantis CashMcCall Sat, 06/16/2018 - 14:38 Permalink

 

   ... that’s true @CashMcCall ... and before all these trade shitshows start morphing into an argumentum ad hominem tirade, let me point out that it was The Dick (Republicunt)  “I’m not a crook” and Therapist Bill (DemocRAT) who opened the floodgates of US corporations flowing into China’s manufacturing ... the Chinese just sat back and let the  “big eyes” WH residents do the sell-off to “slant eyes” ... 

     ... >>> https://en.m.wikipedia.org/wiki/Richard_Nixon%27s_1972_visit_to_China ...

     ... >>> https://en.m.wikipedia.org/wiki/Open_Door_Policy ... 

     ... >>> https://abcnews.go.com/International/story?id=82426&page=1 (Clinton Signs China Trade Bill into Law) ...

     

... and this Caterpillar, is just one of hundreds even thousands of US corporations shutting down their factories in favor of “low-wage” Chinese workers resulting in massive US factories’ layoffs adding to that 120 million US citizens out of the labor force ... not even counting the millions of sidewalk tent-dwellers who each one were once a “somebody” and now a measly forgotten “somebody else” ...

 

       ... Here are are a number of key Caterpillar facilities in China, including Tianjin, Suzhou and Wuxi. 

     ... and this link from their own proudly-advertised web site  >>> https://www.caterpillar.com/en/company/global-footprint/apd/china.html ... 

 

      .... that’s 25 Caterpillar factories (and growing) in China ... factories that would’ve employed millions of American workers ... let that sink in ...

 

      ... are they and/or Boeing or other MIC-corps part of this trade war? ... probably not ...

 

.... remember, as a reminder to all Americans ...when you point a finger, elsewhere, pushing the blame on others, three fingers point back at you ... 

 

In reply to by CashMcCall

CashMcCall PrayingMantis Sat, 06/16/2018 - 14:59 Permalink

I have no sympathy for your Socialist arguments. I am a Capitalist. If you can't compete then Capitalism should destroy you and make way for someone who can. Amazon competed against Brick and Mortar for years. Now all the B&M and TRUMP want to find ways to TAX Amazon and make them less efficient. Trump calls this leveling the playing field. I call it Socialist Special Olympics. 

Cry me an ocean over your Merican Unions. They destroyed most all of your manufacturing along with Obamacare. You concerned citizens just want businesses to be an extension of the Welfare office. News Flash... Socialism doesn't work. 

Take your sorry pathetic teary-eyed story to Elizabeth Warren but don't bring such sniveling around me. If you can't compete then roll under. 

In reply to by PrayingMantis

PrayingMantis CashMcCall Sat, 06/16/2018 - 15:30 Permalink

 

    ... nope @cashmccall, I’m neither socialist, nor capitalist, nor democrat, nor republican ... and about my crying an ocean over my “Merican Unions”, shit, truth is, I’m not even ‘merican’ ... in fact, I have no trouble agreeing with your assessment ... just merely shining a spotlight on who started this China-trade-transfer-of-American-jobs-and-factories deals ... they were your “presidents” or WH residents ... assuming you are ‘merican ... 

    .... I only spent 3/4 of my consulting time in the US ... via a US-issued NAFTA license ...( and oh yeah, paid a lot of taxes too) so I’m just putting my two-cents worth of comments here ... based on my own understanding and opinion ... no need for a “holier-than-thou” attitude ... just pointing out the truth ... unless, as “Jack” would famously say “ You can’t handle the truth!” ...

  ... and Elizabeth “Pocahooker” fake-native-Indian Warren and Bernie “who-didn’t-work-a-real-job-until-he-was-elected-as-mayor-at-40-years-old” Sanders shouldn’t even be allowed to “sign” CONgressional laws ... just goes to show you how “idiots” (politicians) along with “dual-citizens” lawmakers could be elected by equally retarded American constituents ... and I wouldn’t even mention the Queen of Arkancide who should be in prison, as well as how the Kenyans were so amused that one of their native-born sons became a WH resident by fraud ... (note: if you need the link on this, please let me know ... there’s a notarized and certified mail sent to CONgress with a copy of Obumboclot’s real birth certificate from Kenya sent by an ordinary citizen, but all were just totally ignored ... crickets)  ...

 

    ... just point your argumentum ad hominem elsewhere ... you’ll be fine ...

In reply to by CashMcCall

edotabin CashMcCall Sat, 06/16/2018 - 23:53 Permalink

Heartless but fair enough.

I would argue you are correct but that we would need alternatives to Amazon. Even if mostly the same merchants apply to sell their goods on all of them. Regardless of how these monopolies are formed (socialism or capitalism) the end result is the same. There is too much power concentrated in too few hands.

In reply to by CashMcCall

edotabin 4Celts Sat, 06/16/2018 - 23:27 Permalink

Lol Probably.

In an attempt to cut through the copious amount of BS, I see this as a result of shitty policy. All this is happening because of some globalist's wet fucking dream. China was piss poor. So, in an attempt to take advantage of cheap labor they sent everything there. Now, China got a taste of the "good life" and also is taking advantage of the situation by devaluing their currency in an effort to keep it going. OTOH, now, after 40 fucking years Trump comes along and cries foul. Any time the pendulum swings too far from center the reaction to restore equilibrium it will be equally violent.

I can't blame Trump for what he's trying to do and he couldn't do it sooner even if he wanted to. He got elected now. I think China should make concessions to even things out but I can't really blame them for looking out for their interests either. In any case, to expect that this will go very smoothly without even a ripple is simply a fantasy.

The same thing holds true for immigration etc. If you introduce shitty policies you will get a shitty result. Sellout politicians introduce the policies and blind fucking populace goes along with them because they can't see past their goddamn nose.

I suppose sellouts have always existed and always will. When this fucking cycle of stupidity on the part of the people end?

 

 

In reply to by 4Celts

edotabin CatInTheHat Sat, 06/16/2018 - 23:44 Permalink

Making stuff cheap is great and all but they also need to sell that stuff. The Chinese economy is not in a position to absorb all the lost sales. Sure they can probably absorb a decent amount but not all.

How this plays out will be determined by China's abilities. Trump knows what the US is capable of and when he makes his decision he will hunker down. He's not he type to back down. So, I hope he has accurate info because otherwise things can get real ugly, real fast.

There is probably some globalist bullshit going on behind the scenes as well which we are not privy to ( at least I am not...others here might be). Can't tell how much weight that holds and how crucial it will be to the outcome. Engaging in endless speculation about that is tiring and leads nowhere though.

In reply to by CatInTheHat

Baron von Bud Last of the Mi… Sat, 06/16/2018 - 12:47 Permalink

These trade disputes are bad for both countries and have certain outcomes: higher prices for American consumers and pass-thru inflation on a lot of stuff we use everyday. For China it means rising unemployment. Trump knows this but he's not worried. America desperately needs higher inflation to whittle away our incredible federal and consumer debt. Imagine 6% annual inflation and the stupid public will blame it on China. For Trump, that's called a win. China will no choice but to accelerate domestic consumerism.

In reply to by Last of the Mi…

CashMcCall Baron von Bud Sat, 06/16/2018 - 14:30 Permalink

Von Scheiße Korb, China Trade is 4 Trillion a year and increasing at 14.6% a year. Your orange stuffed Ceasar is committing a Trade War over $50 billion in consumer electronics. He's low tech what does he care if your modems cost YOU MORE? 

Think about how stupid Trump is for this... a Smartphone or big screen TV are nothing but bricks without software, phone services, internet services, or content. All that content is made in the USA. By putting on Tariffs, Trump just reduces the amount of these low margin consumer commodities that do nothing by themselves. What Trump is really doing is reducing revenues for content producers, software developers, and phone and internet plan seller in MERICA. Tump is dumb as dirt. 

 

 

In reply to by Baron von Bud

CatInTheHat 847328_3527 Sat, 06/16/2018 - 13:23 Permalink

And that is the biggest propaganda lie fed to US sheep who believe America is exceptional. China does not need US imports to be self sufficient. 

These tariffs are a joke. They are implemented because US gov needs more revenue to continue it's very expensive wars in the ME with this tax passed to consumers who are the only ones who lose. Trump's tax heist for the rich severely limited revenue. The sheep don't make enough in a gig economy to prop up US ponzi

In reply to by 847328_3527

edotabin 847328_3527 Sun, 06/17/2018 - 00:04 Permalink

Yes, they have internal problems as well and many of them have been pushed to the background by $$$. Naturally these will come to the forefront as the $$$ dry up.

My question and overarching theme in all these posts is why let things come to this? How shortsighted or "sold out" must one be to send all manufacturing abroad? You do it in an incremental fashion; slowly and balanced. You don't carve out your country and not imagine that one day you will have to cry foul. Is this the result of business school education of some Harvard hard-ons? What the hell?

In reply to by 847328_3527

just the tip ToSoft4Truth Sat, 06/16/2018 - 12:35 Permalink

i've got a nail gun that was made in wisconsin in 1988.  used it two weeks ago.  replaced the trigger twice.  everything about it works great.

i've got a sears table saw made in 1956.  don't use it very often.

my hasty bake charcoaler that my parents bought back in 1953 is the one i currently use.  the new hasty bake i bought them in 1995 sits in the corner.

i've replaced three dewalt cordless drills in the past four years.  got extra batteries now.

i've replaced two thermostat housings on two different vehicles.  the pot metal they are made of now does not stand up to the temperature of the engine and splits.  one of the replacements cracked as a result of the mating surface not being "flat".

i've still got the same starter on my 1976 corvette.  i've replaced the starter on my 1990 jeep three times.

i've still got the same water pump on my 1976 corvette.  i've replaced the water pump on my 1990 jeep five times.

i can't buy replacement parts for my refrigerator i bought in 1985. 

i couldn't buy replacement parts for the washer and dryer i bought in 1982 so i had to throw them away.

i am currently using my exeltech inverter, made in ft. worth, tx., as i live off grid, that i have had for over 15 years.  i have gone through three chinese inverters, nimbo i think their name is, as back up inverters during that time.

yeah, i know, that's only twenty three examples of items used.

In reply to by ToSoft4Truth

SACRED-COW Baron von Bud Sat, 06/16/2018 - 16:59 Permalink

All kidding aside, quite a bit of my Chinese Junk's quality has improved greatly and now surpasses anything made in the U.S.. In fact, lately, I've purchased some excellent, high quality Chinese merchandise at a ridiculously low price. If you're old enough to remember, the Chinese quality progression rate is following Japan and Korea's progression, albeit at a much greater pace.  Maybe some of you don't remember the shitty cars, motorcycles, lawnmowers, cameras, T.V's, stereo systems, bicycles, etc.,  made in the U.S. before they had competition with the Japanese made products.

In reply to by Baron von Bud

edotabin SACRED-COW Sun, 06/17/2018 - 00:09 Permalink

Yes. Very true. I have seen quality Chinese products.

I have a US-made soldering iron from the 60s that still works perfectly. My father had given me that. I own a washer/dryer from the early 90s that was made in the US. It is used 3 times a week. It works perfectly. I think i spent $60 to have it serviced once in all those years. As for more recent US products, some business school somewhere figured it would be best to lower the quality of products and make $ on parts, repairs etc. This may generate $ for the business but is a major drain on their customers' time and money. It's just sneaky and wrong.

In reply to by SACRED-COW

hwy just the tip Sat, 06/16/2018 - 14:44 Permalink

I have my American dream from 1960 to become rich. I am still having it today.

My American friend have a condom from 1980. He is still using it. It still works fine. Fending off opposite sex.

I have my beautiful 70kg American partner from 1990. Now a 150kg beast spending all my money on food, health equipments, doctors and medicine. 

No more lasting American stuff ! !

 

 

 

In reply to by just the tip

whatsupdoc just the tip Sat, 06/16/2018 - 17:13 Permalink

So you're saying there are ways of manufacturing things right so that they last.  Good for you.

I don't think you understand something ...

When American businessmen started to influence the manufacturing process in the late 70's onwards, profit came before 'good manufacturing'.  That means the reason why your newer products are not repairable or are built to last a week beyond warranty is because of the profit motive that is so indoctrinated into business globally.

IF China were to build products to last using their cheap labor then the USA would not last a minute.  You - and the rest of the high wage Western countries - could never compete with the low waged Chinese.

It is not in China's interests to build things to last.  They need the repeat sales also.  It is not in the interests of the profiteers in America to make things to last either.  It IS in the interests of all other earth creatures to build things to last and stop the massive rape and pillage of resources.

If you want things to last, expect a small turnover and small profit.

 

In reply to by just the tip

tion ToSoft4Truth Sat, 06/16/2018 - 13:58 Permalink

>Tell us 25 things on your Made in USA shopping list please.

Oh dang Paps I could prob fill half those slots with my Lodge cast iron wish list alone.  Frye boots website lets you sort by Made in USA and many of their boots are resole-able. Stormy Kromer hats are made in USA. It would be nice to see more comprehensive lists.

 

In reply to by ToSoft4Truth

tion tion Sat, 06/16/2018 - 14:18 Permalink

I was just thinking about how Pendleton mills and grows a lot of their wool here and it got me thinking about how fucking awesome Rambouillet wool is, which comes from an American breed, some of it machine washes very well too. A Rambouillet query got me to a shop ramblersway.com, they are also getting their wool here, their stuff is v nice. Ultra lightweight wool tees etc are basically AhhhMazing. Do those prices fit into a throw away type wardrobe? No, but they will last quite a long time if cared for well.

In reply to by tion

edotabin Mimir Sun, 06/17/2018 - 00:15 Permalink

I had a Hyundai Genesis that I bought second hand. Absolutely fantastic car! Nothing even comes close for the money. I had to trade it in because of miles/age etc. I looked at many vehicles. Ford is putting out some serious crap. Don't even bother looking at the cars those idiots are producing.

In reply to by Mimir