China Changes Time It Starts Trade War Against US To Avoid Striking First

With the US set to launch the first salvo in the trade war against China at 12:01am on Friday when Washington imposes 25% tariffs on $34 billion in Chinese products, and with Beijing set to immediately respond, a logistical issue emerged: who gets to strike first?

Due to Beijing being 12 time zones ahead of the US, and because China also planned to launch retaliatory tariffs against the US on Friday at midnight, it would mean Beijing would technically start the trade war, because 12:01 a.m. in Beijing on Friday would mean noon Thursday in Washington. So upon reflection, and realizing that the earth's curvature could make China appears as the aggressor, China said that it wouldn’t implement tariffs ahead of the U.S. on Friday, after previous arrangements put it on course to do so.

The earlier arrangement, a Chinese official said Wednesday according to the WSJ, reflected Beijing’s determination to start its tariffs on July 6, the same date set by the U.S. for its tariffs. And since China's plans a tit-for-tat escalation, a statement issued by the China’s State Council on June 16 said that retaliatory extra duties on $34 billion of U.S. imports are set to take effect on July 6.  "It’s the U.S. that started all this,” a Chinese official said. “China is fully prepared.”

However, in a statement published late on Wednesday, the Ministry of Finance said "we will never fire the first shot and will not implement tariffs ahead of the U.S.," after media reported that Beijing would start levying tariffs hours ahead of the U.S. due to the time zone difference.

So, as a result of the timezone difference, it means Beijing would actually implement its tariffs from midday Friday in China—an unusual practice for Chinese customs, which generally assess levies on a full-day basis.

Beijing’s plan shifted as it was wary of being seen as provoking the battle, and as Bloomberg adds, in the brewing trade war between the U.S. and China, "Beijing officials consistently seek to portray their nation as simply being on the defensive against Donald Trump’s aggressive tactics."

Moving ahead of Washington to impose tariffs would have entailed risks for Beijing, analysts said, making it harder for both sides to resume negotiations stalemated for the past month. A first strike would go against the Chinese leadership’s public position that China doesn’t want a trade war with the U.S. President Donald Trump has threatened to levy duties on an additional $400 billion in Chinese products if Beijing retaliates for his first batch of tariffs. - WSJ

Commenting on the 12 hour delay, Timothy Stratford, a lawyer at Covington & Burling in Beijing said that a Chinese head start "would not be moving hearts and minds on both sides toward the positive direction of de-escalation."

China's desire to be seen as the victim in the trade war also explains why the PBOC has been so careful not to give the impression that it is the entity behind the recent devaluation of the Yuan, over concerns that if Trump perceives the PBOC as easing the currency in response to tariffs and not, for example, because the Chinese economy is slowing and Beijing has cut RRR twice already, he would lob even more protectionist measures into the mix (which of course doesn't mean the PBOC is not intervening, in fact as Reuters writes today, the central bank may well get involved, although to a far lesser extent than in 2015 when there was no potential allegation of aiding and abetting a concurrent trade war).

So this is the final sequence of events:

At one minute after midnight Eastern Time on July 6, Trump will roll out 25% tariffs on $34 billion of goods representing sectors including aerospace and information technology as well as auto parts and medical instruments.

At exactly the same time, which however happens to be one minute after noon on Friday Beijing time, China will retaliate by targeting $34 billion in U.S. products ranging from soybeans, beef, pork, chicken and seafood to sport-utility vehicles and electric vehicles.

Furthermore, China picked the farm goods it is targeting to hit U.S. states that supported Trump. However, as the WSJ notes, such tactics have upset U.S. officials, who said targeting American farmers was an ill-willed attempt by the Chinese government.

What happens then?

If both nations are satisfied with just this one round of implemented tariffs, nothing much. According to UBS, $34BN in tariffs will have a limited impact on China’s $11 trillion economy.

The question, of course, is what happens if the conflict escalates. As shown in the chart below, Trump has already proposed a total of nearly $800 billion in total tariffs and countetariffs as part of Washington's trade war playbook.

According to UBS, if the conflict escalates to include only the incremental $200 billion of Chinese exports and global trade slows, it would reduce China's 2017 GDP of 6.9% by 0.5%, excluding secondary effects.

Will it stop there? Unfortunately, that is the question nobody knows, because once tit-for-tat tariffs begin, the equilibrium strategy shift to mutual defection, resulting in growing escalation unless either Trump or Xi wave a white flag and halts the escalation.

Or, as UBS' chief Chine economist Wang Tao puts it "The risk of further escalation has increased."

But at least we'll know that going forward every Chinese "retaliatory" tariff will take place just after noon Beijing time...

Comments

vspam Stuck on Zero Wed, 07/04/2018 - 14:04 Permalink

20 years ago, US was the sole superpower with the largest economy, unsurpassed technology, and all the leverage in the world. China was backwater third-world country.  How did China have any leverage to start a trade war?  People need to take their head out of their ass and stop being sore loser.

US corporations have been raking in profit from Chinese labors and exporting inflation by abusing it reserve currency status.  US spent trillions on wars, so didn't prepare for a competitive 21st global economy.  

Now the Chinese just want to raise their own people out of poverty but losers on ZH keep blaming the Chinese for their failure.  You can't have your record corporate profit, trillions dollar military adventure in ME to secure the region for Israel, massive social security net, and 21st century infrastructure all at the same time. 

In reply to by Stuck on Zero

Arnold TGF Texas Wed, 07/04/2018 - 13:53 Permalink

I went into a local steel mill on a tour.
It had electric hearths, they did a pour we could watch and ran the rolling mills for sheet and beams.
I was quite impressed.
I was a millwright, by virtue of having contributed to design, built and operated several production plants for our remediation business.

It was too much for me, I would not adapt well to it.
Coal fired hearths that went overseas must have been a living hell.
I've seen Glass making lines, surface mining and a lot of petrochemical manipulation.
The generation before me was tough, making these things go, I don't hold a candle to them.
I have a clear view of what is coming after us and sadly shake my head.
I have no answer suitable to the question.

Tears in the rain.
https://www.youtube.com/watch?v=NoAzpa1x7jU

In reply to by TGF Texas

thunderchief PunchyBinThinkn Wed, 07/04/2018 - 12:45 Permalink

The Anglo cock and balls are more envious than many think.   

Trump is proving this.

Chinese,  Democrats,  trans-whatever,  are not measuring up.  

The Democrats are backing a non existent minority group called Transgender that you cannot even decipher whether something goes in it or not.  Banking on the popular vote on that is pure political suicide.

Go Trump!

In reply to by PunchyBinThinkn

not-me---it-wa… machiavellian-trader Wed, 07/04/2018 - 12:58 Permalink

flinched?  why would you assume that?  article clearly explains they want to be seen as reciprocating the tariffs, not starting them.  it's too far gone for the chinese to "flinch."

thing is, trump doesn't understand the chinese.  xi simply cannot afford to lose face.  trumps threats and sanctions and tariffs don't allow them a face-saving way of backing down.

 

In reply to by machiavellian-trader

edotabin not-me---it-wa… Wed, 07/04/2018 - 14:55 Permalink

Sometimes old things are useful and wise and sometimes you just gotta move forward. This "saving face" bullshit is getting old. They've got a $600 billion surplus (or something like that) and a bunch of 'Muricans buying shit at Walmart that their garages can no longer fit. They pay their workers shit and they devalue their currency. Break the damn cycle. It's not healthy anyway.

In reply to by not-me---it-wa…

MusicIsYou Wed, 07/04/2018 - 12:38 Permalink

I hope they put tariffs on everything, I could not care less, and I only make a purchase aside from food every few months. Heck, it's probably going on a year since I've purchased clothing items. The only people the tariffs will impact are people who have to constantly be shopping.

geno-econ Wed, 07/04/2018 - 13:25 Permalink

U.S. will experience a spike in Inflation,just as the Fed and Bankers want in order to decrease size of astronomical debt.   Consumer will also be squeezed and we will see stock market tank because multi national corporations ( members of U.S. Chamber of Commerce ) will lose overseas revenues and profit margins.  Trump  will learn the hard way that the problem is not China trade---it is our reliance on debt financing to keep the system afloat.   Either way the promised Growth will not occur and Trump will be a one term President, or as the Chamber of Commerce predicted, will be impeached on some Trumped up charge

Md4 Wed, 07/04/2018 - 13:26 Permalink

“If both nations are satisfied with just this one round of implemented tariffs, nothing much. According to UBS, $34BN in tariffs will have a limited impact on China’s $11 trillion economy.”

 

An “economy” our traitorous corporate class mostly gave them.

 

“Will it stop there? Unfortunately, that is the question nobody knows, because once tit-for-tat tariffs begin, the equilibrium strategy shift to mutual defection, resulting in growing escalation unless either Trump or Xi wave a white flag and halts the escalation.”

Probably not.

Nor should it.

It’s in China’s interest to play ball, and level the trade field.

You may have 1.5 billion Chinese to consider, but, consider what you’ll do with them when you finish bankrupting your best customer.

What then??

truthalwayswinsout Wed, 07/04/2018 - 14:06 Permalink

This is Vietnam all over again. Gradual escalation. We need a full boycott of China. Any American Company who complains ala Apple and Walmart need to be reminded that they got a massive tax cut so they can more than afford to build automated factories here in the US.

If we do a full boycott of China the massive odds are the Communists will not survive.