"Shocked" China Set To Hit Back At Trump "In Other Ways"

One of the key features of Trump's newly proposed $200BN in 10% tariffs on Chinese exports, is that Beijing simply has no way to retaliate proportionately: after all the US does not export that much to China. That does not mean that Beijing is limited in its reactions: as we discussed last night, Beijing may simply increase the rate on existing tariffs, or expand quantitative tariffs to "qualitative" as Barclays suggested on Monday, or of course pursue even more drastic measures such as devaluation or dumping US assets.

And, as the WSJ writes, China is now contemplating precisely such an approach, and is planning to hit back at Trump "in other ways", such as holding up licenses for U.S. firms, delaying approval of mergers and acquisitions involving U.S. companies and ramping up inspections of American products at borders.

While a Commerce Ministry statement on Wednesday described Beijing as “shocked” by the U.S. action and said China “has no choice but to take necessary countermeasures", behind the scenes officials have described the mood as more cautious.

Specifically, senior Chinese officials are weighing how far to press the retaliation without hurting other national interests. The retaliatory measures are the kind of nontariff barriers that U.S. and European businesses have long complained about, and Beijing is actively courting allies in Europe and elsewhere to fight what officials call U.S. “trade bullying.”

China also needs the U.S. for more than just trade. “The U.S. is not China’s enemy as both countries face many common challenges,” said one of the officials, listing climate change, terrorism and other problems. And the tariff battle threatens to sap an already weakening Chinese economy.

The WSJ also reports that in recent days China's Vice Premier Hu Chunhua, who oversees foreign investment, has instructed local governments to gauge how the biggest round of U.S. tariffs to date — 25% duties on $34 billion of Chinese goods imposed on Friday — is affecting American businesses operating in China.

In particular, authorities are looking for signs of U.S. companies potentially moving facilities out of China, the officials said. That would be a blow to Beijing’s effort to attract foreign capital and keep people employed at a time of gathering economic gloom.

Of course, the opposite is also true: China is now pushing to get more US production in China, as Elon Musk's impromptu trip to Shanghai where he allegedly secured commitment to build a Tesla factory in the next 2 years, has shown.

Meanwhile, Liu He, President Xi Jinping’s top economic envoy, instructed a group of prominent Chinese economists to hold a roundtable discussion on the impact of a trade war with the U.S. on the Chinese economy.

Some of the economists, members of the China 50 Forum think tank that Mr. Liu founded, expressed concerns that the trade brawl could embolden state companies with a stake in the status quo to try to block market-opening reforms Beijing is planning, according to people briefed on the event.

It is worth noting that so far, authorities have avoided aggressively going after American businesses, or fanning overt nationalist sentiment to get the nation’s 1 billion-odd consumers to boycott American products (except the occasional Michelle Obama quote of course).

In the past, such tactics have been deployed against other countries embroiled in disputes, such as South Korea, and it is likely that unless there is a resolution soon, it will take place again, putting sales of iPhones in China in jeopardy.

“The Chinese government understands that a full-scale trade war does more economic harm to China and would work hard to avoid it,” said Wang Tao, chief China economist at UBS Group AG.

Unless, of course, China suffers a market crash that unleashes a recession, and there is little more to lose.

For now there is hope: Both Washington and Beijing have left the door open for talks aimed at a resolution of the dispute, though no negotiations are actively under way. However, as Steven Englander explained yesterday, both nations are now incentivized to push the adversary further, to discover their breaking point. This means that trade war between China and the US will first get much worse, before it gets better.

The market was not happy with the WSJ report, and with futures attempting to stage a modest rally, the E-mini was promptly slammed lower.

 

 

Comments

Lordflin topspinslicer Wed, 07/11/2018 - 09:50 Permalink

China inspecting US goods... I didn't realize Ji Ping was into slapstick...

So far as what your dogs will eat... I breed Anatolian Shepherds. When prior owners come to me I always interview them regarding the fate of their last dog. Most have died of cancer. The list of toxins in Chinese dog food is impressive... this includes popular picks such as Purina. Stick to a local producer.

In reply to by topspinslicer

Rabbitnexus Lordflin Thu, 07/12/2018 - 01:42 Permalink

I'm a Western Aussie Kayak roto-moulder and the last one standing in the state, only other local brand makes theirs in China now and everything else, which wiped out the rest and is hurting us is Chinese made.  Our product has a 10 year warranty and exceeds that easily in use whilst the Chinese shit fades and cracks in 3-4 years.  Same all over.  They even steal the old Aussie brand names and bang them onto Chinese crap, so people always saying "Oh they don't make XXXX like they used to."  Sure because XXXX went out of business after the Chinese ripoff XXXX displaced them.  

 

They stuck our brand name onto a Chinese made piece of shit, which I couldn't afford to sue them over and that chain (a front for a big corporation which still has another chain active.) has since shut down.  Arseholes.

In reply to by Lordflin

Laowei Gweilo topspinslicer Wed, 07/11/2018 - 09:58 Permalink

lol in what world would Canada purposefully create a real estate crash hard landing

and do it to ally with the country trying to Canada an economic crisis hard landing lol

if anything, watch Trudeau announce new export deals with China, namely things like wine, agriculture, in addition to energy -- just like Australia, Chile, Brasil already have to pick up the US slack.

In reply to by topspinslicer

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DingleBarryObummer Looney Wed, 07/11/2018 - 09:24 Permalink

“The Chinese government understands that a full-scale trade war does more economic harm to China and would work hard to avoid it,” said Wang Tao, chief China economist at UBS Group AG.

ok, even they admit it.  time to go full balls and get their shoddy toxic products out of here, so the USA can be more self reliant.

Donald J. Trump said he would favor a 45 percent tariff on Chinese exports to the United States, proposing the idea during a wide-ranging meeting with members of the editorial board of The New York Times - Jan 2016
https://www.nytimes.com/politics/first-draft/2016/01/07/donald-trump-sa…

In reply to by Looney

HopefulCynical DingleBarryObummer Wed, 07/11/2018 - 09:35 Permalink

FUCK THE CHINESE GOVERNMENT.

Passive-aggressive buncha parasites, whining about Trump's 'unfair' actions, when those fuckers have not only economically raped everyone they could for decades, but have made no secret of their goal of completely dominating the whole world, economically and militarily. They bitch about America's behavior for one reason only: we stand in the way of them doing the exact same shit - and being even more ruthless about it, since the Han fancy themselves genetically superior to every other human (gee, who else does THAT sound like, hmmm?)

Cry me a fucking river, Chi-coms.

In reply to by DingleBarryObummer

Expendable Container Jack Oliver Wed, 07/11/2018 - 12:51 Permalink

TRUE! Americans were purposely kept in the dark when their Zionist banker controlled government, in 1975, signed the treasonous Lima Agreement to turn a large portion of their manufacturing and industry over to the third world, with CHINA BEING GRANTED FAVORED NATION STATUS on the receiving end.

Why is the US turning into a third world nation? Because this was the intention of THE (SECRET) LIMA DECLARATION OF 1975.

This also applies to the other First World nations such as Canada, Australia, UK, European nations etc. All these nations and over 180 nations, signed up to it and all political parties support it, whilst keeping the public totally in the dark.

What is the LIMA DECLARATION? The agreement that first world nations flip over to the third world a minimum of 30% of their production and agree to IMPORT 30%. Of course most have done much more than a 30% flip. Australia has already done a 90% flip of its Agriculture and Production, including technology, to the third world. No wonder farmers were and are committing suicide in despair!

10 minutes explanation - excellent video, by an Australian and all he says applies to US/Canada/UK etc just the same:

THE EVIL LIMA DECLARATION OF 1975 TO MAKE FIRST WORLD NATIONS INTO THIRD WORLD DEPENDENTS, HOW, WHY AND QUI BONO?:

https://www.youtube.com/watch?v=u9aHC2tSmRM

Also - China was declared 'favored nation status' in this flip. They were handed our technology, tools etc on a platter! No wonder their economy has blossomed and bloomed while the Western nations stagnate and decline.

Wake up folks!

 

In reply to by Jack Oliver

Frilton Miedman boostedhorse Wed, 07/11/2018 - 09:58 Permalink

Might not get to that, yesterday the senate voted 97-2 to completely contradict Trump's NATO threats, they won't allow him to push us out of NATO.

It's a matter of Time before they reverse Trump's trade wars, making Putin's control over the president moot, there's no question Putin & his oligarchy has shorts positioned in U.S. equities as Trump attempts to do his bidding.

The Dem's would be wise to use trade wars as a campaign platform for November, moderates are bailing on Trump over it, and the most hurt by any trade war is Trumps Rust belt/farmer base.

In reply to by boostedhorse

the artist Frilton Miedman Wed, 07/11/2018 - 10:23 Permalink

Interesting development as far as NATO but this is in its infancy. You may find it hard to get 2/3 of the Senate to agree once the case has been made to the public. They still need to face their constituency. 

Trade wars are not going to play out that way. Americans by and large approve of what is transpiring. Trump will continue to make his case in the public forum and keep winning. 

The only thing that could derail the train is the economy...so until and unless that crashes its trade war to the horizon. 

I have a feeling there is a contingency plan for even that...a la Pizzagate.

In reply to by Frilton Miedman

TimeTraveller boostedhorse Wed, 07/11/2018 - 11:42 Permalink

Don't go beleiving any Mainstream media experts because China ain't going to sell any treasuries. Not now and not in the forseeable future.

Why? Because selling Treasuries would weaken the USD....China is desperately trying to weaken their own currency against the dollar to make exports competitive. Their whole corporate sector's solvency is reliant on the US consumer. 

In reply to by boostedhorse

shortonoil boostedhorse Wed, 07/11/2018 - 11:53 Permalink

Certainly, and the Yuan would go to zero. Maybe they will really hit us hard, and stop exporting chopsticks. Trump has China by the short hairs, and the PTB are going crazy. The damn fools put all their money into the EM. Trump is saying bring that money back, or lose it. We are at the end of the oil age, and Trump is playing the end game to perfection.

In reply to by boostedhorse