Futures, Yuan Slammed As US Plans Higher Tariffs On $200 Billion In Chinese Imports

Hours after Bloomberg reported that Beijing and Washington are working towards a resumption of trade talks, the Wall Street Journal reported that the two countries have "yet to make meaningful progress" moving forward from an impasse, as the next wave of US tariffs are set to hit as soon as Wednesday. 

Treasury Secretary Steven Mnuchin and Chinese envoy Liu He and their staffs continue to talk about a possible meeting, said officials in both capitals, but the talks remain at a very preliminary stage. Both sides argue that it is up to the other to make the first move after several preliminary Chinese offers, mainly involving the purchase of more U.S. goods, were rejected by President  Trump as inadequate.

The two sides have agreed that their initial offers weren’t a solid base for further negotiations, according to a senior member of the U.S. business community tracking the discussions. Those included the Chinese offer to buy more U.S. exports, and the U.S. demand that China essentially scrap the industrial policy that turned it into an economic powerhouse, the senior executive said. -WSJ

But wait - now Bloomberg reports that the Trump administration is set to increase a proposed 10% tariff on $200 billion in Chinese imports to 25% - "ratcheting up pressure on Beijing to return to the negotiating table." If enacted, it would mean overall tariffs of $505 billion on Chinese imports.

The U.S. imposed 25 percent tariffs on $34 billion of Chinese products in early July, and the review period on another $16 billion of imports ends Wednesday. President Donald Trump has threatened an additional $200 billion with levies of 10 percent, a level the administration may raise to 25 percent in a Federal Register notice in coming days, one of the people said. The change isn’t final yet and may not go forward after a public review, the people said. -Bloomberg

Here's what the market thought after hours - completely wiping out the gains from Apple's earnings announcement: 

The Yuan, meanwhile, reversed on the news: 

“They are discarding useless ideas and rhetoric,” the executive said. “They are figuring out what could be on an agenda and what could be a solution.”

Mnuchin told during last week's G20 meeting in Buenos Aires that his team and members of the Chinese delegation had engaged in "chitchat," while former US officials, including former Treasury Secretary Hank Paulson (Mnuchin's old boss at Goldman Sachs), have urged Washington and Beijing to move forward with discussions as soon as possible. 

Last week's tentative trade accord with the European Union has emboldened the Trump administration, after the two sides agreed to go through the World Trade Organization to handle intellectual property theft cases, government pressure on companies for technology transfers and the operation of state-owned industries: all code for alleged infractions committed by China. 

China is “in a very difficult position,” following the EU agreement, said Lawrence Kudlow, director of the National Economic Council in a Sunday appearance on CBS. “China is, I think, being isolated.

Whatever gains the U.S. might have made with Europe, however, haven’t eased the trade fight with Beijing. The U.S. alleges that China presses U.S. companies to hand over valuable technology and uses unfair trade practices to produce an enormous trade surplus with the U.S.

The Trump administration remains deeply divided over how best to deal with the Chinese, and the two main factions are moving in different directions. China trade hawks, led by U.S. Trade Representative Robert Lighthizer, believe that China will make concessions only if it feels the brunt of heavy tariffs, said U.S. officials. -WSJ

Trade doves such as Mnuchin and Kudlow, however, have been searching for a solution that doesn't include massive tariffs out of concern that those penalties, on top of Chinese retaliatory tariffs on several American goods, could hinder US growth and tank financial markets. 

And the pain is already being felt. Qualcomm last week had to scuttle its agreement to purchase Dutch semiconductor manufacturer NXP after China refused to greenlight the deal. Days earlier, Mnuchin called on Liu to lobby for its approval, reports the WSJ, however he didn't believe the call went well. 

The decision was a blow to the Trump administration, which worked to reduce US penalties on Chinese telecom giant ZTE Corp - after it was accused of sanctions violations imposed on Iran and North Korea. Several US government and industry officials assumed Trump's ZTE efforts would translate to reciprocal action by China on the Qualcomm-NXP deal. 

That said, China is now growing skeptical over Mnuchin's ability to deliver a trade deal, after President Trump steamrolled a Chinese bid to buy nearly $70 billion in US farm, energy and other products in June - a move Beijing thought might go a long way to meet Trump's demand of a $200 billion trade deficit reduction - only to have Trump steamroll the proposal. “The two sides just keep talking past each other,” said a person familiar with the discussions.

Beijing appears to be digging in for a long fight, reports the Journal, after President Xi Jinping oversaw a high-level meeting on Tuesday which "signaled a shift in economic priorities toward supporting growth through means such as debt control. 

The meeting laid out a range of pro-growth measures, such as greater spending on infrastructure and easier credit for banks and businesses.

Chinese officials have also been weighing how far to press the pledged retaliation against the U.S. on trade without hurting other national interests. Measures being rolled out so far include holding up licenses for U.S. businesses, delaying approval of mergers and acquisitions involving U.S. companies, and ramping up inspections of American products at China’s borders. -WSJ

So far China has been hesitant to push so hard that US businesses abandon the country - which would be a giant blow to Beijing's efforts to attract foreign capital and keep their citizens employed during an increasingly worrisome economic contraction. To assuage fears, a statement released from Tuesday's meeting reads "legitimate rights of foreign companies in China will be protected."

Comments

Free This Tue, 07/31/2018 - 17:31 Permalink

<====Want me to stay

<====Want me to leave

If the poll speaks let it be!

I will abide by the poll!!!! I mean it - no joke, all kidding aside.

I will add the two polls from the China deal since that is not getting any reads, I feel this will be wider read and a better indication!

My feelings won't be hurt and will abide by the majority. I will post no more until 12 AM tonight. Then check back and will respect the will of the people here! Just seems I am pissing off more people than it is worth. It's the way I roll.

Molon Labe

EDIT - The board has spoken!

I will leave you with some Jamaican nostalgia from when I lived there, I stood out like a lollipop, a ghost in a very dark land, and it is why I am so forward, and crazy. One of the most violent places on the planet!

The story of a country boy who came to Kingston town, kind of like a Rocky story but in the music business, different kind of ending. See if you can spot me!!! This was the time of the roots of Reggae, Jimmy was a star like Bob. If y'all are interested in a peek at the life in Jamaica circa 1970-72.

https://www.youtube.com/watch?v=J9Qq5py-09I - the movie

https://www.youtube.com/watch?v=TiMpFTOs5kY - the sound track album

Irieness mon, ass mi no questians, an i tell you no lies! Forward and priyanka, manacle and go saka! rastafari is i...i an ites!

I bow out gracefully and wish you all happy trails and maybe see you on the FIELD of GLORY some day! I leave you with my profile.

 

Best comment goes to, and there were some good ones, I laughed hard and just wanna say Love and Peace to all:

Mr. Universe Akzed Tue, 07/31/2018 - 19:47 Permalink

His mind is a raging torrent flooded with rivulets of thought cascading into waterfall of creative alternative....

 

I am going to take a break, good advice, go to the beach and hang out a while! Lost a dear friend last week, now my good friend and neighbor told me he has Stage 4 brain cancer. It's all a bit much for me to handle, I am off the rails at the moment. Maybe I will back, I dunno just yet. Gonna think things out.

 

COSMOS IridiumRebel Tue, 07/31/2018 - 21:59 Permalink

Ok so the Chinese tariffs go through, US consumer has to pay more.  So no real competition to Chinese made goods since the Euros make higher end stuff.  It will take years and years to bring manufacturing back that was shipped out to China, if at all possible.  The Chinese will not allow the equipment and manufacturing lines to leave the country since most of these are tied up in copartnerships with Chinese companies.  I am sorry but there is really no 500 billion dollars worth of stuff the Chinese need to buy from the USA.  The imbalance is fundamental.

All the car parts I have bought the past ten years or more have been made in China.  Then new Japanese made car my family bought, the rims are made in China and who knows how many other parts on that car were made there.

All this talk that we have the Chinese by the balls is way off, we should look down and see that their hand is on our balls and we are merely holding some rear mirror fuzzy dice made in China.  The supposed tax cut evaporates away and really the middle class gets squeezed even more.  The rich folks buy the high end Euro stuff anyways.

In reply to by IridiumRebel

opport.knocks IntercoursetheEU Tue, 07/31/2018 - 23:14 Permalink

LOL - China was a mercantile nation for centuries before Columbus crossed the ocean. There have been discoveries of sunken trading ships with chinese goods moving from Shanghai to the middle east dated from 900 AD. I have seen the crates of glazed pottery from those wrecks, they were clearly made on an assembly line with a pattern.

Check it out...
http://culturetripper.com/the-lost-dhow-exhibition-aga-khan-museum-toro…

Typical American, totally self-centered with no grasp of world history. It all began in 1776 right?

 

In reply to by IntercoursetheEU

cheech_wizard COSMOS Tue, 07/31/2018 - 23:49 Permalink

> It will take years and years to bring manufacturing back that was shipped out to China, if at all possible. 

Long term thinking, a good start. But in the face of a collapse, (consider U.S. debt) the U.S. needs to do this, if for no other reason to lessen the blow of that collapse.

 

 

In reply to by COSMOS

duckandcover COSMOS Wed, 08/01/2018 - 00:27 Permalink

>> All the car parts I have bought the past ten years or more have been made in China.

Car parts made in USA can be found.

Waiting and saving for affordable made in USA stuff is just a bit of self denial and time for a build up of demand.  There's that weird 'S' word we have to teach to a couple of generations.

In reply to by COSMOS

83_vf_1100_c duckandcover Wed, 08/01/2018 - 01:10 Permalink

  Made in China pwr strg pump on our Sequoia... complete POS. I needed it now so bought at the local auto parts.

  Start moving production that matters back to the USA. Leave the plastic crap high toxicity stuff to China. The hope is we as a society in the west can learn not to buy plastic crap we don't need and will consign to the garage/trash in a matter of a few months. Fidget spinners, really?

In reply to by duckandcover

ParkAveFlasher duckandcover Wed, 08/01/2018 - 07:25 Permalink

Price on domestic goods is artificially high because of low volume.  No scaling.

Scale up production, you will see the price per unit come down.

Buyers for big manufacturers still fix the prices of components and unfinished goods.

If there is demand, the supply will come online quickly.  There are already supply gluts built up to satisfy demand in the meantime as suppliers tool up and factories hire and train.

This is not a slow process, but a quick one in many marketplaces.  Quicker and bigger than may be intuitive at first glance.

In reply to by duckandcover

naps8906 duckandcover Wed, 08/01/2018 - 11:13 Permalink

China has trade deficit with almost every country except US.  US consumers are the only idiots in this planet that will buy chinese crap even though they know it's crap because it is cheap.  In most countries, they will not touch made in china products even if it is like 50% of the other countries products, especially food/health products.  Other country's consumers are willing to pay higher prices for better & safer products.

Sometimes I feel like lead poisoning of the 60's & 70's from muscle car exhaust has not only lead to lower intellect of the masses, but also lower intellect of their offspring's.  Especially in congested cities where most poor lives.  I need not need to remind you who owned the largest oil & chemical & auto companies of those time, so maybe it was all intended from the beginning.

In reply to by duckandcover

trelokomio77 COSMOS Wed, 08/01/2018 - 02:25 Permalink

Because you don't make anything you probably don't understand why Trump is doing this. Why don't you try taking American made goods or European made goods and shipping them into China. You pretty much can't because the tarrifs and vat in place there is much greater than 25%. This is retaliation to a one sided deal where China makes and sells whatever it wants to anybody and the USA and Europe are getting shafted. He has been telling China to get its act together since he got in office and the Chinese have only increased hostility. It's unfair business practices and Trump is doing the right thing here. 

In reply to by COSMOS

indygo55 COSMOS Wed, 08/01/2018 - 07:09 Permalink

Its pretty clear that this has a lot to do with the dollar losing its legitimacy globally. China has the oil/yuan/gold contract that is growing in leaps and bounds. Their GDP is approaching the US and in some ways can be considered an equal. The US needs to run deficits to keep the empire going. That is being squeezed. Who wants to invest their long term national prospects in the dollar in 2018? Mainly those that don't want to get bombed back to the stone age. The elites that run the western world cannot imagine a world without their hegemony so they attack anything and anyone that challenges them. 

In reply to by COSMOS

DingleBarryObummer Oldguy05 Tue, 07/31/2018 - 17:53 Permalink

I think there are shady zio-shills around heres.  Notice this article sheds Trump in a bad light, and he just had to make a first post distracting from it====>

https://imgur.com/a/3xJHCMZ

You can tell because he put a "." placeholder, and I screenshot it before he edited it.

I remember there was one nut around here @TheLastTrump

that was one crazy zio-shill

In reply to by Oldguy05