US Secretary of State Pomeo appears to be fomenting a new Cold War with China

 (July 31) Secretary of State Mike Pompeo claimed in comments before the Senate Foreign Relations Committee that the "tide is turning' in favor of the US and against China. He says that he has seen more international support for US policies on China in recent days.

US seems determined to start a new Cold War with China

Pompeo has almost daily unleashed diatribes against China. He has called for a global alliance against what he calls Chinese "tyranny'. His comments today indicate he feels he is getting some response to his interest in a new Cold War against China.

Pompeo said:"We see the Chinese Communist Party (CCP) for what it is: the central threat of our times."

US dismayed more countries are not joining with the US against China

Pompeo was particularly annoyed that more nations were not taking a hard line on China on the Hong Kong security law. He declared China the "central threat of our time". It is not clear how exactly China can be such a threat, Perhaps China is a threat to US economic dominance.

US tries to persuade countries not to adopt Huawei 5g technology

The US not only itself is carrying out a trade war with China but is trying to persuade other countries not to invest in Chinese technology such as that of Huawei. Many countries see little benefit to them in joining the US in a trade war against China and many may resent US attempts to stop them from investing in Huawei's 5g technology.

Huawei sold most smart phones globally in the second quarter

Research firm Canalys reports that Hawei shipped 55.8 million devices in the second quarter of 2020 with Samsung in second place. This is in spite of US actions that have made the phones somewhat less competitive outside China: "The restrictions mean Huawei phones now face a distinct disadvantage outside China because they can only run a stripped-down open source version of Google's Android operating system and don't come with the U.S. search giant's apps like Chrome, YouTube, and Google Maps. Users also have to download apps through Huawei’s own app store, not the Google Play store."

The US could very well end up losing the most in its trade war against China. Many countries even allies could resent US attempts to persuade them to abandon what could be beneficial trade relations with China. The US has closed the Chinese consulate in China prompting China to also close a US embassy in a Chinese city. Instead of expanding trade relationships between the two countries that could benefit both, the US is following what can only be a lose lose policy of cutting off such relations.

Previously published in the Digital Journal

Pompeo's rants amount to a new Cold War but with China

 (July 26) After almost daily rants against China, US Secretary of State Mike Pompeo is now indicating that the goal of US hostility is to change China as the US begins what is in effect a new Cold War against the country.

Back to the red scare era

Pompeo likened the situation as akin to the earlier Cold War with the Soviet Union. He said that other nations in the world had an obligation to defend freedom and warned that at “our children’s children may be at the mercy of the Communist party.” He also claimed that the US had changed Soviet behavior.

Pompeo's language harks back to the language of red scares. Like the Soviet reds China wants to dominate the world and is a threat to all "freedom loving" nations. The aim may be in part to cause Americans and others to fear Chinese domination in the future.

Pompeo said: “Changing the CCP’s behavior cannot be the mission of the Chinese people alone. Free nations have to work to defend freedom. If we bend the knee now, our children’s children may be at the mercy of the Communist party." Pompeo said he had faith that the US could get China to change its behavior. This rhetoric is completely bizarre but it shows what US officials believe can still be effective in manufacturing consent for US policy in the future. If the US is so intent on defending freedom why is it a close ally of authoritarian states such as Saudi Arabia and why do they recognize their own chosen coup leader Juan Guaido as the interim leader of Venezuela rather than the elected president Nicolas Maduro?

US domination may be doomed

The US is the dominant nation both economically and militarily throughout the globe. The US tries to function as world policeman backed by its economic and financial power The US uses sanctions to try and control the behavior of nations such as Venezuela that resist its policy aims.

China's huge economic growth is beginning to challenge the US dominance although even allies such as the European Union are becoming frustrated by the US use of international systems such as the SWIFT financial system as a weapon to further its own ends. Christopher Bovis, professor of international business law at the University of Hull in the UK, notes "The European Commission has been developing a system, a parallel system to SWIFT which will allow Iran to interface with European financial systems, European clearing systems, using the nominations supported and created by the European Investment Bank based on the euro."

US policy is not to engage with China

The US and China could develop a win-win trade relationship with each other but US policy seems now to see China as an evil competitor. Pompeo said that the US can "never go back to engagement" declaring it a Marxist Leninist regime that was following a bankrupt totalitarian ideology. However, China's economy has been booming and in time may come to equal US production. Meanwhile, the US appears to be not facing up to its own social and economic problems but instead is using fear of China to divert attention from problems withing the US itself. Instead of pursuing productive trade and other relations with China a win-win situation the US has chosen a path which will hurt the economies of both countries and heighten tensions a lose-lose strategy.

Previously published in the Digital Journal

US shows China its power with naval exercises in the South China sea

 (July 5) The US Navy launched large drills in the South China Sea this Saturday. Two aircraft carriers were in the exercises. The exercises are meant to show that there is freedom of navigation even in areas claimed by China.

Drills were the largest by the US in recent years

The Wall Street Journal reported hundreds of jets, helicopters, and surveillance planes took off from the USS Ronald Reagan and the USS Nimitz.

The US Seventh Fleet said in a statement that the Nimitz Carrier Strike Force celebrated US Independence Day showing off ts unmatched power by conducting dual carrier operations in support of free and open Indo-Pacific. Capt. Todd Whalen, commodore, Destroyer Squadron Nine said: "The ships and Sailors in Destroyer Squadron Nine have been working hard to increase our tactical proficiency in long range maritime strike and anti-submarine warfare. On this Fourth of July at sea, it's a privilege to stand the watch with our teammates in Nimitz and Ronald Reagan Strike Groups to protect freedom of navigation and the free flow of commerce.”

The exercises are a show of force against China

China held its own drills over the weekend close to the Paracel Islands, a disputed archipelago that Vietnam and Taiwan claim as well as China. China has built up military and research facilities on the Paracel Islands as well as the Spratly Islands another disputed archipelago.These Chinese actions have angered the US.

The US FONOP

Since back in 2015 the US has been launching what it calls Freedom of Navigation Operations (FONOP) in the South China Sea. This has increased tensions in the area. The FONOP operations usually involve US sailing a warship or ships near the contested archipelago. Inevitably, the operation evoke a sharp rebuke from China.

Chinese reaction to the recent FONOP

Chinese Foreign Ministry Spokesperson Zhao Lijian said to the press Friday: “The fundamental cause of instability in the South China Sea is the large-scale military activities and flexing of muscles by some non-regional country that lies tens of thousands of miles away.”

The Bashi Channel issue

The Bashi Channel is a waterway just south of the island of Taiwan. It has turned into another hot spot exacerbating relations between China and the US. China regards Taiwan as part of China. Friday represented the 13th day in a row that US military aircraft flew over the Bashi China. The South China Morning Post claims that the US sent 6 large reconnaissance aircraft and two refueling tankers on the Friday mission. The US claims the planes are searching for Chinese submarines in the area.

Previously published in the Digital Journal

Increased Tensions between China and US could lead to conflict

 (June 25)Experts on US-China relations claim that as tensions between the two countries escalate specific incidents have a much greater chance of exploding into actual war. Experts claim that communication between the two governments needs to be strengthened.

Chinese Think Tank urges better communication

A report from China's National Institute for South China Seas, was more moderate in response to US actions compared to some recent government denunciations. The Institute warned that worsening of military ties would increase the possibility of armed conflict between the two countries. Wu Shicun head of the institute said at a media briefing: "Stable military relations ... must become the stabilising factor in bilateral relations." The institute warned that channels of communication should remain open such as a hotline set up way back in 2008 between the US and Chines defense departments.

US and Chinese ship nearly collided last September

Wu said: “I think the risks of conflict are rising, especially after the near-collision between the USS Decatur guided-missile destroyer and China’s destroyer the Lanzhou in September in the South China Sea." In September of 2018 the USS Decatur was performing what the US calls a "freedom of navigation" operation and it came within 41 meters (130 feet) of the Lanzhou close to the Gaven Reef which China claims as its territory. China accused the US of taking provocative action.

Communication links between China and the US are deteriorating

Wu noted that China and the US were engaged in rivalry on many fronts, and that there was political trust building up between the two. This had led to many intergovernmental communication channels simply shutting down. The institute reported that communication between the two countries had been in sharp decline singe 2018. The deterioration was hastened when two years ago the US withdrew an invitation to China to participate in the large scale multinational naval exercises known as Rim of the Pacific.

No sign that two countries interested in repairing relationships

The Trump administration has claimed it is in a great power competition with China. Trump has even spoken of entirely decoupling from China a move that would be disastrous for both countries. The US has increased the number of troops in the Asia-Pacific region to 375,000 and has 60 percent of US Navy ships in the region. Neither side wants an outright war between the two countries that could be disastrous for both sides but there seems little appetite for improving relations between the two countries a move that could benefit them both.

Published previously in the Digital Journal

Trump still thinks that complete de-coupling from China is an option

(June 19) In this era of globalized trading, the idea of complete decoupling from the economy of another nation, cutting off all economic dependencies is a tall order.

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Trump sees decoupling from China as an option

With recent tensions between China and the US growing Trump has actually suggested that decoupling is an option for the US even though the annual trade now between the two countries is more than $600 billion.

Even after damaging trade wars with China and one day after Trump's top trade adviser Robert Lighthizer warned him that complete decoupling was not a reasonable policy Trump still insists that it remains an option. U.S. Trade Representative Robert Lighthizer told lawmakers that "I don't think [decoupling is] a policy or reasonable policy option at this point." Lighthizer also claimed that the U.S.-China trade deal is on track. Trump wrote in a tweet: "It was not Ambassador Lighthizer's fault (yesterday in Committee) in that perhaps I didn't make myself clear, but the U.S. certainly does maintain a policy option, under various conditions, of a complete decoupling from China."

The two super powers decoupling completely would be disastrous

The US would probably fare the worst even though the devastation would be on a global scale. The US would have a difficult time as it scrambled to replace items made only in China or raw materials mostly available there.

Trump appears to have a skewed unrealistic view of trade considering it a type of zero-sum game. He appears to think that if the US cuts $500 billion of imports from China then it gains $500 billion. However, some imports also help US companies who get inexpensive parts from China. Trump could argue that the parts could be made in the US. Even if they could US consumers could pay much more.

Continually raising the issue of decoupling could negatively effect any diplomacy with China. It could signal to China that the US is not a reliable partner. The Chinese might decide to develop and stress trade relations with other countries to protect themselves from possible US actions.

Previously published in the Digital Journal

Mike Pomeo says China threat to Israel and US

(June 15) Mike Pompeo US Secretary of State gave a speech to the American Jewish Committee (AIC) which reflected US mounting hostility towards China. Pompeo argued that China and its foreign policy are a mounting challenge to both the US and Israel.

Chinese and Israeli interests do not conflict or even interact much

However, Israel may go along with or at least approve US rhetoric in order to ensure US continue treating it well. Pompeo played up the idea that China was a threat to the US "way of life" and endangers everyone. More likely Chinese expanded economic power is a threat to US remaining the global bully and policeman.

Pompeo slammed China's foreign policy as well as its human rights policy internally and in relations with Hong Kong.

US trying to have Israel limit ties with China

The Trump administration has been attempting to get more nations to disconnect from relations with China where it can. Pompeo had recently visited Israel and had then pressed Israel to limit any business ties with Chinese companies.

Pompeo also praised US policy in the Middle East although its vision is rejected by the Palestinians: "Pompeo also said that the Trump administration’s vision for the Middle East is the “most realistic path” to ending the Israeli-Palestinian conflict. He did not, however, refer directly to the question of Israeli annexation of settlements in the occupied West Bank, or to the prospects of negotiations between Israel and the Palestinian Authority." The US supports Israeli annexation of portions of the occupied West Bank as part of its plan for peace.

EU will not join in the Trump anti-China campaign

Joseph Borrell, the EU High Representative for Foreign Affairs, has ruled out any alliance with the US against China and dismissed the whole idea of "systematic rivalry" with China. Borrell called for a "big positive agenda for EU-China cooperation". Borrell made this statement just a day before he and 27 foreign ministers are expected to have a video conference with Mike Pompeo. Many countries are beginning to resist and counter US attempts to determine their relations with China.

The appended video is one Chinese reaction to US policy.

Previously published in the Digital Journal

US Federal Communications Agency bans use of federal funds to purchase equipment from China's Huawei

(November 23, 2-19) The US Federal Communications Commission (FCC) in a unanimous vote has blocked US telecom companies from using any federal funds to buy Huawei equipment.

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The new regulations

Wireless carriers will be unable to use money from the Universal Service Fund (USF) to make any purchases from many companies that are considered a national security risk. The USF provides billions of dollars in subsidies to offer wireless service throughout the US. The vote has initially named two Chinese telecom companies as national security threats Huawei and ZTE.

FCC chair Ajit Pai said: "Given the threats posed by Huawei and ZTE to America’s security and our 5G future..this FCC will not sit idly by and hope for the best.”

Huawei's problems in the US

US lawmakers and intelligence officials have claimed that Huawei could be used for espionage. An article in the Verge shows the wide variation of views on the degree to which Huawei is a security risk. Huawei has not only denied there are any security threats but has launched a suit against the US government claiming the ban on its products is unconstitutional: "Huawei’s response has been simple: it’s not a security threat. Most importantly, the company’s leaders have said the US has not produced evidence that it works inappropriately with the Chinese government or that it would in the future. Moreover, they say, there are ways to mitigate risk — ones that have worked successfully in other countries. Huawei’s chairman has even gone so far as to call the US government hypocritical, criticizing China while the National Security Agency spies around the globe. The company has also denied any criminal wrongdoing."

A Huawei spokesperson complained that the FCC had designated Huawei a national security threat "based on selective information, innuendo, and mistaken assumptions": “Huawei believes this order is unlawful as the FCC has singled out Huawei based on national security, but it provides no evidence that Huawei poses a security risk.”

Trump blocks US businesses from doing business with Huawei

The Trump administration banned US businesses from doing business with Huawei without a licence back in May but the application of the ban was postponed until August as reported by Reuters: "...the Commerce Department granted Huawei a license to buy U.S. goods until Aug. 19 to maintain existing telecoms networks and provide software updates to Huawei smartphones, a move intended to give telecom operators that rely on Huawei time to make other arrangements."

Wilbur Ross gave another 90-day extension in August. The extension was about to run out when another extension was granted. If another extension is not granted the regulation will go into effect on February 16th 2020.

Rural carriers worry about Huawei ban

Rural US carriers complain that Huawei provides affordable equipment that they rely on. However the FCC is likely to go further and vote on a proposal that would require all wireless carriers that use Huawei equipment to fully remove it from their networks. The argument is that if the equipment poses a threat it should be removed not just the subsidy. However, the Rural Wireless Association said the costs to make any such change would be quite significant across the board.

Previously published in the Digital Journal

China cancels visits to US farms

(Sept. 22)In an unexpected move, China canceled planned visits to US farms. The trips had been touted by the Trump administration as building goodwill between the two countries who have been involved in a trade war.

Visits in both Montana and Nebraska called off

A recent article reports: "The Montana Farm Bureau Federation was told by the Chinese embassy that the delegation “had an adjustment of their agenda” and they’re headed back to China earlier than planned, Rebecca Colnar, a spokeswoman for the Montana bureau, said Friday. The Nebraska Department of Agriculture also said Friday that planned visits were canceled."

The trip cancellation is just the most recent manifestation of the unraveling of the Chinese visit. US Agriculture Department Secretary Sonny Perdue said Thursday that China was planning to visit US farms next week as a gesture of goodwill. The Montana Farm Bureau confirmed the plans but said later in the day that the visits were tentative.

Willie Delwiche a market strategist at Bair based in Milwaukee said: “In this case, it’s a bit more concerning because it’s China making the decision, rather than Trump."

US and global stocks decline on the news

A recent Reuters article reports: "An index of global stock markets surrendered early gains on Friday after Chinese agriculture officials who were to visit U.S. farm states next week canceled their trip, dampening optimism on U.S.-China trade talks.....The MSCI world equity index .MIWD00000PUS, which tracks shares in 47 countries, was 0.23% lower."

US equities also declined on the news as did trade-sensitive commodities such as soybeans and holds. On the other hand gold prices jumped as investors sought a safe haven.

Trump demands a total trade deal with China

Tump says he does not want just a partial trade deal with China and claimed that voters would not punish him for his trade war in the 2020 elections. China had been making conciliatory moves on US agriculture recently as it had encouraged purchases of some US agriculture products that were before subject to tariffs. Soybeans and hogs had been excluded from extra tariffs. Soybean export sales jumped to a six-month high helped by the increased Chinese purchases. Given that the moves do not seem to have brought the Chinese closer to a deal it is not clear whether this policy will continue.

Right now there is no trade deal between the US and China on the horizon and not even any new talks taking place.

Previously published in the Digital Journal

87 percent of US firms operating in China have no plans to leave

(September 2)As Trump's trade war with China heats up, Trump is not only adding more tariffs to Chinese goods but encouraging US companies to move out of China.

Trump's demand

As a recent article reported: "President Donald Trump on Friday said he was ordering U.S. companies to “immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”"

Trump claimed that many companies plan to leave China. In response to a question he said: "Thirteen per cent of the companies will be leaving China in the fairly near future. And I'm not surprised to hear that. I think it's going to be much higher. Because they cannot compete with the tariffs. They can't compete."

Vast majority of US companies intend to stay in China

A new survey of US China Business Council members found that 87 percent of respondents have not moved and do not plan on moving operations out of China. This is down from 90 percent a year ago. Some may indeed leave but the vast majority are planning to stay. Only 3 percent of those responding said that their Chinese operations were not profitable. This is unchanged from the year before.

The survey reached about 100 members of the Council and was conducted over three weeks in June. However, relations between China and the US government has since grown even worse so perhaps there will be more intending to leave.

Trump may be most concerned with US companies exporting to the US from China

Craig Allen, the Council president said that he did not thing that Trump actually wanted US companies that serve Chinese domestic markets to leave the country. Trump appears to be most negative against Chinese exports. Allen said: “We do not believe that he wishes to encourage other American companies that have successful operations in China to leave. Our members are in China for the long term, none of them are anticipating orders to leave.” Less than a quarter of Council members invested in China to export to the US or regionally.

Effects of US China trade war on US businesses in China

83 percent of the Council members said they did not curtail investments over the past year in spite of the trade war but a year ago the number was considerably higher at 92 percent.

There were other negative effects: “Nearly half of respondents report lost sales and ceding market share to foreign competitors,” the survey stated. The primary contributor to lost sales is the implementation of both U.S. and Chinese retaliatory tariffs, as evidenced by lost price competitiveness, shifts in supply chains, and uncertainty of continued supply.”

Allen said that loss of business in the Chinese market due to the trade war could have long-term negative impacts for US companies. Allen noted that it was easy to lose market share but quite difficult to ever get it back.

Previously published in the Digital Journal

Trump's Huawei ban may be planned as a negotiating tactic

US President Donald Trump met with Xi Jinping the Chinese president as the G20 Summit in Japan wrapped up today. Trump announced after the meeting that the two countries would resume trade talks and hold off implementing new tariffs indefinitely.

Was the Huawei ban just a negotiating tactic?

Trump also indicated that US companies would be allowed to resume sales to Huawei. However, he did not make it clear when or how this will happen. How can these sales resume if Huawei is a huge security threat as Trump claims? He has even used the security threat as a reason to convince other countries not to use Huawei's 5G networks.

Trump's position

In May, Trump signed an executive order allowing the US government to block sales by US companies to foreign firms considered a security risk. This was applied to Huawei. A recent article in Verge quotes Trump explaining his position: "TRUMP: Huawei is something that’s very dangerous. You look at what they’ve done from a security standpoint, from a military standpoint, it’s very dangerous. So it’s possible that Huawei even would be included in some kind of a trade deal. If we made a deal, I could imagine Huawei being possibly included in some form, some part of a trade deal."

Trump claims Huawei's technology could be used for spying in spite of Huawei's denial of this. However, Trump's position makes no sense. If Huawei is so dangerous, it will be no less dangerous after a trade deal. Trump's position makes sense only if Huawei is not as he claims a threat to US security and the ban was used as a bluff and a lever to get a better deal from China.

The Verge article concludes: "Trump’s executive order has caused immense chaos and concern, not just for Huawei but for its suppliers in America and users around the world. He owes those people an honest explanation for why this was done. So far, they haven’t gotten one." Given the way Trump operates it is unlikely that he will ever give such an explanation. No doubt he cannot in any event.

No sign of lifting the ban as yet

So far it is not clear what if any steps Trump has taken to lift the restrictions. According to the Washington Post Trump told reporters that he will be meeting with Huawei officials to ease pressure on Huawei but there has not been a formal decision to lift the ban as yet. On the other hand he told the Wall Street Journal that the two countries will leave what to do about Huawei until the end of the negotiations. This sounds as if Trump is continuing to use the ban as leverage even though it is a bluff to get China to accept a better deal for the US.

China said to make reprieve from ban a condition of further talks

However, China has reportedly made a reprieve from the Huawei ban a condition of returning to the bargaining table. Trump said last month that the US could lift restrictions if there were some forward progress in negotiations with China. Now that there seems to be some progress with talks continuing Trump may say that there will be a reprieve from a ban. However in reality he has done nothing leaving the ban as a threat and leverage in the negotiations.

Meanwhile not only China but many US companies who supply parts for Huawei are being hurt by the Trump. Trump is supposed to be known as a deal maker. Perhaps he should be known as the dirty deal maker.

Previously published in the Digital Journal

Chinese users rally around Huwaei after US actions against it

After a US government order that will limit or end trade with any foreign company that is regarded as a security risk Google (Alphabet) cut off Huawei's license to use Android proprietary apps and services on its Android phones.

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The US government order

A recent Digital Journal article notes: "In the midst of a trade war with Beijing, President Donald Trump has barred US companies from engaging in telecommunications trade with foreign companies said to threaten American national security. The measure targets Huawei, a Chinese telecoms giant in Washington's sights that is listed by the Commerce Department among firms with which American companies can only engage in trade after obtaining the green light from the authorities. The ban includes technology sharing."

Google's response

Google said that it is complying with the order as well as reviewing its implications. Google will need to halt much of its business activity with Huawei. It will not be able to transfer hardware software and technical services that are not publicly available. It will only be able to use the open source publicly available version of Android but with none of the popular proprietary apps and services according to a source close to the matter.

Chinese consumers respond

The Google license cutoff is less of a problem in China as most of the services and apps do not function in China anyway. But social media posts on Weibo and Douyin exhibit strong support for Huawei according to the site What's On Weibo.

Chinese customers are posting on social media that they will continue to buy Huawei phones and other devices in the future. Hashtags such as "Huawei doesn't need to rely on America for its microchips" and "Huawei's Self-Developed Operating System Hong Meng" were trending on Chinese social media. The posts highlight that Huawei has already developed its own components for its phones and it has been developing its own operating system for just such a contingency as is happening now.

In a recent interview with the German magazine Die Welt Huawei executive Richard Yu said: “We have prepared our own operating system, if it turns out we can no longer use these systems, we will be ready and have our plan B.”

Huawei began working on its own operating system in 2012 when the US began an investigation into Huawei as well as ZTE. It was still developing the system in 2016. If Huawei is not able to get technology from the US that it licenses, it will no doubt quickly transfer to using its own technology.

US order will hurt US tech companies

Many US firms are part of China's supply chain. Last year US firms sold an estimated $11 billion worth of components to Huawei.

Trump's executive order could in effect ban makers of US hardware and software from selling to Huawei by requiring a special license to do. There are 90 days before the order goes into effect.

Bloomberg News reports that the US-based chipmakers, Intel, Qualcomm, Broadcom and Xilinx have all indicated that they would halt shipments to Huawei. This will help hasten Chinese development of its own chip technology as well as removing an important large and no doubt profitable markets from the US firms. Other companies selling in China such as Apple may also suffer as a result of more Chinese supporting their national products. This will be exacerbated by Chinese retaliatory tariffs that will make US products more expensive.

Previously published in the Digital Journal

China warns it can harm large Dow Jones listed firms in a trade war

(June 21) The Chinese government-controlled Global Times tabloid said that China could hit back at Dow Jones listed U.S. firms should the U.S. keep exacerbating tensions over trade.

Trump threatens even further tariffs on Chinese goods

Just this Monday U.S. president Trump threatened to put 10 percent tariffs on $200 billion of Chinese products if China were to follow through on the threat to retaliate against his earlier targeting of $50 billion in Chinese imports with tariffs.

The threats are beginning to have a negative effect on stocks in the Dow Jones index (DJI). It closed down 0.17 percent on Wednesday. For the year now the index has declined 0.25. However, the Chinese Shanghai Composite Index has declined even more this year, 13.1 percent.

China may retaliate further

In a commentary, Global Times said: “If Trump continues to escalate trade tensions with China, we cannot rule out the possibility that China will strike back by adopting a hard-line approach targeting Dow Jones index giants.”

There were three rounds of high level talks between the world's two largest economies since early May but they failed to reach a compromise. The U.S. complains about Chinese trade practices and the $375 billion trade deficit it has with China.

Chinese commerce minister, Gao Feng, on Thursday said that although previous trade talks with the US were constructive the U.S. was now acting capriciously over bilateral trade issues. He warned that the interest of US workers and farmers would in the end be hurt by the Trump policy of brandishing "big sticks".

The U.S. has accused China of stealing intellectual property from the US, a charge that the Chinese deny: "Washington’s accusations of forced tech transfers are a distortion of reality, and China is fully prepared to respond with “quantitative” and “qualitative” tools if the U.S. releases a new list of tariffs, Gao told a regular briefing in Beijing."

In response to Washington's decision to levy tariffs on $50 billion of Chinese goods China plans to impose additional tariffs on 659 U.S. products. Duties on 545 of the goods is to start on July 6. These tariffs are in addition to tariffs already imposed on 128 U.S. goods including pork, fruits, and nuts a response to Trump's earlier imposition of tariffs on Chinese steel and aluminum. The goods to be affected on July 6 include also pork, fruit, but soybeans, autos and many marine products.

China remains committed to opening up its markets

Even as China takes measures in retaliation against US tariffs the tabloid insists the country is committed to reform and opening up its markets saying: “Beijing will further open up China’s financial markets to the world, a move that may draw funds from U.S. stock markets as global investors increasingly add Chinese stocks to their portfolios.Those measures may further knock down U.S. stock prices.”

China has said that it is willing to boost imports and widen market access. In April this year, Chinese president Xi Jinping said at a high profile Chinese forum that import tariffs on goods such as cars would be cut. In May, China promised it would lower import tariffs on 1,449 consumer goods beginning on the first of July this year. On Thursday Xi told a group of foreign executives in the capital Beijing that he had been keeping his promises.

Xi said that countries should not fight among themselves but cooperate to meet challenges together and warned that the last financial crisis was not that long ago. Xi said: “We still have vivid memories of what happened during the financial crisis and we are not yet fully recovered. We must also stay vigilant because, as economic growth still lacks momentum, we have seen a surge of trade protectionism, isolationism and populism.”

Gao warned that a trade war between China and the U.S. could disrupt global supply lines for the tech and auto industry and derail world growth. This would ultimately harm the interest of U.S. companies, workers, and farmers, Gao warned.

While the tariffs may be temporary and an attempt to force China to come to an agreement more favorable to the US the tactic could backfire. The tariffs could end up hurting farmers many of whom may support Trump. U.S. farmers export huge amounts of soybeans to China. However, in response to the tariff threats China has ordered its farmers to plant more soybeans. It is also planning to import more soybeans from other countries such as Canada. U.S. farmers may find that even if the tariffs are eventually removed by China their markets are mostly evaporated as China relies more on its own production and other countries than the U.S. for imports.

Previously published in Digital Journal

Trump names anti-China economist as trade council chief

While Donald Trump seems to be friendly with Putin and anxious to pursue better relations with Russia, with respect to China his position is one of opposition. This trend is confirmed in his naming of his trade council chief.

 

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Trump has named Peter Navarro, an anti-China economist to the important post. Navarro has accused China of wrecking the U.S. economy. He has even produced a long documentary film on China.

Trump has described Navarro as a visionary. Navarro has also suggested that the U.S. could become more engaged with Taiwan. Trump has already spoken with the Taiwanese president, angering China. The U.S. has long pursued a 'one China' policy — a position supported by China. Trump said recently on Fox News Sunday that the U.S. does not necessarily need to stick to the present U.S. view that Taiwan is part of one China. He said this after negative reactions to his speaking with the Taiwanese president.

Navarro's opposition to China is regarded as extreme by many. Navarro regards China as waging an economic war against the U.S. However, other less developed countries also take advantage of their cheaper labor power and lower safety and environmental standards to operate more cheaply than U.S. companies. In many cases it is U.S.-based global companies who have decided to shift jobs to such countries. While Trump may try to improve trade and other relations with Russia, many fear that the appointment of Navarro could destabilize trade and political relations with China.

In a recent statement about Navarro, Trump's transitional team said that Navarro would "develop trade policies that shrink our trade deficit, expand our growth, and help stop the exodus of jobs from our shores". One wonders what benefits there would be for the trading partner in such deals. The present trend of globalization is towards satisfying the interests of powerful international corporations who are concerned with maximizing their profits globally rather than focusing on the situation in a particular country such as the U.S.A. Trump may find himself up against powerful opponents should he try to implement a policy that puts the interests of the U.S. first. His attempts to do so could actually have negative effects on the U.S. economy. Trump also campaigned on fostering industries such as coal production which are waning and attempts to revive them will require subsidies and at the same time do considerable environmental damage. Consumers may not be happy when the cost of formerly cheap products rises considerably.

In his 2012 documentary Navarro claims that China is responsible for the loss of 57,000 U.S. factories and the loss of 25 million jobs. While Navarro may be exaggerating it is no doubt true that many factories closed down because goods were produced more competitively in China and also jobs were lost. However, many U.S. companies were complicit in the process through investments in China. Not surprisingly, few economists agree with Navarro. Most support globalization and the interests of global corporations. Marcus Noland of the Peterson Institute for International Economics described a tax and trade paper authored by Navarro with Wilbur Ross, named as Trump's commerce secretary as "the type of magical thinking best reserved for fictional realities". He said the economic analysis was seriously flawed.

During his campaign, Trump railed against the bad trade deals that the U.S. had made in the past. He threatened to impose tariffs not just on goods from China but Mexico as well. China's foreign minister, Wang YI, warned that with Trump as president ties with the U.S. could face new complications and that a stable relationship required each side respecting the other's core interests.

Perhaps, Trump is attempting to drive a wedge between Russia and China in order to ensure they do not join together to combat the power of the United States on the world stage.