US-China trade war fears escalate as threats ramp up



The escalating trade confrontation between Washington and Beijing threatened to boil over Friday after President Donald Trump lashed out again and China called on the European Union to join the battle, sending global stocks into the red.
Trump remained defiant and argued the pain of the dispute will pay off in the end, while China said that his administration would only "shoot itself in the foot" if it didn't back down from the "extremely wrong" threats.

Treasury Secretary Steven Mnuchin acknowledged there was a risk of a trade war, but said the intention is to defend US interests and the administration remains willing to negotiate.

Global stock markets were unhappy with the turn of events, as Wall Street dropped more than two percent, following European and Asian markets lower.
In the wake of the decision to impose steep tariffs on steel and aluminum imports, the United States on Tuesday published a list of $50 billion in Chinese goods to be hit by tariffs over what Washington says is widespread theft of intellectual property and technology.
China retaliated by unveiling planned levies on $50 billion worth of major US exports including soybeans, cars and small aircraft.
Trump hit back again late Thursday, instructing trade officials to consider tariffs on an additional $100 billion in imports.
"Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers," Trump said, calling Beijing's reaction "unfair."
So far, only the tariffs on steel and aluminum have taken effect, but Trump's latest threats take the dispute to a new level: China cannot retaliate in kind since it only imports $130 billion in US products, meaning it would have to find another way to respond.
Amid widespread concern, and calls for restraint from US businesses and farm states most vulnerable to Chinese retaliation, Trump said Friday the outcome would be worth the short-term risk.

"I'm not saying there's not going to be any pain," he told WABC radio in New York, but "we're going to be much stronger for it."










Update: During a scheduled press briefing, the Chinese envoy just said the European Union and China "must act together" to counter US protectionism.

It appears to have reminded the machines to stop buying the dip...


China has responded to President Trump's calls for an additional $100 billion in tariffs, saying that it would counter U.S. protectionism "to the end, and at any cost."
"The Chinese side will follow suit to the end and at any cost, and will firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people,” the Commerce Ministry said in a statement on its website on Friday.
“We don’t want a trade war, but we are not afraid of one."
President Trump's decision to push for a more trade tariffs may well be the tipping point for the US dollar as global reserve currency since it leaves Beijing with limited tit-for-tat retaliation... forcing the cornered nation to 'get creative'.

As Bloomberg reports, China acted swiftly this week to announce reciprocal tariffs on $50 billion worth of American imports, unveiling a match for the Trump administration’s move against Chinese imports less than 12 hours before.
Now that U.S. President Donald Trump has ordered a review of measures on $100 billion of additional Chinese goods, China will have to get creative to keep up the like-for-like rhetoric.
There aren’t enough American goods imports to target...

Of course, China could still take other measures - like curbing package tours or student transfers to the U.S., or steps against American companies’ operations in China; or the final threat of 'going nuclear' by withdrawing from US Treasury auctions, devaluing its currency (think Aug 2015 turmoil), or a more petrodollar-focused retaliation.
“This is starting to feel like the beginnings of a trade war, if simply each proposal is matched with a retaliation,” said Patrick Bennett, a Hong Kong-based strategist at Canadian Imperial Bank of Commerce. “The U.S. risks isolating itself from global trade in this process and we think the U.S., USD and U.S. asset markets have more to lose.”





Last week, we reported that satellite images had captured China’s only aircraft carrier in deployment, the Liaoning, flanked by 40 other warships and submarines, conducting unprecedented live-fire drills in the South China Sea. This massive Chinese naval exercise was observed for the first time, with China watchers pointing out that such a forceful display of deterrence was highly unusual for the People’s Liberation Army Navy. Perhaps in light of recent events, it was merely a warning.
Li Jie, a Beijing-based naval specialist, said, “it was the first time the Liaoning had taken part in live-fire drills. This will test the Liaoning’s real combat strength as well as joint-operations skills between the aircraft carrier and warships from other fleets.”
“China wants to show the outside world its determination to defend the fruits of its economic reforms over the past 40 years,” Beijing-based military analyst Zhou Chenming said.“Like the US, China’s military might is one of the government’s political tools to protect the country’s national interests.”
Now, according to the South China Morning Post, as Beijing flexes its naval war muscle, the US is preparing for its own "show of force" naval drill in the Asia-Pacific region, and in close proximity to the Liaoning. The Pentagon is reportedly sending an unprecedented three aircraft carrier battle groups to the region, with the USS Theodore Roosevelt flotilla arriving in Singapore sometime early next week. 

Separately, the USS Carl Vinson and its fleet have just paid a first visit to the Vietnamese coastal city of Da Nang since the end of the Vietnam war, a move Chinese military experts said was aimed at countering Beijing’s influence in the region.
Meanwhile "China is believed to have deployed the DF-21D, dubbed the “carrier killer”, in the East and South China seas to fend off any possible US aircraft carrier battle group attacks on coastal cities, the country’s economic heartland," according to the SCMP.
America’s last full-blown global trade war was ignited by the notorious Smoot-Hawley tariff of 1930, as the U.S slid into a Great Depression — all in attempt to protect struggling American farmers by increasing tariffs on agricultural imports. The global reaction was short and quick, after that, a trade war ensued. These protectionist and nationalist economic policies severely disrupted global trade, facilitated the rise of fascist leaders, and ultimately some years later contributed to the outbreak of World War II.