trade war

Trump Threatens to Raise Tariffs on China Again

Trump tweeted this morning that he will raise the tariffs on Chinese goods from 10% to 25%. Obviously the US-China trade talks are stumbling. This is a bit surprising, since just a few days ago, the Trump administration was telling everyone that the deal is about to be finalized be next Friday.

Trump and the China hawks in his team (Lighthizer, especially) are playing hardball. To be fair, China has compromised a lot in the last few months as it:
— got rid of technology transfer requirements
— got rid of mandatory joint ventures
— opened many new sectors for foreign competition (while the USA blocks Huawei)
— passed laws for IP protection
— agreed to buy lots of soybeans, oil etc. to reduce the trade deficit
— even stopped talking about “Made in China 2025” plan.

And many western corporations have already made use of these laws. For example, Tesla opened a fully-owned factory in Shanghai, without the need for a Chinese partner. BMW bought shares in its joint venture and became a majority owner. A German insurance company (Allianz) was able to open a fully-owned subsidiary in China. American Express was finally allowed to operate in China. Visa and Mastercard were told they could do the same in 2-3 years.

What more can Xi Jinping do? He keeps compromising, while the US keeps turning the screws. Here are some of the ways the US is kicking China, while demanding all sorts of compromises from the Chinese:

— spreading unproven allegations about “1 million Muslims in concentration camps”. The Uyghur story is absolute nonsense. Just two days ago, the number was raised to “3 million.” No proof needed!

Arresting Huawei’s CFO, Meng Wanzhou

— Preventing many Chinese corporations from buying or investing in US corporations. The CFIUS has stopped numerous acquisitions by China over the last two years (Lattice Semiconductor, Moneygram and others)

— Forcing a Chinese company to sell its shares in Grindr (coz it’s a gay dating app and the Chinese may blackmail some of the members!)

Preventing Chinese scholars or refusing visa for Chinese students from doing research on certain topics in US universities

— The US military officials and the Pentagon constantly declaring that China is a threat

— US warships sailing the Taiwan Strait numerous times; and the US selling new fighter jets and tanks to Taiwan

— US relentlessly smearing China’s Belt and Road Initiative and trying to stop other countries from joining that infrastructure project

To summarize, the US position is: “Hey China, you’re evil, so we will kick you, sabotage you and demonize you. But you must open up your economy, allow US corporations to profit from your market, and buy lots of American goods to help our economy.”

This is chutzpah. There’s no win-win philosophy here. Let’s see how this all ends …

Update on Sunday evening: China might cancel the trade talks this week! Stock futures are already down. It will be an interesting week …