Trade wars on again in response to Trump’s interventionism

It’;s hard to keep up with Donald Trump’s varying positions on a number of issues, but it looks like trade wards are back on after he imposed tariffs in steel and aluminium imports.It’s too soon to tell what this may escalate into, but the signs look ominous.

Reuters: U.S. isolated at G7 meeting as tariffs prompt retaliation

U.S. President Donald Trump told Canada and the European Union on Friday to do more to bring down their trade surpluses, a day after hitting them and Mexico with import tariffs on steel and aluminum.

Trump castigated Canada, a top U.S. trade partner and ally, in a tweet on Friday morning, saying it had treated U.S. farmers “very poorly for a very long period of time.”

“Highly restrictive on Trade! They must open their markets and take down their trade barriers! They report a really high surplus on trade with us,” he wrote.

Trump also told French President Emmanuel Macron of the need to “rebalance trade with Europe,” the White House said.

The strong words followed swift responses to the tariffs by Canada, Mexico and the EU, which all plan to retaliate with levies on billions of dollars of U.S. goods, including orange juice, whiskey, blue jeans and Harley-Davidson motorcycles.

ODT: Trade war repercussions likely

By later today,  or early tomorrow, it will be known the extent to which Europe, Canada and Mexico will go to counter the United States’ tariffs.

Canada and Mexico have made early moves but there are suggestions more barriers will be put in place for US exports.

US President Donald Trump unilaterally imposed sweeping tariffs on  steel and aluminium imports from the European Union, and its Nafta trading partners Canada and Mexico.

European commissioner Jean-Claude Juncker is promising to have retaliatory measures in place. In a furious address to a conference, Mr Juncker was threatening like for like, enough to make free-trade countries like New Zealand shudder.

The move is likely to have an immediate impact on global trade in steel and aluminium, particularly between the US and Canada, the largest supplier of imported steel to the US.

A meeting of the Group of Seven, in Canada, was taken by surprise by the announcement. Concern about Mr Trump’s hardening approach to trade dominated the discussion panel as top policy makers from the United States, Britain, Germany, France, Italy, Japan and Canada gathered in the alpine village of Whistler, British Columbia, Canada.

There is growing concern trade wars may turn into real wars — particularly with the ongoing tit-for-tat squabble between China and the US.

On Tuesday, the White House pledged to slap an additional 25% tariff on a long list of Chinese products, including metals. Within hours Beijing retaliated with the promise to lift levies on $US50 billion worth of US imports by 25%. The Chinese list includes soybeans, automobiles, chemicals and aircraft. In response, Mr Trump threatened an additional $US100 billion in tariffs against China.

Global supply chains are at risk from the actions being initiated by Mr Trump and, because of his powerful position and erratic behaviour, no-one knows for sure how this will play out.

Mr Trump’s posturing is damaging to not only global trade. He is facing a backlash from some of his Republican allies, who are now worrying about surviving midterm elections.

The bigger fear over the current conflict is how escalating retaliatory tariffs may undermine institutions such as the World Trade Organisation, which have underpinned the world trading system since the aftermath of World War 2 and have prevented the outbreak of major trade wars.

Reuters:

Trump’s tariffs on Washington’s closest allies also drew condemnation at home from Republican lawmakers and the country’s main business lobbying group and sent a chill through financial markets.

The US markets keep bouncing around:

This year they have been as erratic as Trump, which is no coincidence.

While steel and aluminium tariffs may help protect some US industries they are likely to raise prices on many products that use steel and aluminium.

These particular tariffs aren’t likely to impact greatly on New Zealand, but if it escalates into a wider trade war then we are likely to get tossed around in the storm.

Meanwhile Trump is trying to prop up some big business friends: Trump orders Energy Department to help ailing coal, nuclear plants

U.S. President Donald Trump on Friday directed Energy Secretary Rick Perry to take emergency steps to keep at-risk coal and nuclear plants running, the White House announced.

Under the directive, Perry would require grid operators to buy electricity from ailing nuclear and coal-fired power plants to keep them from being shuttered.

Trump is an erratic interventionist.

Trump’s trade warmongering a risky game

It’s hard to know what is going to happen with world trade, with Donald Trump making heavy handed threats, partly retreating, then making more threats with a mist of both bullying and vagueness hovering over  it all.

Trump recently imposed steel and aluminium tariffs, citing national security. He talked tough.

Financial Times: Trump defends steel and aluminium tariffs threat with attack on EU

Donald Trump launched a fresh attack on the EU on Tuesday as he defended his plan for tariffs on aluminium and steel imports. Despite a growing Republican backlash against the tariffs, Mr Trump said he planned to impose them in a “very loving way” that would command new respect for the US around the world.

“The European Union has been particularly tough on the United States,” Mr Trump said. “They make it almost impossible for the United States to do business with them. And yet they send their cars and everything else . . .” The president repeated a threat of new tariffs on European car imports should the EU retaliate against his trade moves.

Republicans fear that any trade war that might ensue could undermine the economic benefits of last year’s tax cuts, ahead of November’s midterm elections.

In a letter to the president on Tuesday, Orrin Hatch, who chairs the Senate finance committee, said the proposed tariffs were akin to “harmful and unnecessary tax increases on American workers and consumers”.

Mr Trump insisted again on Tuesday that he was delivering on his campaign promise to protect American workers and companies from unfair foreign competition. But Republicans are trying to convince him that too broad an approach would hurt other steel and aluminium-using industries such as the drinks sector.

“This isn’t about backing down. This is about hitting your target,” Kevin Brady, chairman of the House ways and means committee, told CNBC.

But either Republican pressure or on a whim Trump has partially backed down, in the short term at least.

Reuters:  Trump temporarily excludes EU, six other allies from steel tariffs

In a presidential proclamation published late on Thursday, Trump said he would suspend tariffs for Argentina, Australia, Brazil, South Korea, Canada, Mexico and the European Union, the U.S.’s biggest trading partner, until May 1, 2018 as discussions continue.

After May 1, Trump would decide whether to permanently exempt the countries based on the status of talks, the White House said in a statement.

So Trump is all over the place. But not, on this, with New Zealand.

Stuff, March 12: New Zealand steel and aluminium exports pose ‘no threat’ to US: Ardern

Prime Minister Jacinda Ardern says New Zealand has a “strong case” for an exemption from US tariffs, claiming steel and aluminium exports pose “no threat” to the world’s largest economy.

Ardern told reporters at her weekly post-Cabinet press conference that ministers were seeking an exemption from the tariffs “as we speak” and believed the case was strong.

“We have what I would characterise as an important and broad relationship with the US, not unlike Australia, so we believe we have a strong case for an exemption.

“I think that case is enhanced by the fact that we are clearly not a target here. Our exports of steel and aluminium are very small,” Ardern said.

New Zealand sent the US a letter asking to be exempted. Perhaps Ardern should have threatened via Twitter, but I doubt that Trump nor the republicans would care much about our tiny case.

Now Trump moves to crack down on China trade with $60 billion in tariffs on imported products

President Trump took the first steps toward imposing tariffs on $60 billion in Chinese goods and limiting China’s ability to invest in the U.S. technology industry Thursday, saying the moves were a response to Beijing’s history of forcing U.S. companies to surrender their trade secrets to do business in China.

The president directed U.S. Trade Representative Robert E. Lighthizer to announce within 15 days a proposed list of products to be hit with tariff increases. After a public comment period, the final list, designed to target Chinese products that benefited from improper access to U.S. technology, will be made public.

“We’re doing things for this country that should have been done for many, many years,” the president said before signing a memorandum setting in motion the trade actions.

The president blamed China for the loss of 60,000 factories and 6 million jobs, a number that most economists say blends the impact on U.S. employment of both Chinese competition and automation.

Trump said that unfair Chinese trade practices are responsible for the yawning U.S. trade deficit with China, which has reached a record $375 billion on his watch.

But China is fighting back in trade areas that the US is vulnerable.

CNBC: China responds to Trump tariffs with proposed list of 128 US products to target

  • China on Friday announced plans for reciprocal tariffs on 128 U.S. products that include pork, wine, fruit and steel.
  • Beijing said it will take measures against the U.S. goods in two stages if it cannot reach an agreement with Washington

China’s commerce ministry proposed a list of 128 U.S. products as potential retaliation targets, according to a statement on its website posted Friday morning.

Recent U.S. trade actions severely damage the multilateral trading system and disturb the international trading order, China’s commerce ministry said, urging Washington to resolve its issues with Beijing to avoid harming the bilateral relationship.

There’s some irony here regarding the Trans-Pacific Partnership. The US joined the TPP in part to improve it’s influence in the Pacific trade region to combat China’s growing influence. Trump withdrew the US from the TPP as soon as he became president last year.

If the US-China trade war comes to actual blows, and the US imposes tariffs on member countries of the TPP (now signed by eleven countries as the CPTPP), this may strengthen China’s hand in the region.

To further confuse things – Mnuchin: US to consider TPP re-entry after other priorities

U.S. Treasury Secretary Steven Mnuchin says that the United States will consider rejoining the Trans-Pacific Partnership after it deals with other priorities.

The other priorities seem to be threatening tariffs and raising the prospects of trade wars.

Trump withdrew the U.S. from the agreement last year, but the remaining 11 members pressed ahead and recently signed a sweeping free trade deal in the Chilean capital.

Mnuchin said Wednesday that the Trump administration is focused on talks to renegotiate the North American Free Trade Agreement.

That’s odd, because the two countries the US is renegotiating with, Canada and Mexico, are in the TPP. If they renegotiate NAFTA it could be difficult to then bring that in to the TPP.

Businesses like certainty on things like trade so they can plan into the future. US farmers need to know which crops are worth planting in future seasons. US car manufacturers would like to know how much their steel is going to cost. It may depend on which country they import steel from, and what Trump ends up deciding. Companies like Apple that do a lot of their manufacturing in China are likely to be anxious about the outcome of the escalating trade threats.

Things like international trade are a lot more complex than running a reality TV show where dramas every week keep the ratings up – and there a more than just one host running the world show.

Some things Trump does may turn out for the god of the US and possibly for the greater good, but there’s just as likely to be negatives, and one bad misstep could precipitate a major negative.

Stock markets often recover from temporary upheavals, but sometimes they don’t.

Express: Trump trade war threat sends world markets PLUNGING: Dow Jones, FTSE, Dax and CAC all drop

DONALD Trump’s trade war threats has caused a global stock market crisis with the Dow Jones, FTSE, Dax and Cac all plunging.

The US President is on the verge of slapping tariffs worth $60billion on China, sending investors fleeing towards safer currencies.

The levies for Chinese products would be the “first of many”, Mr Trump said yesterday as he confirmed they would be going ahead.

Reverberations have been felt throughout numerous stock markets.

The US share market steadily rose through last year, but since Trump has been throwing around trade threats and tariffs it has become a lot bumpier, and has dropped from it’s highs (and trump has stopped claiming credit for the trends).

Dow Jones over the last twelve months:

That shows a slight recover so far today after a significant trade war affected drop on Thursday. It shows a bumpy track over the last two months.

UPDATE: The Dow Jones finished the day down 1.77%, to a 3 month low.

Trump’s bluster and brinkmanship  is a very risky game.

 

 

Pushback against Trump’s tariff proposals

Widespread concerns over Donald Trump’s steel and aluminium tariff proposals, and the threat of a trade war, are so far being dismissed by the White House.

Politico: Frustrated White House free traders mount campaign to weaken Trump tariffs

Since President Donald Trump announced plans last week to hit steel and aluminum imports with new tariffs, his trade adviser Peter Navarro and Commerce Secretary Wilbur Ross have been all over television celebrating their victory and rebutting suggestions that the move would incite a damaging trade war.

But economic adviser Gary Cohn and other free-trade advocates inside the White House and the Treasury Department are mounting a last-ditch effort to blunt the impact of Trump’s head-turning decision, even as the president insisted Monday that he wasn’t going to be convinced out of it.

Cohn and like-minded officials in the administration are hoping the parade of senior GOP lawmakers, donors, lobbyists and business groups loudly opposing the pending decision will convince Trump that his proposed tariffs will damage the U.S. economy. There was a growing sense among some administration officials that the best way to talk Trump out of the tariffs was to make sure he hears from people outside of the White House, since he’s ignoring advisers inside the building.

RNZ:  Republicans ‘extremely worried’ by Trump’s metal tariffs plan

US President Donald Trump said on Saturday that steel imports would face a 25 percent tariff and aluminium 10 percent.

US Speaker of the House Paul Ryan said he was “extremely worried” about the impact of a trade war, adding that it could undermine economic gains.

But Mr Trump pushed back during a White House meeting with Israeli Prime Minister Benjamin Netanyahu.

“We’re not backing down,” he told reporters on Monday. “I don’t think you’re going to have a trade war.”

White House press secretary Sarah Huckabee Sanders said on Monday that Mr Trump was “very confident” the US would win any trade war.

Mr Trump’s Monday comments came an hour after Mr Ryan released a statement urging the White House to reconsider its plan.

“We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan,” Mr Ryan’s spokeswoman AshLee Strong said.

“The new tax reform law has boosted the economy and we certainly don’t want to jeopardise those gains.”

Many countries and trade groups have expressed concern, including the UK, EU, Canada, Australia (and New Zealand). And also the World Trade Organisation:

The World Trade Organization (WTO) on Monday also called on member states to “stop the fall of the first dominoes” of a trade war.

“Once we start down this path it will be very difficult to reverse direction,” WTO Director General Roberto Azevedo told negotiators in Geneva on Monday. “An eye for an eye will leave us all blind and the world in a deep recession.”

There is also pushback from within the US:  Companies, industry groups target Congress to derail Trump tariffs

Automakers, business groups and farmers took their fight against U.S. President Donald Trump’s proposed tariffs on steel and aluminum to Capitol Hill on Monday, betting that Republican lawmakers would stand up to the White House on their behalf.

By turning to Congress, lobbyists for industries that could lose in a trade war are making a bet that Republican lawmakers would stick to their traditional support for open trade, and potentially use legislative power to derail tariffs.

Trump and administration trade officials over the weekend said they are determined to go ahead with protective tariffs for steel and aluminum, despite the potential for retaliation by trading partners.

Industry groups opposed to the tariffs got support on Monday from House Speaker Paul Ryan and other senior Republicans. Some Democratic lawmakers from auto-producing states have praised Trump’s move, joining unions long skeptical of open trade deals such as the North American Free Trade Act (NAFTA).

Automakers are reaching out to senators and governors and asking them to make the case against tariffs to the White House, officials said.

Manufacturers of metal-intensive products such as cars and airplanes already are wrestling with rising prices for steel and aluminum, in part because of tight production capacity.

Administration officials in TV interviews over the weekend downplayed the impact on automakers as adding only up to about $200 to the price of a vehicle — a fraction of the average $35,000 sales price. However, Goldman Sachs said in a research report on Sunday that the tariffs could depress General Motors Co and Ford Motor Co’s adjusted operating incomes by $1 billion each.

Groups representing auto dealers weighed in to support the manufacturers. In a flattening auto market, headlines about trade wars and tariffs could cause Americans to put off buying new vehicles, said Cody Lusk, president and chief executive of the American International Automobile Dealers Association.

“Everybody is reaching out to their allies on Capitol Hill just to make sure they are aware of what’s at stake,” Lusk said.

Farm groups representing producers of wheat, corn and soybeans, the top U.S. crop exports valued at nearly $37 billion last year, joined criticism of the proposed tariffs on Monday. Farm groups had been among Trump’s core support group during the 2016 election.

This may all fall on deaf ears. Trump often seems intent on being a tough decision maker and seems obsessed by ‘winning’, and has said it would be easy to win a trade war with the rest of the world.

But he is losing support.

Trade war possible between Australia and US?

Donald Trump’s threat of steel and aluminium tariffs has sparked concern around the world, amongst allies as well as with trade competitors. Australia is showing some concern after earlier being assured of an exemption, with no clarification forthcoming from the US.

It looks like Trump makes things up as he goes, risking making major messes that may be difficult for his officials to clean up.

ABC News: Donald Trump promised Malcolm Turnbull Australia would be exempt from trade tariffs

Donald Trump “emphatically” promised to exempt Australian steel and aluminium from US tariffs during a meeting with Prime Minister Malcolm Turnbull last year, it can be revealed.

The ABC understands the promise was witnessed by high-ranking officials on both sides of the meeting, which was held on the sidelines of the G20 meeting in Hamburg, Germany, in July 2017.

Among those in the US delegation who saw the undertaking first-hand were US Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and Whitehouse Chief Economics Adviser Gary Cohn.

On the Australian side were Finance Minister Mathias Cormann and the Deputy Secretary of the Department of Prime Minister and Cabinet David Gruen.

This revelation explains why the Australian Government has been stunned by Mr Trump’s declaration last week that the tariff regime will be enforced, and subsequent statements by Mr Ross that country-specific exemptions are unlikely.

Sources have told the ABC Mr Trump’s promise was emphatic and that he instructed Mr Ross to work out the specifics to “make it happen”.

The Prime Minister and the Australian delegation was “absolutely certain” that a deal had been struck during the Hamburg meeting.

Trusting trump may have been naive.

news.com.au: Turnbull govt considering a ‘trade war’ with the US over steel and aluminium imports

LABOR has pledged support for the Turnbull government if it joins a trade war against United States President Donald Trump.

Prime Minister Malcolm Turnbull discussed trade with Mr Trump in Washington last week but was given no assurances Australia would be affected badly by his trade policy.

In fact, the ABC reports Donald Trump “emphatically” promised to exempt Australian steel and aluminium from US tariffs during a meeting last year.

Australian Trade Minister Steve Ciobo at the weekend telephoned US Commerce Secretary Wilbur Ross but was unable to get any clarification. That was because at that stage even senior members of the Trump administration hadn’t been given the details of the President’s plans.

Mr Trump’s move move could ignite a trade war, with Europe already threatening to put levies on American goods. This could push up interest rates, rock the stock market, and add to global economic uncertainty.

Mr Trump is being told by many sources, including British Prime Minister Theresa May, who telephoned him at the weekend, that the tariffs would hurt America’s allies such as the United Kingdom, South Korea and Canada.

It appears that Trump doesn’t care about what US allies think of his proposed tariffs.

RNZ:  NZ to seek exemption from Trump’s steel tariffs

New Zealand will not be making any threats of retaliation against Donald Trump’s plan to put tariffs on imports of steel and aluminum, Trade Minister David Parker says.

However, New Zealand would not be adding its voice to the criticism, with Trade Minister David Parker saying New Zealand will not be making any threats of retaliation.

“We wouldn’t be responding by the threat of trade retaliation ourselves, which I see has been the response of some countries,” he said.

“But we would certainly be advocating on behalf of the New Zealand steel industry that these tariffs if introduced [would] not apply to them

“We are of course a traditional partner of the United States, so we would be submitting to them that they shouldn’t be catching New Zealand steel exports in a regime like that if they introduced it.”

It’s hard to see That trump would care about steel trade with New Zealand.

‘Trade wars are good, and easy to win’

On Thursday Donald Trump announced that the United States would impose tariffs on imported steel and aluminium.

After a negative reaction around the world and on the US stock market, Trump has tweeted that ‘trade wars are good, and easy to win’.

Reuters: Trump tweets: ‘Trade wars are good, and easy to win’

Trump said on Thursday that the United States would apply duties of 25 percent on imported steel and 10 percent on aluminum to protect U.S. producers, although White House officials later said some details still needed to be ironed out.

Fears of an escalating trade war triggered selloffs on Wall Street and in Asia and Europe, hitting the share prices of steelmakers and manufacturers supplying U.S. markets particularly hard.

Trump believes the tariffs will safeguard American jobs, but many economists say the impact of price increases for users of steel and aluminum, such as the auto and oil industries, will destroy more jobs than curbs on imports create.

Australia’s trade minister said the measures risked triggering retaliation from other economies and could cost jobs, on Friday, while China predicted harm to trade if other countries followed the example of the United States.

In Brussels, the European Commission called the step a blatant intervention that amounted to protectionism. However, while promising to act“firmly”, it made no mention of retaliation but instead spoke of counter-measures that conformed to World Trade Organization (WTO) rules.

Brussels will join other countries in challenging the measures at the WTO and says it will also look into safeguard measures.

Reuters: Spooked by Trump tariffs, investors see few good options

The specter of a trade war started by U.S. President Donald Trump rattled Wall Street on Thursday and exacerbated worries about inflation and the future of a nine-year bull market.

The S&P 500 slumped 1.33 percent after Trump said the United States would impose duties on imported steel and aluminum, making good on promises to aggressively challenge China and other countries he blames for lost manufacturing jobs.

On Wall Street, Trump’s announcement exacerbated already-brewing concerns about inflation, which could push the U.S. Federal Reserve to hit the brakes in coming months on an expanding U.S. economy and spell the end to record-breaking stock price gains.

News of the tariffs drove the stocks of U.S. domestic steel and aluminum makers sharply higher, but the damage to stocks in other sectors was wide-ranging and illustrative of how broadly investors believe a trade conflict could damage the U.S. economy.

Halfway through Friday trading the Dow Jones was down further but had recovered slightly earlier in the day.

Investor’s Business Daily:  Sorry, Mr. President: Your Trade Protectionism Will Cost The U.S. Dearly

Protectionism is a political feel-good policy that does nothing for the economy. It’s a big cost with very few tangible benefits. That’s why President Trump has made a big mistake in imposing big tariffs on steel and aluminum.

We understand, of course, that President Trump feels beholden to his constituencies in the U.S. who have been hurt by foreign competition, particularly in basic industries like steel and aluminum. But the 25% tariff on steel and 10% tariff on aluminum that Trump seeks to impose will lead to higher prices for all, the loss of thousands of jobs and a political-crony windfall for a handful of big companies.

‘Political-crony windfall’ is becoming a familiar theme of Trump’s presidency.

WSJ: Trump’s Steel-Tariffs Plan Rattles GOP Lawmakers

Since he became president, Donald Trump’s threats to sanction global trading partners sent tremors through business-oriented congressional Republicans worried about how potential retaliation from abroad could reverberate through the businesses and farms in their districts.

On Thursday, the rattle turned into an earthquake.

WSJ: U.S. Allies Steel for Trump Tariff Tussle

President Donald Trump’s planned tariffs on steel and aluminum put U.S. allies around the globe in a tough spot, driving down stock prices and generating warnings of a possible international trade war.

UPDATE:

According to two officials, Trump’s decision to launch a potential trade war was born out of anger at other simmering issues and the result of a broken internal process that has failed to deliver him consensus views that represent the best advice of his team.

On Wednesday evening, the president became “unglued,” in the words of one official familiar with the president’s state of mind.

A trifecta of events had set him off in a way that two officials said they had not seen before: Hope Hicks’ testimony to lawmakers investigating Russia’s interference in the 2016 election, conduct by his embattled attorney generaland the treatment of his son-in-law by his chief of staff.

Trump, the two officials said, was angry and gunning for a fight, and he chose a trade war, spurred on by Commerce Secretary Wilbur Ross and Peter Navarro, the White House director for trade.

In response to NBC News, another White House official said that the communications team “was well-prepared to support the president’s announcement” and that “many of the attendees had been in the White House before and had already been vetted for attendance at a presidential event.” A different official said of the decision, “everyone in the world has known where the president’s head was on this issue since the beginning of his administration.”

There were no prepared, approved remarks for the president to give at the planned meeting, there was no diplomatic strategy for how to alert foreign trade partners, there was no legislative strategy in place for informing Congress and no agreed upon communications plan beyond an email cobbled together by Ross’s team at the Commerce Department late Wednesday that had not been approved by the White House.

No one at the State Department, the Treasury Department or the Defense Department had been told that a new policy was about to be announced or given an opportunity to weigh in in advance.

The Thursday morning meeting did not originally appear on the president’s public schedule. Shortly after it began, reporters were told that Ross had convened a “listening” session at the White House with 15 executives from the steel and aluminum industry.

Then, an hour later, in an another unexpected move, reporters were invited to the Cabinet room. Without warning, Trump announced on the spot that he was imposing new strict tariffs on imports.

By Thursday afternoon, the U.S. stock market had fallen and Trump, surrounded by his senior advisers in the Oval Office, was said to be furious.

 

Key on Chinese trade allegations

John Key has played down allegations that China is threatening retaliation against New Zealand over an investigation into the quality of steel imported from China – see China allegedly threatens NZ on trade.

Stuff: John Key downplays retaliation suggestions over potential China steel import sanctions

Prime Minister John Key has downplayed fears of a trade war from China if sanctions are slapped on its steel, saying he has received “no indication” the world superpower is upset with New Zealand.

Highly-placed sources have confirmed China is applying pressure in an attempt to sway regulators at the Ministry of Business, Innovation and Employment (MBIE) away from imposing anti-dumping or countervailing duties – which are imposed when goods are subsidised – on cheap imported Chinese steel.

Speaking shortly after his arrival in Indonesia for a three-day trade trip, Key sought to pour cold water on the idea of any Chinese retaliation.

While he could not confirm whether MBIE had received a complaint about steel dumping, due to the confidentiality of the complaints regime, the Government had received “no indications” of Chinese concerns about possible anti-dumping duties, or potential retribution.

“Even if there was a complaint, and even if it was investigated, whether a country like China would take retaliatory action against New Zealand, I don’t believe that’s the case that they would.”

“There’ll be lots and lots of ways of them looking to resolve issues if there were any, but it wouldn’t be through the sort of things that we’ve seen reported.”

Key said there was no “substantiated source” confirming that China would take action against New Zealand exports, only speculation.

“People can have their own version or view … of what they think might happen, but our exports are flowing across the border into China.

“I regularly see the Chinese leadership, the Chinese ambassador has my phone number if he wants to pick it up and make a phone call – none of those things have happened.”

However it appears that the allegations have been taken seriously

Kiwi trade officials have been asked to “seek assurances” from the Chinese embassy about the country’s stance on competition issues, as local exporters worry about a backlash.

McClay had asked officials from the Ministry of Foreign Affairs and Trade to speak to the Chinese embassy on Monday morning and “seek assurances” about the country’s position on competition issues.

McClay said he had no concerns about imported Chinese steel coming into New Zealand.

“We’re a trading nation, we sell a lot of things to China and other parts of the world, and we import a lot of things from them as well, so in as far as our trade relationships are concerned, with China it’s very strong.”

Perhaps “highly-placed sources” have tried to fight back against threats by leaking to media.

Regardless of whether the allegations of threats are true or not it is likely that China won’t be happy seeing this played out in public.

 

China allegedly threatens NZ on trade

The Sunday Star Times claims that “behind the scenes” China has threatened “retaliatory measures” against New Zealand trade if inquiries continue into the quality of Chinese supplied steel.

If accurate this is chilling. It puts a small country like us, dependent to a significant degree on trade with China, in a difficult and relatively powerless position.

China threatens reprisals on NZ dairy, wool and kiwifruit if government doesn’t back off cheap steel inquiry

China has threatened “retaliatory measures” against New Zealand trade, warning it will slow the flow of dairy, wool and kiwifruit imports.

The world’s biggest trading nation is angry at New Zealand inquiries into a glut of Chinese steel imports flooding the market; the Chinese believe New Zealand is part of a US-led alliance to target Chinese national interests.

New Zealand is angry that China should take such a combative approach, and is asking that it desist.

New Zealand ‘anger’ may be futile in a trade war between China and the US.

The quality of steel from China is becoming a concern.

Pacific Steel, the sister company of iron miner and processor NZ Steel, has lodged a confidential application, under local and World Trade Organisation rules, for an investigation into China dumping cut-price steel on the New Zealand market.

The local industry is struggling to compete with the glut of sometimes substandard Chinese metal, which is being used in major projects like the $1.4 billion Waterview Connection and bridges on the Waikato Expressway.

Competing with cheap imports from China has been a problem for New Zealand manufacturers for a long time, as has the quality of imported goods.

The durability of structural steel is is of much greater concern than the durability of track pants and onesies.

Right now, lawyers for the Ministry of Business, Innovation and Employment are deciding whether the investigation should proceed, which could result in punitive anti-dumping tariffs against China.

But somehow, China learned of the application – and it is taking retaliatory action.

In the past week, representatives of New Zealand’s biggest export industries have been called in by Chinese officials, and told to exert their influence to make sure the MBIE investigation does not go ahead.

To up the ante, they have been told China has begun consulting with its local food producers about imposing reprisal tariffs to slow down the access of New Zealand dairy, wool, kiwifruit and potentially meat to the 1.35 billion-strong Chinese consumer market.

Local producers are alarmed. 

So the should be – and not just local producers.

A trade war with China is definitely not in our interests,” says Andrew Hoggard, a Manawatu dairy farmer. “It’s about 20 per cent of our markets and we’re getting good market penetration with added value products in there.”

Highly-placed sources have confirmed China is applying pressure in an attempt to sway regulators away from imposing anti-dumping or countervailing duties – which are imposed when goods are subsidised – on imported Chinese steel. Zespri and Fonterra are said to have been heavied, and other exporters may have been.

But I don’t thing New Zealand can compromise on the quality of critical things like structural steel.

The world’s biggest trading nation believes the United States is leading an alliance of sycophantic nations, doing the US bidding by shutting down Chinese trade and trying to force its military out of the contested islands and atolls of the South China Sea.

China’s unusual tactics have caused government and industry to close ranks. The Ministry of Commerce of China (MOFCOM) has denied consulting on retaliatory tariffs. Fonterra spokesman Phil Turner and Zespri’s chief operating officer Simon Limmer both denied any knowledge of the Chinese industry consultation.

But trade expert Charles Finny, who has worked on China-New Zealand trade issues for decades, said sources in Government confirmed at least one major exporter had been told “the Chinese Government would like pressure to be applied to MBIE”.

I don’t think we have a choice – New Zealand has to stand firm on our procedures for dealing with potentially substandard imports of building materials.

If China takes retaliatory action in other markets then we just have to bear the brunt of that. We can’t allow another country – any other country – to dictate how we do things via threats.

It may adversely effect some of our trade but the alternative is worse.

UPDATE:  McClay to follow up on China retaliation claims (NZME)

Trade Minister Todd McClay says he will ask officials to contact the Chinese Embassy in Wellington to clarify China’s position on competition issues.

He was commenting about news reports that China could take retaliatory action against dairy and kiwifruit exports from New Zealand if a formal investigation into alleged steel dumping by China is launched by the Ministry of Business, Innovation and Employment (MBIE).

McClay said he would be asking his officials to contact China’s embassy.

“Certainly I would be asking officials to clarify the Chinese position in as far as any competition issue was concerned,” he said today from Townsville, en route to Indonesia with a trade delegation, where he is meeting up with Prime Minister John Key.

Retaliatory action was serious.

“Market economies don’t do that with each other. WTO [World Trade Organisation] rules don’t allow it,” McClay said.

“I will certainly be talking with my colleagues and the Prime Minister when we get to Indonesia.”