Apple earnings warning a casualty of trade war

The Apple (APPL) share price dropped nearly 9% on the sharemarket after they issued earnings warning that they will earn much less than they have previously advised/expected. The drop in earnings is said to be primarily due to the US trade war with China. The share price has recovered a little on Friday US time, by midway through the day bouncing back 3.4%.

9to5mac: Apple’s shock earnings warning sees AAPL stock plunge 9% in pre-market trading

Apple’s shock earnings warning – the first time it has issued one since 2002 – has sent the stock price crashing in pre-market trading. At the time of writing, AAPL is almost 9% down on yesterday’s close.

It follows a letter from Tim Cook warning investors that Apple expects to miss the low end of its fiscal Q1 guidance by $5B, and the high end by $9B.

Cook said that almost all of the missing revenue was in China, thanks to a combination of low economic growth in the country and tensions created by the Trump administration’s trade war with China.

It wasn’t just AAPL stock hit by the news: Business Insider reports that shares in major Apple suppliers are also taking a hammering. AMS, which makes Face ID sensors for Apple, took the brunt of the impact, losing 17% of its market cap overnight – but it wasn’t the only casualty.

Apple’s last earnings warning was in 2002.

Like any wars there can be casualties on all sides in trade wars.

 

Trade war and Trump praise continue

The US-China trade war continues to escalate, Donald Trump claims “some really super” GDP growth and praises himself, but warnings there are from within the US.

USA Today: Trump escalates trade war with 25 percent tariffs on another $16 billion in Chinese goods

The Trump administration announced Tuesday it is moving forward with a 25 percent tariff on $16 billion in Chinese goods, further escalating a trade war with Beijing.

The tariffs are the second round of duties that the U.S. has imposed on Chinese goods in a dispute over technology. An initial round of tariffs was placed on $34 billion of Chinese products on July 6.

More tariffs could be coming soon

President Donald Trump earlier proposed 10 percent tariffs on an additional $200 billion of Chinese imports. Last week, he instructed U.S. Trade Representative Robert Lighthizer to consider more than doubling those duties to 25 percent. Those tariffs could be levied in September, following a public comment period.

The latest round of tariffs comes during a breakdown of trade talks between the Trump administration and Beijing and amid a growing trade dispute that has rattled global markets.

CBA News: Trump predicts GDP growth above 5 percent next quarter

President Trump predicted Tuesday that gross domestic product growth in the next quarter “could be in the 5s” — that is, higher than 5 percent.

Mr. Trump made the bold prediction Tuesday evening before a dinner at his Bedminster, New Jersey, golf resort with leaders from FedEx, Mastercard, Boeing, PepsiCo and other companies.

The president also hailed his own economic and trade policies, saying he is “taking our economy to incredible new heights” in spite of fears of damage from the escalating trade disputes he has provoked.

“You’re gonna see some really super growth,” he promised.

The government reported last month that the economy grew at a rate of 4.1 percent in the second quarter, the fastest pace in nearly four years.

That’s good for now, but risks are also growing, as is US debt.

He acknowledged, “We’re in a little bit of a fight with China” over tariffs, but predicted a “fantastic trading relationship” eventually.

Maybe. Or it could turn to trade and economic custard.

At the end of his remarks, President Trump asked the business leaders to introduce themselves. The introductions began to resemble the scene at many of Mr. Trump’s Cabinet meetings, in which the president’s appointees take turns praising him. Trump jokingly noted that everyone at the dinner appeared to like him.

Trump seems to have a need to keep seeking praise. His oversized ego needs to be continually propped up, usually by orchestrated meetings.

But there are concerns within the US.

Washington Examiner: Trump’s trade war has Indiana on edge

President Trump’s trade policies are sending tremors across Indiana, as voters reliant on the agriculture and manufacturing industries that are the backbone of a thriving state economy brace for the fallout from retaliatory tariffs being slapped on U.S. exports.

Trump’s aggressive imposing of tariffs on foreign imports to negotiate more favorable trading terms for American products threatens to upend a strong Indiana economy that exports $4.6 billion annually in agriculture commodities, according to government figures.

Indiana also is a manufacturing hub that sustains hundreds of thousands of factory jobs. That’s why the Republicans that dominate politics here, and the voters they represent, are growing anxious as the disputes with China and other countries that Trump instigated and, once boasted would be easy to win, show signs of escalating into a full blown trade war.

“The ag community is extremely nervous,” Indiana Lt. Gov. Suzanne Crouch, a Republican who oversees the state department of agriculture, said this week in an interview with the Washington Examiner. “It seems to be our president’s modus operandi to push issues to get a agreeable settlement. We are hopeful that that is what is happening here.”

Conceding the initial pain his policies could inflict, the president has proposed a $12 billion federal bailout to keep the agriculture industry afloat during what could be protracted negotiations.

Trump has urged patience, promising jittery Republicans and loyal supporters in farm country that the administration’s strategy will pay big long-term dividends. Conceding the initial pain his policies could inflict, the president has proposed a $12 billion federal bailout to keep the agriculture industry afloat during what could be protracted negotiations.

Republicans are hesitant to criticize Trump, preferring a united front — and hoping to avoid his Twitter wrath — heading into the midterm elections. But privately, they are concerned Trump’s trade agenda and liberal use of tariffs could be a drag on the economy less than 100 days before the vote.

A warning sign: Trump’s Trade War Is Killing American Blue Jeans

It’s the latest gut punch for an industry that had already declined into a shell of what it once was. In the past year, two of the last-standing major denim mills closed, including the biggest: Cone Denim’s facility in Greensboro, North Carolina, that many firms say was the last to make high-end denim fabric in the U.S. on a large scale. Increases in California’s minimum wage also helped drive several apparel factories in Los Angeles to shutter or move to Mexico, adding to a tumultuous year for an industry that’s been just hanging on.

On top of that, free-trade agreements had been pushing blue jean-making overseas for two decades, and now the remaining manufacturers can’t believe the irony of getting hit by a return to protectionism. Major brands, like Levi Strauss & Co., had already largely bailed, shifting almost all of their production to Asia or Mexico.

Another warning sign: South Carolina’s first tariffs casualty: Television factory in Winnsboro closes, lays off 126

A television maker in Winnsboro that uses Chinese components for its assembly operation has announced that increased costs related to tariffs are forcing it to shut down.

Element Electronics’ plant just north of Columbia is the first in South Carolina to close as a direct result of the emerging global trade war, according to a governor’s office spokesman.

Gov. Henry McMaster called the plant’s closure “a sad moment” as it is the only TV manufacturer in the United States. But he also offered cautious support of President Donald Trump’s tariffs strategy, saying that trade around the world needs to be free, open and fair.

“I am hoping that when all the work is done and all the facts are known, that the businesses and industries in South Carolina will not be hurt but instead will prosper,” he said.

Maybe this is just a bit of collateral damage on the way to better trade relations with China. But it could also be an warning sign – not that Trump is likely to take any notice. He seems intent on using threats and disruption to try and drive better bargains, and is confident he will win, but there is going to be losers as well.

Trade wars have led to both World Wars

While trade war threats ramp up between Donald Trump and China there’s a timely warning that major trade wars have contributed to escalations into both World Wars.

CNBC: Trump says he’s ‘ready’ to put tariffs on all $505 billion of Chinese goods imported to the US

  • President Donald Trump has indicated he is willing to put tariffs on all $505 billion of Chinese goods the U.S. imports.
  • The rhetoric ramps up the U.S.-China trade war another step, though each country has issued just $34 billion in tariffs so far.

President Donald Trump has indicated that he is willing to slap tariffs on every Chinese good imported to the U.S. should the need arise.

“I’m ready to go to 500,” the president told CNBC’s Joe Kernen in a “Squawk Box” interview aired Friday.

“I’m not doing this for politics, I’m doing this to do the right thing for our country,” Trump said. “We have been ripped off by China for a long time.”

Trump said the U.S. is “being taken advantage of” on a number of fronts, including trade and monetary policy. Yet he said he has not pushed the tariffs out of any ill will toward China.

“I don’t want them to be scared. I want them to do well,” he said. “I really like President Xi a lot, but it was very unfair.”

From The Diplomat: Trump’s Trade War on China Is About More Than Trade

Against this backdrop, the trade war can be viewed as a paradigm shift of Washington’s China policy. Along with other recent developments in U.S. policy, such as the Taiwan Travel Act passed in February and the passage of U.S. Navy warships through the Taiwan Strait, the trade war is, in effect, part of a much larger strategy of hedging.

Once we realize that the trade war is not merely about trade, we can then appreciate the very real potential for large-scale conflict between the United States and China.

Dene Mackenzie at ODT looks at some history: Trade wars catalysts for world war, the past teaches

History often repeats itself if we do not learn from it. The two full-blown trade wars some 80 and 100 years ago helped to ignite the two world wars.

Trade wars can also cause currency wars.

The end of  World War 1 sparked the first worldwide currency war, starting in Weimar Germany in 1921, followed by France in 1925. In the end, all the major economies scrambled to devalue their currencies — sterling, the franc and the US dollar — throughout the 1930s.

In 1930, US president Herbert Hoover signed into law the Smoot-Hawley Tariff Act, which intensified the currency war and deepened the Great Depression. The protectionist law raised tariffs on more than 20,000 imported products and triggered retaliation by many of the United States’ trading partners.

Trade wars stoke nationalism and hatred among people and finally trigger wars, as evidenced by the breakout of World War 2.

The Japanese invaded Manchuria in 1931, and the whole of China in 1937; the Germans invaded Poland in 1939, then the rest of Europe; and the Japanese attacked Pearl Harbour in 1941.

A quote often attributed to the 19th-century French economist, Frederic Bastiat, goes: “When goods do not cross frontiers, armies will”.

The geopolitical situation has changed a lot over the last two centuries – but as WW1 and WW2 showed, military might and technology has increased substantially. The risks are much higher when nuclear armed countries are involved.

Especially now when the erratic and loose-mouthed Trump is on one side of the tensions.

We don’t want to hear “I meant yesterday that I definitely wouldn’t be launching missiles immediately, not would“.

The trade war with the US could not have come at a worse time  for China, which had just begun focusing “in earnest” on fixing problems in its economy, JP Morgan analysts said on Wednesday.

…those indirect effects could lead to large collateral damage, they said.

There’s a lot of gamesmanship going on, and there are also major risks to local economies and the world economy.

Bluster and threats are often eventually moderated by discussions and negotiations leading to reasonable solutions. But not always.

There’s also always risks of things escalating into military war.

US-China trade war heats up

World trade is increasingly at risk as the US-China trade war kicks in and heats up.

Reuters: Trump’s $500 billion trade threat makes China’s already battered investors shiver

Six months of wrangling over trade tariffs with the United States has wiped out about a fifth of China’s stock market value and driven its currency down sharply. But those moves may have just been a downpayment on what is yet to come.

Shanghai’s benchmark share index .SSEC is down roughly 22 percent since January, when U.S. President Donald Trump’s first trade tariffs on solar panels were announced. It has fallen 9 percent since June 19, when Trump outlined his plans to tax a lot more Chinese imports than he initially proposed.

Tariffs on the first batch of $34 billion worth of Chinese imports kicked in on Friday. Beijing said it had no choice but to respond in kind by taxing a similar amount of U.S. goods coming into China. U.S. tariffs on another $16 billion of Chinese goods are due to go into effect in two weeks, Trump said on Thursday.

But Trump also raised the temperature much further by telling reporters that after the initial $50 billion of goods has been targeted with tariffs, Washington could add another $500 billion.

With Beijing indicating it will respond with tariffs on more U.S. imports or other corresponding actions of its own, the specter of a full-blown trade war risks sinking China’s markets deeper into bear territory.

This could get very ugly, and New Zealand could easily be affected.

NZH: How US-China trade war could affect NZ

With a trade war brewing between two of the world’s biggest economies, China is more likely to be prepared to agree to more favourable terms in the upgrade of its Free Trade Agreement with New Zealand.

Short-term there is potentially some upside for New Zealand if producers here can replace some of the American products in China.

This is where our FTA talks can help, to position these short-term opportunities as long-term realities. And the Chinese may be appreciative if we show good faith, which we have done in the past.

If we show good faith to China in a trade war Trump may not view us very favourably.

Trade Minister David Parker…acknowledged the proposed e-commerce chapter in the upgraded FTA is of particular importance to New Zealand.

It’s a difficult issue as the Government is moving to reform our GST rules on online shopping, which is likely to act as a barrier to expanded e-commerce.

Imagine what headaches it could bring to Kiwi exporters if China introduces a similar rule and New Zealand exporters are required to register for VAT in China?

There are a lot of ‘what ifs’ in the international trade arena at the moment. I don’t think anyone can know how it will pan out.

Economic boom, or bust? Or both?

Two contrasting views on economic prospects in the US. Given it’s size the economy in the US will impact on the rest of the world, including New Zealand.

Kevin Brady, Republican member of Congress and chairman of the House Ways and Means Committee writes (WSJ): Six Months After Tax Reform, Something Big Is Happening

Six months ago, Republicans in Congress joined with President Trump to redesign America’s tax code and enact sweeping tax cuts. We were determined to let families and local businesses keep more of what they earn. The new tax code was built to help American companies and workers compete and win anywhere in the world.

Now something big is happening to America’s economy. Since January, more than one million jobs have been created.

In only six months, the economy has been reinvigorated—and the best is yet to come. That’s because the new tax code leapfrogs America’s competitors abroad. The U.S. is now at the head of the pack—one of the best places on the planet to find that next job, to build that new manufacturing plant, or to set up company headquarters.

As a result, businesses of all sizes are now investing in American workers and communities. They are bringing back their dollars from overseas and investing at home again. It’s no coincidence that small-business optimism has hit its highest reported level in 35 years.

There is a new hope and a new optimism that wasn’t here before

Given the choice between keeping taxes high and allowing families to keep more of their money, Republicans chose—and continue to choose—the American people. Empowering families to run their own lives is at the heart of the American Dream. It’s the key to our nation’s economic success, and it’s the reason that, six months into tax reform, Americans are more hopeful about their future.

But domestic tax rates aren’t the only thing that affects the US and world economies. Not everyone is this hopeful about the economic future.

Nomi Prins (The Nation): Donald Trump’s Trade Wars Could Lead to the Next Great Depression

Leaders are routinely confronted with philosophical dilemmas. Here’s a classic one for our Trumptopian times: If you make enemies out of your friends and friends out of your enemies, where does that leave you?

Let’s cut through all of this for the moment and ask one crucial question about our present cult-of-personality era in American politics: Other than accumulating more wealth and influence for himself, his children, and the Trump family empire, what’s Donald J. Trump’s end game as president?

If his goal is to keep this country from being, as he likes to complain, “the world’s piggy bank,” then his words, threats, and actions are concerning. However bombastic and disdainful of a history he appears to know little about, he is already making the world a less stable, less affordable, and more fear-driven place.

Trump’s approach may force the world into sorting out some shortcomings of current trade arrangements, but it has major risks.

What the American working and the middle classes will see (sooner than anyone imagines) is that actions of his sort have unexpected global consequences. They could cost the United States and the rest of the world big-time.

Could.

So far, President Trump has only taken America out of trade deals or threatened to do so if other countries don’t behave in a way that satisfies him. On his third day in the White House, he honored his campaign promise to remove the United States from the Trans-Pacific Partnership, a decision that opened space for our allies and competitors, China in particular, to negotiate deals without us. Since that grand exit, there has, in fact, been a boom in side deals involving China and other Pacific Rim countries that has weakened, not strengthened, Washington’s global bargaining position.

Meanwhile, closer to home, the Trump administration has engaged in a barrage of NAFTA-baiting that is isolating us from our regional partners, Canada and Mexico.

Trump is also annoying Britan and the EU over his trade barrages.

In the past four months, Trump has imposed tariffs, exempting certain countries, only to reimpose them at his whim. If trust were a coveted commodity, when it came to the present White House, it would now be trading at zero.

His supporters undoubtedly see this approach as the fulfillment of his many campaign promises and part of his classic method of keeping both friends and enemies guessing until he’s ready to go in for the kill. At the heart of this approach, however, lies a certain global madness, for he now is sparking a set of trade wars that could, in the end, cost millions of American jobs.

“Could, in the end, cost millions of American jobs” contrasts with Brady’s “more than one million jobs have been created”.  In fact both could be correct. Short term gains could disappear if Trump tirades turn trade into a turkey and the economy goes bad.

As the explosive Group of Seven, or G7, summit in Quebec showed, the Trump administration is increasingly isolating itself from its allies in palpable ways and, in the process, significantly impairing the country’s negotiating power.

If you combine the economies of what might now be thought of as the G6 and add in the rest of the EU, its economic power is collectively larger than that of the United States. Under the circumstances, even a small diversion of trade thanks to Trump-induced tariff wars could have costly consequences.

Good international relations generally means better outcomes. Wars of any kind are likely to make things worse.

A recent report by Andy Stoeckel and Warwick McKibbin for the Brookings Institution analyzed just such a future trade-war scenario and found that, if global tariffs were to rise just 10 percent, the gross national product (GDP) of most countries would fall by between 1 percent and 4.5 percent—the US GDP by 1.3 percent, China’s by 4.3 percent. A 40 percent rise in tariffs would ensure a deep global recession or depression.

In the 1930s, it was the punitive US Smoot-Hawley tariff that helped spark the devastating cocktail of nationalism and economic collapse that culminated in World War II.

The current incipient trade war was actually launched by the Trump administration in March in the name of American “national security.”

Using “national security” as a loose excuse for abuse is bad enough, but it has some disturbing parallels.

From the United States Holocaust Memorial Museum:

As an absolute principle of national security, Nazi ideology called for the elimination of “racially inferior” peoples (such as Jews and Roma) and implacable political enemies (such as communists) from regions in which Germans lived.

Back to Prins:

The global economic system first put in place after World War II was no longer working particularly well even before President Trump’s trade wars began. The problem now is that its flaws are being exacerbated.

Once it becomes too expensive for certain companies to continue operating as their profits go to tariffs or tariffs deflect their customers elsewhere (or nowhere), one thing is certain: It will get worse.

I don’t think that’s a certainty, but it is a real possibility if Trump’s ‘negotiations’ turn trade to custard.

Is the US headed for boom, or bust?

It could easily be both. Busts often follow booms.

 

 

US-China trade war escalates

The on again, off again trade war between the US and China is escalating, with more tariff threats from both countries.

Trump aims to hit China as tit-for-tat tariff war erupts

A top U.S. trade adviser said China has underestimated President Trump’s resolve to press ahead with tariffs, in comments that undercut the chances of settling a looming trade war between the economic superpowers.

The threat of a growing trade conflict with China hit financial markets hard, with Beijing vowing a firm response after Trump on Monday said he would implement tariffs on an additional $200 billion of imports from China if Beijing went ahead with reprisals over an initial set of U.S. tariffs.

White House trade adviser Peter Navarro, a sharp critic of Chinese trade actions, said China has more to lose from any trade war.

“The fundamental reality is that talk is cheap,” Navarro told reporters on a conference call, again accusing China of “predatory” trade policies.

When it comes to stoking a major trade war talk could be quite expensive to both countries, and potentially to others including New Zealand.

The threat of new tariffs against China pits the world’s two largest economies against each other and looks set to disrupt global supply chains for the tech and auto industries, two sectors that rely heavily on outsourced components.

In total, Trump has now threatened up to $450 billion in Chinese imports with tariffs, including another $200 billion in Chinese goods if Beijing retaliates after the step Trump announced on Monday.

Mounting concerns over the U.S.-China dispute sent global stock markets skidding and weakened both the dollar and the Chinese yuan on Tuesday. Shanghai stocks plunged to two-year lows.

The Dow Jones is still trading in the US Tuesday and is currently down 1.18% for the day. That isn’t a drastic drop.

This could all have significant impact in this part of the world – From the Aussie to soybeans and cars: what’s at risk in a trade war?

The Aussie dollar takes a thumping, soybean prices swing and German carmaker shares are stuck in reverse.

Countries with open economies reliant on global trade are most at risk when disputes over international commerce hit.

The Australian dollar ticks those boxes. Australia counts China as its biggest trading partner and its currency is heavily correlated to global growth. Many investors see the currency, known as the Aussie, as a better global trade bellwether than the Canadian dollar, which has been buffeted by negotiations over NAFTA, the North American trade pact.

This week, the Aussie fell to its lowest level in 13 months, and the positioning of options signal more weakness ahead.

If Australia is badly affected that must have an impact here. New Zealand is also at risk directly with US and Chinese trade upheaval.

China-US trade war on hold, deal pending

The risk of a trade war between the United States and China has diminished after a deal has been made, which means threatened US tariffs and counter tariffs from China may be scrapped.

Avoiding a trade war is better for both countries – and for world trade – than trying to win a war that would adversely affect both countries.

RNZ (BBC): Trade war on hold as US and China halt imposing tariffs

China and the US say they will halt imposing punitive import tariffs, putting a possible trade war “on hold”.

The deal came after talks in the US aimed at persuading China to buy $US200 billion of US goods and services and thereby reduce the trade imbalance.

The US has a $335b annual trade deficit with Beijing.

In March this year, Mr Trump announced plans to impose tariffs on Chinese imports – mainly steel and aluminium.

Beijing threatened equal retaliation, including tariffs on a number of US imports – among them aircraft, soybeans, cars, pork, wine, fruit and nuts.

Two days of talks ended in Washington DC on Friday with a framework agreement.

US Treasury Secretary Steven Mnuchin…

…told Fox News on Sunday that China would buy more US goods “to substantially reduce the trade deficit”.

Concrete numbers had been agreed, he said, although he refused to disclose if this meant China was buying $200bn in return for the US threat to be lifted. US Commerce Secretary Wilbur Ross would travel to China soon, he said, to work on details, which would involve industries – not just the two governments.

“We are putting the trade war on hold. Right now we have agreed to put the tariffs on hold while we try to execute the framework” of the agreement, Mr Mnuchin said.

But he warned that failure to implement it would result in the imposition of the threatened US tariffs.

Chinese vice-premier Liu He…

…said his visit to the US had been “positive, pragmatic, constructive and productive”.

He described a “healthy development of China-US economic and trade relations” which would result in enhanced co-operation in areas such as energy, agriculture products, healthcare, high-tech products and finance.

“Such co-operation is a win-win choice as it can promote the high-quality development of the Chinese economy, meet the people’s needs, and contribute to the US effort to reduce its trade deficit,” he added.

Mr Mnuchin said the new framework agreement included structural changes to Chinese economy to enable fair competition for US companies, but this would take time, China’s vice-premier said.

And, perhaps because of that, he said the two countries “should properly handle their differences through dialogue and treat them calmly in the future”.

That’s a much better threat than making public threats and launching a trade war. But as is normal with the trump administration, there is some uncertainty.

Reuters: U.S., China putting trade war on hold, Treasury’s Mnuchin says

Trump’s top economic adviser, Larry Kudlow…

…told CBS “Face the Nation” it was too soon to lock in the $200 billion figure. “The details will be down the road. These things are not so precise,” he said.

Trump was in a “very positive mood about this,” Kudlow said.

However, he said there was no trade deal reached.

“There’s no agreement for a deal,” Kudlow told ABC. “We never anticipated one. There’s a communique between the two great countries, that’s all. And in that communique, you can see where we’re going next.”

One next step will be dispatching Commerce Secretary Wilbur Ross to China to look at areas where there will be significant increases, including energy, liquefied natural gas, agriculture and manufacturing, Mnuchin and Kudlow said.

So there is a lot of work to do yet.

US v China trade war continues

The share market and Trump approval polls seem to be reacting to the escalating trade war between the US and China.

The Dow Jones dropped 2.34% in Friday trading after a minor mid week recovery from a Monday low.

And the normally Trump friendly but unusually volatile (especially for a tracking poll) Rasmussen has turned against the President after a mid-week boost.

Treasury Secretary Steven Mnuchin acknowledged Friday that President Trump’s threatened tariffs on Chinese imports could kick off a full-scale trade war, but he implied that the administration is in talks with China about resolving the standoff.

“There is the potential of a trade war,” Mnuchin said in an interview with CNBC Friday afternoon. “There is a level of risk that we could get into a trade war,” he repeated.

As the United States and China exchange increasingly antagonistic trade threats, American business leaders, farm groups and some economists worry that President Trump might be going too far.

Given China’s ambitions to dominate cutting-edge technology, he may have to go much further to get Beijing to back down.

Mr. Trump’s threat to sharply escalate the administration’s tariffs on Chinese imports — a threat he reiterated on Friday — shows that neither side has yet gone far enough to persuade the other to compromise. Bigger and broader tariffs may be necessary to get China’s attention.

“The administration, if it’s serious, better be prepared for much more,” said Derek Scissors, resident scholar at the American Enterprise Institute.

China’s leaders sound supremely confident that they can win a trade war with President Trump.

“China is not afraid of a trade war,” the vice minister of finance, Zhu Guangyao, declared at a news conference to discuss possible countermeasures. More than once, he cited the history of the “new China” — which began its extraordinary economic revival four decades ago — as evidence that it would “never succumb to external pressure.”

Washington and Beijing were always set to clash, but such a struggle has been deferred time and time again. We need to accept now that there is no more common ground to preserve, no more common enemy to rally against, and that trade is not the elixir it once was – but rather part of a larger struggle likely to last for many decades.

Considering both nations are on the opposite ends of a regional struggle over issues such as who will dominate the South and East China Seas, Taiwan, the fate of North Korea’s nuclear program and now hundreds of billions of dollars of trade and millions of jobs, we should get ready for the geopolitical and economic reality that is before us.

The facts are obvious: America and China are now enemies. And there is no turning back.

Who will blink first? Both have a lot to lose and it is questionable what they may gain from the escalation.

One significant difference is democracy, or more precisely, US elections. Senators and representatives from states that would be most impacted by Chinese retaliatory tariffs – particularly agricultural states, already showing anxiety, and many of them have to deal with mid-term elections later this year.

The Chinese leader has just been appointed for life so doesn’t have to worry about votes.

Tit for tat tariffs escalate trade tensions between US and China

Both the US and China have increased trade tariffs between the two countries, escalating tensions and increasing world market jitters. However Donald Trump says it isn’t a trade war, and the US Commerce Secretary has said that talks are possible.

This looks a bit like a repeat of Trump tactics – to talk big (in this case he has said that trade wars are good and he would win), to throw US weight around to provoke things, then pull back to talks. Similar to his approach to the North Korean problem, and also his approach to renegotiating NAFTA.

It hasn’t been particularly successful on NAFTAS yet, and his big talk and quick withdrawal from the Trans-Pacific Partnership may have back-fired with the eleven other countries ignoring him and doing a deal without him (with the US subsequently suggesting they may consider joining the now CPTPP).

Bloomberg: China’s Counterpunch to Trump’s Tariffs Sparks Global Selloff

Earlier on Wednesday, China said it would levy an additional 25 percent levy on about $50 billion of U.S. imports including soybeans, automobiles, chemicals and aircraft. The move matched the scale of proposed U.S. tariffs announced the previous day. The U.S. is allowing 60 days for public feedback and hasn’t specified when the tariffs would take effect, leaving a window open for talks.

The Trump administration indicated it’s willing to negotiate with China on escalating frictions between the world’s two biggest economies, helping to ease fears among investors of a tit-for-tat trade conflict.

U.S. Commerce Secretary Wilbur Ross said China’s response isn’t expected to disrupt the U.S. economy. In an interview on CNBC on Wednesday, he said China’s reaction “shouldn’t surprise anyone.” He said the U.S. isn’t entering “World War III” and left the door open for a negotiated solution.

“Even shooting wars end with negotiations,” Ross said.

Mixed signals about wars there. And typically garbled tweets:

I wouldn’t be sure about that. Financial and labour markets can always get worse.

U.S. stocks opened sharply lower, but recovered as investors speculated that the flurry of tariffs may not do much damage to the global economy.

Halfway through the afternoon on Wall Street the Dow Jones has mostly recovered from an initial drop of a couple of percent. The market has been volatile so far this week.

Investors are weighing the risks of a trade war, with the Trump administration’s latest offensive based on alleged infringements of intellectual property in China. The U.S. is targeting high-tech sectors that Beijing sees as the future for its economy.

While the China retaliation was more “belligerent” than expected, Beijing probably wants to de-escalate tensions by underscoring what’s at stake for both sides, Oxford Economics director of global macro strategy Gaurav Saroliya said in a research note. “Negotiations will probably lead to less disruptive outcomes for both sides,” Saroliya wrote.

Also from Bloomberg: Trump Wanted a Trade War. Here’s What One Looks Like

In a two-week span, President Donald Trump ordered up an array of tariffs against numerous countries, blocked Chinese takeovers of U.S. companies and sought new restrictions on future Chinese investment. China responded with tariffs of its own on imports of 128 U.S. goods. Economists are warning that the world is on the verge of an all-out trade war, featuring tit-for-tat reprisals, heated rhetoric and appeals to the World Trade Organization, which may be ill-equipped to respond.

And a Bloomberg reference:

  • The full list of Chinese imports that will be subject to new U.S. tariffs.
  • QuickTake explainers on Trump’s claim that China stole U.S. intellectual property, the 1962 law Trump cited for his steel tariffs, the difficulty of the U.S. quitting Nafta and Trump’s solar-panel tariffs.
  • Canada and Mexico got a reprieve from the new tariffs.
  • Bloomberg Economics says an all-out global trade war could cost economies about $470 billion by 2020.
  • How China can punch back.
  • The “nationalists” are back in power in Washington.
  • Why Trump’s steel and aluminum tariffs might set a bad precedent.
  • China stands to gain from Trump’s steel tariffs, Michael Schuman writes in Bloomberg View.
  • How Trump’s tariffs could aim for China but hurt U.S. allies more.

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.