China-USA Tariffs: Trade war headlines could get much worse before they get better - by Patti Domm

With little apparent progress in U.S.-China trade talks, the Trump administration could be about to open up a new front in the trade wars by taking on the European auto industry — and that could spook markets.

U.S. negotiators head to China next week, and while there are few signs any kind of deal is near, many strategists expect to see some signs that talks will continue and an eventual agreement will be reached, even if a March 1 deadline on new tariffs is pushed back.

But while the market has focused on those talks, another battle is brewing. The Commerce Department by Feb. 17 is expected to release a broad report on auto imports and national security, and experts say a part of that report could recommend tariffs on European autos.

The White House would then have 90 days to respond.

Dan Clifton, head of policy research at Strategas, said Trump could be using the threat of auto tariffs as a way to get the EU to cooperate on other matters. The EU has been resisting efforts to include U.S. agriculture in a trade deal. "Just because there's a report does not mean tariffs will go into effect," he notes.

But some economists expect the administration to move on the auto tariffs, specifically on European cars. For instance, UBS economists said they expect 25 percent tariffs to be placed on finished vehicles, not parts. The administration then could grant exemptions to other countries that have cooperated, like Korea, Canada and Mexico, but the European Union would not be exempted.

"It just seems like if people had been worried about the tariff war with China, this would be another reason for people to worry. In our view, this is not a macro event for the U.S. because the auto industry seems to be pretty tariff savvy and can get around them," said Seth Carpenter, chief U.S. economist at UBS.

Some strategists fear investors are keenly focused on China, and expect a resolution, but could be surprised by ramped-up trade friction with Europe.

"The market would tank," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "The market has spoken loud and clear that it's had enough of these tariffs. ... The market is fed up with this. Global growth is slowing dramatically because of trade. You want to put another bullet in it's head?"

Read more: Trade war headlines could get much worse before they get better

USA - Backfire Policies: Trump Doesn’t Understand His Own Trade War - by Mark Gongloff

It's not entirely clear what President Donald Trump wants out of his trade war against China (and the rest of the world, for that matter), but one theory is that he thinks his tariffs will hurt so badly that Beijing will have to cede to his demands (whatever those are), helping U.S. trade while also firing up his base ahead of the midterms.

Michael Schuman argues this approach misunderstands a lot about China. First, the tariffs won’t hurt it that badly. Second, the tariffs won’t hurt just China – they’ll also hurt foreign companies, including Americans (and that’s before we even start talking about retaliation). Finally, they’ll only make Xi Jinping dig in his heels more. After all, he has a political base too.

Another Trump misconception ahead of the trade wars was that nobody would retaliate, writes Ramesh Ponnuru. This belief – part of the idea that trade wars are easy to win – is one of four “new rules” (some might call them “fundamental misunderstandings”) Trump followed going into his trade wars. The other three are: 1) inflict pain on your own companies and consumers; 2) fight every country at once; and 3) keep your demands unclear

Former WTO chief judge James Bacchus suggests Trump is right to complain about China’s “Made in China 2025” drive, which just looks like more protectionism. He argues China would be more likely to achieve its goals by following the rules. But James, like Michael, notes the West has exploited and cheated China for a very long time. That might help explain not only why China breaks the West’s rules but also why it won’t buckle to Trump.

Read more: Trump Doesn’t Understand His Own Trade War - Bloomberg

Trade Wars and the Economy: Trump's Trade War Leads Straight to Economic Collapse - by Alessandro Bruno

The United States and China have started a war. As with all wars, there will be victims. This one is no exception; economic collapse will occur before anyone can claim victory.

The sound of gunfire has not gone off yet, because the weapons of this war are trade tariffs. But the global economic hegemony is at stake.

The United States has engaged in a kind of “reverse” Pearl Harbor moment. In 1942, an ultra-nationalist Japanese leader launched an attack on the United States against advice from top officials that Americans would react—fiercely.

The Japanese dared, lost, and ended up waking the sleeping giant that would become the world’s sole superpower by 1990. The stakes this time are devastating in different ways.

Economic collapse doesn’t sound as bad as a world war with thousands dead and wounded, as well as destroyed infrastructure to contend with—especially because U.S. soil was never attacked in a major conflict.

Nobody should make the mistake of underestimating China’s ability to damage the United States, physically, socially, or—it goes without saying—economically.

Trump understands this—his advisors will have warned him. But many of his voters, and not without some justification, see China as the source and core of their economic woes.

Trump’s measures could send the world into chaos
.
The full Chinese retaliation has not come yet. So far, there are only hints of what shape it will take.

That said, American farmers will be taking a hit and you can expect your local gas station will be stocking more ethanol enhanced fuels.

Beijing has scrapped orders for over a million tons of U.S. soybeans due in August. It amounts to $14.0 billion a year in losses that many of Trump’s own supporters will have to endure. (Source: “North Dakota soybean processors hit hard by tariffs as China cancels orders,” CNBC, July 11, 2018.)

It’s always easier to blame an outsider for big problems rather than focus on insidious factors operating under your nose

Like all wars, the ones of the trade variety are easy to start. But they’re also harder to win. Those who start them may score big points in the battles, but will still fail to win them..

Read the complete report: Trump's Trade War Leads Straight to Economic Collapse

EU-USA Relations: EU drags US to WTO over steel, aluminum tariffs

EU-US Relations turn sour

The European Union on Monday complained to the World Trade Organization over US tariffs on steel and aluminum imports.

The move comes despite US President Donald Trump temporarily exempting the 28-nation bloc from the tariffs that have threatened to trigger a trade war.

The EU made following statement in reference to their WTO complaint

• The EU rejects the "national security" justification for the US tariffs and believes they have been imposed just to protect US industry.
• It wants to hold consultations with the US as soon as possible.
• The aim of the discussions would be to "exchange views and seek clarification regarding the proposed measures."

Read more: EU drags US to WTO over steel, aluminum tariffs | News | DW | 16.04.2018

Trump Tariffs: China reacts to Trump's tariffs by vowing to open its markets further - Simon Denyer - by Simon Denyer

China responded to the threat of new tariffs from the United States by vowing Tuesday to further open its own markets to foreign trade and investment, while warning that a trade war between the two nations would hurt both sides.

President Trump is preparing to impose a package of $60 billion in annual tariffs against Chinese products, a move that he says will punish China for intellectual property theft and create more U.S. jobs, administration officials say. He is determined to bring down the U.S. trade deficit with China, which reached $375 billion last year.

But China’s premier, Li Keqiang, said the issue should be solved through dialogue and negotiation.

“No one will emerge a winner from a trade war,” Li told a news conference at the conclusion of China’s annual parliamentary session. “What we hope is for us to act rationally instead of being led by emotions.”

Read more: China reacts to Trump's tariffs by vowing to open its markets further - The Washington Post

US Economy: Tax reduction=increased national deficit+tariffs on foreign steel and aluminium = bad economics

President Donald Trump fired the first shot in a delusional and destructive trade war: tariffs of 25% on steel and 10% on aluminum. Shares of US Steel jumped 5.75%, about $460 million in market capitalization, but the overall US stock market capitalization fell by more than 1%, around $340 billion

The trade wars of the early 1930s helped to trigger, then deepen and prolong, the Great Depression.

CNN's Jeffrey Sachs reports: "Trumps actions are based on three primitive fallacies. First, Trump thinks that America runs trade deficits with countries like China and Germany because the US is being swindled by them ".

"The real reason is that the US saves too little and consumes too much, and it pays for this bad habit by borrowing from the rest of the world. The Trump theory of international trade is like a man in deep debt who blames his creditors for his spendthrift behavior".

"Come to think of it, that is precisely how Trump has spent his whole business career: over-borrowing, going bankrupt, and blaming his creditors.

"Second, Trump thinks that trade barriers will protect the US. Nonsense. These measures might temporarily protect US Steel, but not US society. American consumers will lose. US businesses that buy steel will also lose because now they must pay higher prices. American export competitiveness will suffer as production costs rise.

"Third, Trump believes that US trade barriers will crush China and sustain American global economic and military dominance. How pathetic. China and Europe will surely retaliate. American companies will face reduced access to China's fast-growing market. China will shift its own exports to other markets, especially towards fast-growing Asia, as well as towards Africa, Europe, and Latin America"

Within one day, other countries announced their displeasure and in some cases, their intention to retaliate. The European Union Trade Commissioner Cecilia Malmstrom stated that the EU would have no option but to respond. "Imposing sweeping measures like this is generally not the way forward. We risk seeing a dangerous domino effect from this.".

Trump is making these primitive errors because he hasn't a clue as to how the world economy works and how to deliver on his promises to raise US living standards. Raising US living standards requires long-term investments in education, research and development, environmental sustainability, and infrastructure.

But for Trump, it's always gimmicks and lies: tax cuts and increased budget spending that are paid for by rising public debt. Federal budget cuts on science, advanced technology, and environmental safety that leave the US less competitive and highly vulnerable to hurricanes, floods, and forest fires. And reckless trade wars that will harm US competitiveness and trigger global retaliation.

EU-Digest.

US Tariffs Announcement: EU says it will impose trade 'countermeasures' against US goods in retaliation to Donald Trump’s new tariffs - by Jon Stone

The European Union has said it will impose trade “countermeasures” against American goods in retaliation to Donald Trump’s new tariffs on imported steel and aluminium.

European Commission president Jean-Claude Juncker said retaliatory policies would be announced “in the next few days” in order to “rebalance” the trade situation between European and the US following the move by Mr Trump.

The US president said on Thursday he would introduce a 25 per cent import tariff on steel and 10 per cent on aluminium, claiming that the US had been suffering from “unfair trade”.

“We strongly regret this step, which appears to represent a blatant intervention to protect US domestic industry and not to be based on any national security justification. Protectionism cannot be the answer to our common problem in the steel sector,” Mr Juncker said on Thursday evening.

“Instead of providing a solution, this move can only aggravate matters. The EU has been a close security ally of the US for decades.

“We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk. I had the occasion to say that the EU would react adequately and that's what we will do.

“The EU will react firmly and commensurately to defend our interests. The Commission will bring forward in the next few days a proposal for WTO-compatible countermeasures to rebalance the situation.

Europe’s Trade Commissioner Cecilia Malmström said the measures would “have a negative impact on transatlantic relations” and “will raise costs and reduce choice for US consumers of steel and aluminium, including industries that import these commodities”.

She said the EU would raise a dispute at the World Trade Organisation in Geneva over the tariffs “at the earliest opportunity”.

In what appears to be a veiled reference to Chinese steel production, the Commissioner added that “the root cause of problems in these two sectors is global overcapacity caused by non-market based production”.

During his presidential campaign Mr Trump claimed foreign countries were “dumping vast amounts of steel all over the United States, which essentially is killing our steelworkers and steel companies”.

Read more: EU says it will impose trade 'countermeasures' against US goods in retaliation to Donald Trump’s new tariffs | The Independent