We Don’t Need China
Trade and currency wars took another huge leap forward just one day after another oft-repeated message that a deal with China is coming.
The Wall Street Journal reports Trump Orders U.S. Businesses to Find Alternative to China.
President Trump said U.S. companies were “hereby ordered” to start looking for alternatives to doing business in China after Beijing said it would impose tariffs on $75 billion worth of additional U.S. products.
“Our Country has lost, stupidly, Trillions of Dollars with China over many years,” Mr. Trump wrote in a series of tweets. “They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them.”
Mr. Trump’s comments came in response to China’s plan, laid out Friday, to impose tariffs of 5% and 10% on almost all the remaining U.S. imports on which it has yet to impose punitive taxes, including vehicles and car parts, in retaliation against U.S. moves to slap punitive tariffs on an additional $300 billion of Chinese goods.
The president demanded that U.S. companies “immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
Items China plans to impose tariffs on include agricultural products, apparel, chemicals and textiles.
Some major car companies will be hit hard by the increase in tariffs, particularly Tesla Inc.and Ford Motor Co., as well as Germany’s BMW AG and Daimler AG ’s Mercedes-Benz. These companies build a significant number of vehicles in the U.S. for export to China—mostly premium models—and a higher tariff could force them to raise prices.
Soon after President Trump announced his plans for fresh tariffs set for Sept. 1, Beijing responded by officially announcing the freezing of purchases of U.S. agricultural products and letting its currency drop to its lowest level in a decade. A weaker yuan makes Chinese exports cheaper.
China Tweetstorm
Wow
Bond yields are tumbling, the DOW is down 500 points, The Yuan is hitting new lows and gold is up $30.
Mike “Mish” Shedlock
Did you forget about the shitty economy and interest rates at 22% you ass clown twit!
Expect the controversy over just how much trade contributes to America’s economic growth to be ramped up as growth slows. In many ways, trade should be seen as a way to increase access to a greater variety of goods at a better price but this only works over a long period of time if it is balanced.
The promise that increased trade will create new jobs has turned out to be largely a myth. Much of the “free trade” movement is driven by mega-companies desire for larger markets and greed. The article below explores the role of trade in our economy.
Il Duce!
i wonder if China’s retaliation will impact on Tesla
The Show must go on…and on:
8 min ago From CNN’s Nikki Carvajal
President Trump announced a new round of tariffs on China, set to start Oct. 1.
The President tweeted that “the 250 BILLION DOLLARS of goods and products from China, currently being taxed at 25%, will be taxed at 30%.”
“Additionally, the remaining 300 BILLION DOLLARS of goods and products from China, that was being taxed from September 1st at 10%, will now be taxed at 15%,” Trump wrote.
“You mean …. Got Gold?”
Gold and popcorn, the winning combo of the day along with the long bond
Eventually, the path we’re on has a fork ahead; One leads to fair and impartial arbitration, the other to war.
Having spent over $15 billion at Huawei alone on R&D last year, the Chinese are probably well on their way to discovering the importance of patent protection in world trade. Also:
Trade with the west has lifted over 700 million Chinese out of poverty since 1979. We can point to our current $1 Trillion credit card balance, for starters, as evidence of our continuing contribution to that effort.
The WTO, or some other mutually agreed binding arbiter, is urgently needed. We need to get the bull and dragon out of the trade China shop now.
I wonder if Mish Sherlock is embarrassed by the irony of Trump’s mental derangement after he promoted the fake “Clinton has a brain disease” story in the 2016 election cycle?
Every time I think I can’t be shocked by anything he does, he does it again.
What happens if the CEO’s don’t follow him on twitter? DOW now down 600+.
My take is the FED is not inclined to risk taking interest rates negative so the Donald is gonna do a trade war to try to blame the Chinese for the ensuing recession.
Exactly.
What is better than a scapegoat? 2
The irony is is every time Trump attacks the fed he makes accommodative policy less likely as they struggle to maintain a semblance of political independence.
So let it be written, so let it be done.
I always thought President Trump had a skewed idea of what the actual powers of the Presidency are. They are really designed to be simply to implement the laws passed by Congress and to be the Commander in Chief in war. That’s it. I wonder who gets to tell him that he actually can’t “hereby order” private businesses to do bumpkus. I would not want to be that guy.
A lot of big business (read: S&P 500) have SUBSTANTIAL contracts with US Government. DJT does have a cudgel here.
“can’t “hereby order” private businesses to do bumpkus.”
Xi is not thus constrained. +1 China
If there is one thing about President Trump that everyone knows by now, it is that he make many radical statements that he does not follow through on. We have no choice but to wait and see if any of his recent remarks actually translate to policy.
Meanwhile, the algos react as though each time he says something it is a done deal. It makes me wonder if someone on the inside is making obscene amounts of money on these wild market swings.
It’s all makes sense. When we engaged China economically, it was because of labor arbitrage — a great disparity in salaries. With time salaries there increased and here decreased (in real terms). Something like that is happening with the economic system — at least ours is becoming more like theirs…
This could get serious.
When tensions are high … the littlest things can become a spark.
US navy sent a warship thru Taiwan Straits earlier today.
Mommy! Donald and Xi are in the fuel tank playing with matches again!
The problem with dementia is that it gets progressively worse. I predict that trump will have a very visible mental breakdown at some point in the next 6 months. I am wondering if he can even complete his first term.
I’ve been predicting he won’t make it past 2020 in good health as far back as 2017. I still expect impeachment proceedings by April of 2020. He may be the GOP nominee but his fate will be sealed if the GOP nominates a President that has been impeached by the House. Scaramucci is predicting Trump will step aside if he can’t see a path to victory. If there is an economic collapse by then I wouldn’t be surprised at anything. One thing I know is Trump will declare victory to his supporters and move on no matter what happens. He will say more bombastic things to try and paint himself in a positive light to his supporters. He will a show on Fox at some point.
His approval ratings are sinking every week. He is now down to 62% disapproval and it will go lower as he attacks everyone and everything. He is already making noises about cutting Social Security and Medicare. How many of his old white cult members are going to stick around for that?
This administration does not understand global trade. For example I order $10M of products to be delivered in September. $1M will ship to the USA to be sold to domestic customers. The $9M balance is drop shipped to the rest of the world. The entire $10M in revenue comes to the USA where it funds staffing, rent, profits are taxed, etc. This is highly beneficial to all parties involved.
The supply chain simply cannot be changed to the USA, Vietnam, or elsewhere over the short or midterm. In fact if possible at all it will take many years.
excellent comments
May use in a subsequent article
Trump and his voters don’t know nor care about complex systems. They only care about sound bites and 1st level analysis.
To be fair, neither does the other side.
In contrast to the Communist Party which “controls” Chinese businesses, in America private businesses are not told what to do by the government. O wait…
Well said. You had me going until the “Oh, wait….” part.
Well, not much to say at this point … except … Got Popcorn?
It’ll make a hell of a movie.
You mean …. Got Gold?
Another win for the Chosen One