Friday 23 March 2018

Trump’s Trade War Starts.


Baltic Dry Index. 1117 -unch.    Brent Crude 69.55

The difference between stupidity and genius is that genius has its limits.

Albert Einstein

Crash, bang, wallop, and with a “Glasgow Kiss” to China, President Trump launched round two of the Great Global Trump Trade War. Boeing went into an immediate dive while Caterpillar fell into a hole.  American consumers can look forward to inflation ahead in domestic and foreign made cars, and a host of consumer goods imported from China. Offsetting that, they might get a break from cheaper pork and California wine, if China does actually block US exports.

Below, day one of Round Two of President Trump’s Great Gamble; lets repeat the early 1930s and see if this time it’s different.

Only two things are infinite, the universe and human stupidity, and I'm not sure about the former.

Albert Einstein

Asia Stocks Slump, Bonds Rise; Yen Climbs Past 105: Markets Wrap

By Adam Haigh
Updated on 23 March 2018, 03:32 GMT
Asian stocks followed their U.S. counterparts lower after President Donald Trump’s decision to slap tariffs on China heightened concern a trade war could hurt global growth. The yen climbed to its strongest in over a year.

Equity indexes from Tokyo to Shanghai tumbled more than 3 percent. U.S. stock futures also declined, signaling a further retreat for the S&P 500 Index after it tumbled 2.5 percent, the most in six weeks. As investors dumped stocks, they rushed to the safety of Treasuries, where yields fell back toward 2.8 percent, and the yen, which jumped past 105 per dollar for the first time since November 2016. Follow live coverage of reaction here.

The sell-off began after Trump instructed U.S. Trade Representative Robert Lighthizer to levy tariffs on at least $50 billion in Chinese imports. Subsequently, China announced plans for reciprocal tariffs on $3 billion of imports from the U.S., including products from steel to pork.

Adding to the image of the ascendance of the "America first" faction, Trump said he is replacing White House National Security Adviser H.R. McMaster with John Bolton, a controversial foreign-affairs specialist whom the U.S. Senate declined to confirm as President George W. Bush’s ambassador to the United Nations.

Investor fears of escalating trade tensions are being realized as the U.S. tariffs quickly sparked a reciprocal response from China. Traders had already been bracing for the possibility of slowing economic growth as the Federal Reserve reiterated its commitment to further interest-rate increases after Wednesday’s hike. Furthermore, the U.S. president’s continued shake up of his administration’s top ranks adds an additional level of uncertainty to the current geopolitical environment.

 “It’s a significant step in escalation in trade tensions between the U.S. and China,” said Paul Eitelman, senior investment strategist at Russell Investments. “The biggest watchpoint from here is how China responds to this and any potential escalation that creates going forward.”
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Stocks Drop Most in Six Weeks on Trade War Tension: Markets Wrap

Sarah Ponczek and Jeremy Herron
Updated on 22 March 2018, 20:53 GMT
U.S. stocks tumbled, pushing benchmark gauges back toward the lows set during the worst of the February rout, as President Donald Trump’s decision to slap tariffs on Chinese goods heightened concern that a trade war could throttle global growth.

The S&P 500 Index sank 2.5 percent, the biggest one-day drop in six weeks, and the Dow Jones Industrial Average lost more than 700 points. As investors dumped stocks, they rushed to the safety of the Treasury bond market, where yields fell back toward 2.8 percent, and the yen, which rallied the most in three weeks.

In a stock market that’s been floundering ever since it hit record highs in late January, the prospect of a widening trade spat only added to jitters. Traders had already been bracing for the possibility of slowing growth as the Federal Reserve reiterated its commitment to further interest-rate increases after Wednesday’s hike. Not even technology stocks, long the favorite of Wall Street investors, have provided relief of late as the latest data fiasco at Facebook sparked a rout in the sector this week. The Nasdaq is down more than 6 percent since its record 10 days ago.

“Tariffs mean a trade war and the news has the world’s investors running for the exits,” Chris Rupkey, chief financial economist at MUFG Union Bank. “Those are storm clouds out there, that’s what the stock market is saying and that’s why investors are running for the exits.”
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Here’s why the stock market took the China tariffs so hard

Published: Mar 22, 2018 7:04 p.m. ET
The stock market plunged Thursday in a broad selloff that analysts pinned largely on President Donald Trump’s announcement that he would impose tariffs on billions of dollars of Chinese imports.
For investors, it might inspire déjà vu after the administration’s decision in early March to impose tariffs on steel and aluminum imports provoked a steep selloff, only to see most of the decline reclaimed in subsequent weeks.

The decline Thursday accelerated into the close. At the finish, the Dow DJIA, -2.93%  was down 724.42 points, or 2.9%, while the S&P 500 SPX, -2.52%  dropped 2.5% — marking the biggest one-day percentage drop for both since early February.

Will this pullback also prove fleeting or does it reflect a heightening of trade tensions that pose a real threat to global growth and corporate bottom lines? Here’s what investors need to know:

In themselves, the tariffs outlined Thursday won’t have a big impact on the economy even if implemented in full, but that doesn’t necessarily dictate how market participants respond, said Andrew Hunter, U.S. economist at Capital Economics, in a note.

See: Trump-Xi relationship enters rocky phase as U.S.-China trade fight heats up

As Thursday’s market reaction highlights, “there is a clear risk that sentiment continues to deteriorate. And the damage from a further escalation of the trade conflict with China could be much greater,” he said.

Indeed, the worry for investors might have more to do with concerns about potential retaliation and escalation. China’s government criticized the punitive actions and said it would take “all necessary measures” in response.

“For companies that sell to China, or indeed any country outside the U.S., the effects are likely to be negative — which is why markets are reacting again. Even the best-case results would still be worse, economically, than where we are now,” said Brad McMillan, chief investment officer at Commonwealth Financial Network, in a note.
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Cracks Are Starting to Appear in the Global Economy's Momentum

By Piotr Skolimowski, Alessandro Speciale, and Carolynn Look
22 March 2018, 12:43 GMT Updated on 22 March 2018, 14:06 GMT
The global economy’s upswing showed signs of strain in March as a drop in momentum at businesses from Japan to the euro region underscored the world’s vulnerability to confidence shocks from a trade war.

Hours after the U.S. Federal Reserve raised interest rates and boosted growth forecasts for this year and next, survey data from elsewhere provided a reminder of how the international economic outlook could turn. The euro area’s private sector grew at the slowest pace in 14 months, Japanese manufacturing lost steam and German business confidence fell to the weakest level in almost a year, reports on Thursday showed.

The U.S. nevertheless showed resilience with IHS Markit’s gauge of American factory purchasing managers advancing to a three-year high of 55.7 in March. The preliminary reading for the month was driven by employment and longer lead times as producers attempt to boost inventories.

The environment outside of the U.S. might suggest cracks in a picture of global economic thrust that Group of 20 finance chiefs highlighted as recently as this week. Officials meeting in Buenos Aires also failed to agree on a truce as escalating trade tensions threaten to drag the world into a war of attrition over commerce.

“The kind of growth that we saw at the end of last year was a peak” in the euro area, said Dirk Schumacher, an economist at Natixis in Frankfurt. “The question is what happens now, and how the trade issue evolves is key here. For now, some tightening from the Fed was expected, momentum remains solid and there is no reason why expansion shouldn’t continue, unless things deteriorate politically.”

---- Tit-for-tat actions on trade aren’t “going to be any good for the whole economy,” Cofco Corp. President Patrick Yu said in a Bloomberg Television interview at the state-run firm’s headquarters in Beijing. “It just creates a lot of conflicts and misunderstandings.”

While the European Union may be exempted from some tariffs, the threat of protectionism is weighing on sentiment in Germany. The country’s Ifo institute said that business confidence in Europe’s biggest economy continued to drop in March. Its gauge of sentiment fell to 114.7 from 115.4 in February, marking the second month of declines.
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The road to perdition has ever been accompanied by lip service to an ideal.

Albert Einstein

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

Today, NATO gets a steel trade war walk, China gets an ala carte menu.

March 23, 2018 / 4:13 AM

Trump temporarily excludes EU, six other allies from steel tariffs

WASHINGTON (Reuters) - U.S. President Donald Trump has temporarily excluded six countries, including Canada and Mexico, and European Union states from higher U.S. import duties on steel and aluminium meant to come into effect on Friday.

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.

Here Are U.S. Targets Most Vulnerable to China Trade Retaliation

By Steve Matthews, Alan Bjerga, and Andrew Mayeda
22 March 2018, 00:14 GMT
China could hit back with measures against America’s $140 billion of annual exports to the Asian powerhouse if President Donald Trump imposes tariffs.

The president is expected to announce punitive actions on Thursday after the U.S. Trade Representative’s office concluded that China is violating intellectual-property rules. When the Chinese respond, “they’ll pick and choose with political aims in mind,” said Claude Barfield, a resident scholar at the American Enterprise Institute, who was a consultant to the Reagan administration on trade policy.

To date, China has followed a policy of "strategic composure" in dealing with Trump’s America First ethos. If that changes, below are some potential targets.

Agriculture may be on the front line of Chinese retaliation -- and the sector, one of the few in America that runs a trade surplus, is painfully aware.

The U.S. shipped $14.6 billion of soybeans to China, its biggest buyer, in the last marketing year -- more than a third of the entire crop. China is making noise about the purchases, with a Tuesday editorial in its Global Times newspaper accusing the U.S. of “dumping” its government-subsidized beans.

Rumblings against U.S. sorghum, also dependent on China trade, sent that commodity plunging in February. The chief executive of the American Soybean Association has said Chinese retaliation would have long-term consequences, as Brazil and other competitors would likely take market share.

China would feel some impact if it cuts back -- it’s heavily dependent on U.S. soybeans for cooking oil and animal feed, especially in seasons when Brazil isn’t harvesting. But the damage would be real, both economic and political. Soybean production is concentrated in middle-American states that voted for Trump.

---- Another possibility is that China emulates the European Union’s retaliatory tactics, the AEI’s Barfield said. The EU is considering restrictions on imports of U.S. goods including Harley-Davidson motorcycles (whose maker is based in House Speaker Paul Ryan’s home state of Wisconsin) and jeans from San Francisco-based Levi Strauss & Co. (headquartered in House Minority Leader Nancy Pelosi’s district.)

Aircraft

China hasn’t been shy about threatening U.S. corporate interests. The Global Times warned in late 2016 that a trade war would have economic consequences. “Boeing orders will be replaced by Airbus,” the Communist Party newspaper said in an editorial.
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Technology Update.
With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards?

A lithium battery that operates at -70 degrees Celsius, a record low

Date: February 28, 2018

Source: Cell Press

Summary: Researchers in China have developed a battery with organic compound electrodes that can function at -70 degrees Celsius -- far colder than the temperature at which lithium-ion batteries lose most of their ability to conduct and store energy. The findings could aid engineers in developing technology suited to withstand the coldest reaches of outer space or the most frigid regions on Earth.

While batteries can operate in relatively cold climates, they have their limits. Most perform at only 50% of their optimal level when the temperature hits -20 degrees Celsius, and by -40 degrees Celsius, lithium-ion batteries only have about 12% of their room temperature capacity. This can be severely limiting when it comes to operating batteries in space, where temperatures can dip to -157 degrees Celsius, or even in parts of Canada and Russia, where temperatures can be lower than -50 degrees Celsius.

But a team of battery researchers have found a design that can function even where other batteries might fail. "It is well known that both the electrolyte (the chemical medium that carries ions between electrodes) and electrodes (the positively charged cathode and negatively charged anode) have great influence on the battery performance," says Dr. Yong-yao Xia, a battery researcher at the Department of Chemistry of Fudan University in Shanghai, China.

When it gets cold, the ester-based conventional electrolytes that lithium-ion batteries often use become sluggish conductors and the electrochemical reactions that occur at the interface of the electrolyte and the electrode struggle to continue -- meaning that lithium-ion batteries don't hold up too well in ultra-chilly climates. It's a problem that has consistently vexed researchers.

The team experimented with using an ester (ethyl acetate)-based electrolyte, which has a low freezing point that enables it to conduct a charge even at extremely low temperatures. For the electrodes, they used two organic compounds -- a polytriphenylamine (PTPAn) cathode and 1,4,5,8-naphthalenetetracarboxylic dianhydride (NTCDA)-derived polyimide (PNTCDA) anode. Unlike the electrodes used in lithium-ion batteries, these organic compounds don't rely on intercalation -- the process of continuously integrating ions into their molecular matrix, which slows down as the temperature drops.

"Benefitting from the ethyl acetate-based electrolyte and organic polymers electrodes, the rechargeable battery can work well at the ultra-low temperature of -70 degrees Celsius," Xia says.

Xia and his team believe this may be a more elegant solution than alternative attempts to boost lithium-ion battery function in extreme temperatures. Other battery researchers have tried to remedy the issue by developing additives to externally heat the batteries or by using a liquefied gas electrolyte, but these solutions require additional materials that add extra weight.
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Another weekend and an exciting one in our new global trade war. Mainstream media will be full of pundits, gloom, fake news, but not yet doom. It’s far too early for the doom of rising unemployment. That probably comes nearer to Christmas, if we stay on present policies. But what will the new trade war mean in the currency  wars? Stay long fully paid up physical gold and silver, held outside of the hypothecating financial system, just in case.

Nothing is so admirable in politics as a short memory.

John Kenneth Galbraith.

The monthly Coppock Indicators finished February

DJIA: 25,029 +283 Up 01. NASDAQ:  7,273 +313 Up 03. SP500: 2,714 +212 Flat.

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