If all
else fails, immortality can always be assured by spectacular error.
John Kenneth
Galbraith.
In the Great Global Trump Trade War, (GGTTW,) the first casualties
are in, and they are global stock markets led by US equities, and Japanese
steelmakers who alone don’t seem to have been granted a temporary exemption
from Trump’s tariffs on steel and aluminium.
So far, a spectacular own goal with far more still to come,
given that effectively so far, the GGTTW is mostly just a war or words, with
all sides still just talking about what they are going to do, rather than
actually doing it. The sensible thing to do is for Asia and Europe not to
retaliate against Uncle Scam, but to attempt to negotiate a realistic trade
compromise with President Trump, but domestic politics in Asia and the dying
EUSSR make such a weak response impossible.
So, within a couple of weeks the GGTTW is headed for teeth
and a brutal global trade fight. When elephants fight the best thing to do is
to get out of their way. Investors are doing just that. Taking profits in
global stocks and looking desperately for safe havens to ride out the coming real
trade war. A trade war all too likely to wreak havoc on a slew of the fiat
currencies. Gold and oil, seem to be the early safe havens.
Trump Closes Era of Constructive Economic Engagement With China
By Andrew Mayeda
23 March 2018, 06:00 GMT
The U.S.’s era of constructive engagement with China on economic matters is
over.That was the message as President Donald Trump ordered tariffs on Chinese imports worth $50 billion and investment curbs on Chinese companies. After nearly half a century of trying to woo China into the club of major market-based economies, Trump made clear his administration plans to brandish sticks, not carrots, to achieve U.S. trade goals with Beijing.
The question is whether the gambit will lead to a healthy rebalancing of the world’s two biggest economies, or trigger a punishing trade conflict that sideswipes the broadest worldwide expansion in years.
“We’re in a very precarious moment,” said Orville Schell, director of the Center on U.S.-China Relations at the Asia Society. “The U.S. has never pushed back to this degree. We don’t know if this will be a constructive or destructive move.”
So far, investors appear to fear the latter. U.S. stocks fell the most in six weeks amid concerns the U.S. tariffs will provoke China to retaliate. “We don’t want a trade war but we are not afraid of it,” said China’s ambassador to the U.S., Cui Tiankai. “If people want to play tough, we will play tough and see who will last longer."
Hours later came the inevitable counter punch: China’s Commerce Ministry on Friday said it plans a 25 percent tariff on U.S. pork imports and recycled aluminum, and 15 percent tariffs on American steel pipes, fruit and wine.
“This seems to be the beginning of an era of reversing globalization,” said Tao Dong, vice chairman for Greater China at Credit Suisse Private Banking in Hong Kong. “If that is true, the impacts to the Chinese economy, to the Sino-U.S. relationship, to the global economy and to the world prospects could be huge.”
With his landmark visit to China in 1972, Richard Nixon set the U.S. on a path of using diplomacy to convince Beijing to open the Chinese economy to market forces and play by the rules of the American-led world order.
China took a major step toward integrating into that order in late-2001, when it joined the World Trade Organization, a move supported by the Clinton administration.
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Stocks Tumble in Biggest Weekly Decline Since 2016: Markets Wrap
By Sarah Ponczek
Updated on 23 March 2018, 20:07 GMT
U.S. stocks
tumbled, sending the S&P 500 Index to its biggest weekly loss in more than
two years, on concern that a trade war and higher borrowing rates could
throttle global growth. Oil surged on speculation sanctions on Iran will be
re-imposed.
The Dow
Jones Industrial Average slumped to the lowest since November, led by losses
Friday in companies as diverse as 3M Co. to Goldman Sachs Group Inc. The
S&P 500 dropped to its least since the volatility-fueled meltdown in early
February. Gold rallied and Treasury yields declined as investors sought safe
havens.
Global markets were caught in a risk-off mode after China announced retaliation against President Donald Trump’s proposed tariffs announced Thursday. China’s ambassador to the U.S. wouldn’t rule out the possibility of the Asian nation scaling back purchases of Treasuries in response to the tariffs.
It’s been a miserable week for higher-risk markets globally, as a trade war edged closer, the tech sector was roiled by Facebook Inc.’s privacy scandal and data showed European growth sputtering. The tech heavy Nasdaq 100 dropped 7.3 percent this week, the most since 2015. Traders had already been bracing for the possibility of slowing expansion as the Federal Reserve reiterated its commitment to further interest-rate increases after Wednesday’s hike.
“There is a tug of war between Fed tightening, fiscal stimulus, strong earning but slowing sales and now tariffs and potential trade wars,” said Jason Browne, chief investment strategist at FundX Investment Group.
Adding to the image of the ascendance of the “America first” faction, Trump replaced 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.
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A Horror Week for the Dow Has Investors Begging for Trump Respite
By Elena Popina
Updated on 23 March 2018, 21:40 GMT
Spring has sprung -- just not in U.S. stocks, where a harrowing week has
walloped traders with echoes of February’s correction.In the past five years, there have been only two other stretches with losses of this magnitude. The S&P 500 Index is down 6 percent. And the picture looks just as bad for the Dow Jones Industrial Average, which sank to a four-month low by the Friday close. Both indexes suffered their steepest weekly drop in more than two years.
Equities are now teetering near -- and for blue chips, below -- levels seen at the worst point in February’s volatility-fueled meltdown. At the epicenter this time is U.S. President Donald Trump, with his China tariffs driving Boeing Co. down more than 5 percent in a single session on Thursday and losses rippling across industries from technology to banks.
“Investors that have for months relied on Trump’s pro-business rhetoric are now caught off guard,” said Matt Maley, equity strategist at Miller Tabak & Co. “Trade tariffs are a big change and China’s response can even get stronger. There isn’t too much to be optimistic about: investors’ concern associated with Trump’s tariffs isn’t going to be resolved neither next week nor the week after.”
Consider this as a worrying sign of investor fragility: the S&P 500 has closed lower than the midpoint of its daily range for 10 straight days, the longest stretch since at least 1982. That suggests traders are finding reasons to dump shares in the afternoon rather than buy dips.
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March 24, 2018 / 3:07 AM / Updated 2 hours ago
China should target U.S. soybeans, says former finance minister
BEIJING (Reuters) - The response by China’s commerce ministry
to the latest U.S trade measures is too weak, and should target U.S. soybeans,
former Chinese finance minister Lou Jiwei said on Saturday.
The commerce
ministry on Friday unveiled a plan to levy additional duties on up to $3
billion of U.S. imports including fruit and wine, in response to U.S. import
tariffs on steel and aluminium.
“I think the
measures taken by China’s commerce ministry are relatively weak,” said Lou,
currently chairman of the National Council for Social Security Fund (NCSSF).
“If I were
in the government, I would probably hit soybeans first, then hit autos and
airplanes. We cannot let other people profit at our expense.”
Lou was speaking
at the annual China Development Forum in Beijing.
However, Lou
also said a trade war is not good for either side.
“It’s like
killing one thousand enemies and losing eight hundred of our own people,” he
told reporters separately on the sidelines of the forum.
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China's Tariffs Are Sobering News for California’s Wine Country
By Lynn Doan
22 March 2018, 23:59 GMT
Just three days ago, a trade group representing California’s vintners issued a report
showing China was among the top importers of the Golden State’s wine, bringing
in almost $79 million worth of U.S. wine last year.“China has a rapidly growing middle class that is traveling outside the country and adopting many Western tastes,” Christopher Beros, the Wine Institute’s trade director for China and Pacific Rim, said at the time. “We expect this trend to continue for the foreseeable future.”
So maybe not. China just announced plans to add a 15 percent tariff on a range of U.S. products from pipes, to fruit, to -- yes, wine.
The
tariffs, in response to ones President Donald Trump ordered on Chinese products
earlier on Thursday, could put a real dent in Wine Country revenue growth.
China’s thirst for imported wine has increased 2.5 times in the past five
years.
“China is one of our largest
export markets -- we’re already expensive, because they already have existing
duties and tariffs,” said Michael Honig, president of Honig Vineyard &
Winery and past chairman of the Napa Valley Vintners Association. “It’s a
burgeoning market that we had been hoping to make great strides in growing
forward.”
A 15 percent tariff is going
to make that goal “very difficult,” he said. “It will have a big impact on our
ability to sell and be competitive.”
March 23, 2018 / 11:16 AM
Oh nuts! China shoppers lament tariffs on US almonds, pistachio and fruit
SHANGHAI
(Reuters) - As Beijing and Washington exchange barbs that threaten a potential
trade war, health-conscious Chinese shoppers are beginning to fret over what
this could mean for their pockets: a potential jump in prices for U.S.-grown
cherries and pistachios.
Close
to 80 fruit and nut products from the United States are at risk, after China
declared plans to levy additional duties on up to $3 billion of U.S. imports in
retaliation against U.S. President Donald Trump’s plans to slap tariffs on up
to $60 billion in Chinese goods.
“At the end of the day it’s us
common people who will pay the bill because fruits will become pricier,” said
one user on China’s Twitter-like Weibo service, where the potential U.S.-China
trade war ranked as the most-read topic on Friday.
“American pistachios will
become even more expensive. I will need to switch to use domestic peanuts from
pistachios in my meals,” said another user.
Chinese imports of fresh fruit
and nuts have surged in recent years thanks to the country’s rapidly growing
middle class, which has given rise to a new generation of consumers willing to
splurge on healthy food.
In a demonstration of their
buying power, Chinese shopping portal JD.com sold 57 million cherries to
Chinese consumers in one day during a shopping event in June last year.
These fruits and nuts are part
of a list of 128 U.S. products that could be hit with tariffs if the two
countries fail to agree on trade issues, China’s Ministry of Commerce said.
The two countries have,
however, said they are in talks. The Trump administration says it wants to
impose the tariffs in response to China’s “economic aggression”.
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Trump Wanted a Trade War. Here's What One Looks Like
By Andrew Mayeda and Bryce Baschuk1. What is a trade war?
The dictionary says it’s “an economic conflict in which countries impose import restrictions on each other in order to harm each other’s trade.” Trump’s tariffs and the threatened retaliation from other countries meet this definition, but so do centuries of protectionist skirmishes by numerous countries in countless sectors. The recent escalation is stoking fears that Trump has touched off a full-blown trade war by singling out of China for retaliation for intellectual property theft. The quid-pro-quo actions by the U.S. and China over steel tariffs, Trump’s invocation of national security to justify some of his moves -- which could open a Pandora’s Box of similar claims by other nations -- and Trump’s threat to further punish the EU if it imposes counter-duties also add to the trade-war atmospherics.2. What happened in previous trade wars?
One of the most notorious examples is the Smoot-Hawley Act passed by Congress in 1930 and often blamed for deepening the Great Depression. The law hiked U.S. tariffs by an average of 20 percent, initially to protect American farmers but then broadened as other industries lobbied for protections. As demand collapsed, countries scrambled to maintain their gold reserves by devaluing their currencies or imposing even more trade barriers. Global trade fell off a cliff.3. Who wins in trade wars?
No one, if history is any guide. When President George W. Bush raised steel tariffs in 2002, U.S. gross domestic product declined by $30.4 million, according to the U.S. International Trade Commission. The U.S. lost about 200,000 jobs, about 13,000 of which were in raw steel-making, by one estimate. A report by the pro-free trade Peterson Institute for International Economics estimated that Bush’s tariffs cost about $400,000 for every steel-industry job saved. The World Trade Organization also ruled that the Bush tariffs were illegal.
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“It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity. If there must be madness something may be said for having it on a heroic scale."
John Kenneth Galbraith. The Great Crash: 1929.
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