Posts of 2018

Trump’s Inner Conflict: Tariff Man v Dow Man

♠ Posted by Emmanuel in Trade at 12/25/2018 04:58:00 PM

Donny Demented must decide between Tariff Man and Dow Man since he likely can't be both.

Unlike any other (normal) American President, Trump continually boasted about rising stock markets earlier in his term. But, as with all things in a gravity-prone world, what goes up must come down. This danger all his predecessors innately understood, but Trump is...different. Interestingly, this tendency to brag about stock market performance--call him Dow Man after the world's most famous stock index (the Dow Jones Industrial Average--is at odds with his other persona. Yep, we're talking about his self-declared "Tariff Man," happy to slap taxes on all and sundry imported goods due to alleged unfair practices of America's trade partners.

Infamously, he tweeted that he was "Tariff Man" on December 4, tanking hopes that the US would cool its trade war, especially against China. The Dow Jones fell 800 points on his tweet. As the saying goes, it's all been downhill for American stocks since then. You see, the Dow Jones Industrial Average's 30 corporations are among US firms deriving the largest share of their revenues from overseas. So, obviously, the more Trump threatens to undermine global supply chains stretching the world over by slapping tariffs on these companies' imports, the worse their earnings are expected to be--and this is reflected in their stock prices being lowered in the here and now.

So which will win out, Dow Man or Tariff Man? Although Trump says tariffs have helped the stock market rise earlier in his term, few market commentators would agree.Which Trump persona will win out if he can't have both?

“Trump loves two things very much: tariffs and a rising stock market. It’s becoming increasingly clear he can’t have both … ‘I think Trump the Dow Jones Man is ultimately going to eat Trump the Tariff Man,’ said one former senior administration official intimately familiar with the president’s stock market obsession, citing Trump’s touting of a recent agreement to hold off on increased tariffs after a dinner with Chinese President Xi Jinping. ‘What he agreed to after that dinner had basically been on the table for two years. He knew he had to give Wall Street something.’

Something has to give, and some have placed their bets on rampant protectionism. That is, Dow Man trumps Tariff Man. Still, you have to see both sides in this trade skirmish. how much can Trump take before suing for peace? Certainly, the leader in a (for now) democracy has to be more responsive than the PRC leadership which does not have to be. The Yanks have (for now) real elections:

“The question is, what is Trump’s pain threshold? And what is China’s pain threshold? It’s almost like two cars zooming toward each other. Which one is going to turn first?” asked Stephen Moore, visiting fellow at the Heritage Foundation and an outside Trump adviser. “If the stock market fell another 1,000 points it would give him pause. He does love a bull market and hate a bear market. But he also feels this is the fight of our lifetime.”

The stock market cratering is undermining one of Trump's claims to progress, which is a rising market:

Trump and other senior administration officials, including Treasury Secretary Steven Mnuchin, have long considered the stock market a scorecard on White House performance. Trump has touted a rising market over 30 times on Twitter since taking office. And senior aides say he watches market moves throughout the day on cable news and regularly asks how his potential decisions will impact Wall Street.

“You walk in the Oval and he wants a stock market quote, I give him that,” Larry Kudlow, Trump’s top economic adviser, said in a recent interview. When the market is falling, Trump wants to know precisely why, Kudlow said.

I too think Dow Man will win in the end, but it may still be some time until we see his emergence. First, the anti-globalist forces in his coalition must be placated, then we move into more of what passes for normalcy in Trump's administration.

...There are Still Foreign Students in the US?

♠ Posted by Emmanuel in Education,Migration at 12/22/2018 06:50:00 PM

There's an interesting article over at Politico about how Trump's nativist / white supremacist / neo-apartheidist rhetoric and policies have impacted not only illegal but, perhaps more importantly, legal migration. While all of it is certainly worth reading, let's focus on something I've been quite curious about: international students going to the United States to learn. After all, why would you want to go and give money to a country whose leader disparages you for your race, color, creed or "foreignness"? Trump whipping up anti-immigrant fervor against Muslims, Latinos and anyone who isn't a white Trump voter isn't going to enhance your safety against rising hate crimes, either.

So today's "no sh-t, Sherlock" moment is finding that international student visas being issued by the United States are cratering for apparent reasons:

Student visas under Trump have fallen, too. The State Department issued roughly 363,000 F-1 student visas in fiscal year 2018, according to a POLITICO analysis of State Department data. That represents a 23 percent decline from fiscal year 2016. The number of foreign students enrolled for the first time in U.S. colleges and universities declined in 2017 for the second year in a row, according to a report released in November. The report, based on an annual survey by the nonprofit Institute of International Education, calculated that new enrollment dropped nearly 7 percent compared with the previous year.

Leaders of universities and colleges blame Trump’s immigration tactics for the slowdown as the administration has moved to toughen standards for foreign students. “Many of our most successful companies are based on the talents of those international students,” said Janet Napolitano, president of the University of California system and a former Homeland Security secretary to President Barack Obama. “It just seems not wise, to put it mildly, to discourage that kind of international talent from coming to the United States.”

To help make matters worse, the Trump administration has just introduced policies designed to make life even harder for international students:

A new USCIS policy announced in October threatens to saddle international students with an immigration penalty if they remain in the country beyond the term of their visa, a hard-line move to compel students without authorization to depart the country quickly.

So why exactly would any sane prospective student want to go to America? The dollar is very strong, making it an expensive destination. So you're paying top dollar to be scapegoated and racially abused by Trump and people who think like him.

For many who considered studying Stateside, those Trump-alikes are far too many, and personal safety is certainly not guaranteed at this time when they're whipping up fervor against foreigners. This outcome is, regrettably, far too sensible. As the title suggests, the interesting observation may be that there are still any international students at all.

Huawei to Hell: Globally Restricting PRC Tech

♠ Posted by Emmanuel at 12/19/2018 05:16:00 PM

Wrongly or rightly, Huawei is now perceived as an extension of the People's Republic of China. More specifically, the Communist leadership is thought of as directing its commercial activities in pursuit of national objectives. To be sure, this prospect was always the likely one given that its founder is a former People's Liberation Army officer who has not exactly distanced himself from his former employer. In the wake of his daughter, Huawei CFO Meng Wanzhou, being detained in Canada on charges that Huawei violated American sanctions on Iran, many other countries have raised security concerns over using Huawei equipment in sensitive applications.

The Japanese have effectively banned state purchases of Huawei gear without mentioning it directly:

Japan decided on a policy Monday that will effectively exclude Chinese telecommunication equipment giants Huawei Technologies Co. and ZTE Corp. from public procurement starting in April next year, the government said.

The decision comes amid concerns about security breaches that have already prompted the United States, Japan’s key ally, and some other counties to ban the two companies from supplying infrastructure products.

“It is extremely crucial not to procure equipment that embeds malicious functions including information theft and destruction,” Chief Cabinet Secretary Yoshihide Suga said at a news conference after cybersecurity officials from relevant government ministries and agencies agreed on the plan.

Nor are the French and Germans taking any chances in also overlooking Huawei equipment:

Huawei faces fresh challenges in Europe after France's Orange said it would not hire the Chinese firm to build its next-generation network and Germany's Deutsche Telekom announced it would review its vendor strategy.

The shift by the national market leaders, both partly state owned, follows Huawei's exclusion on national security grounds by some U.S. allies, led by Australia, from building their fifth-generation (5G) mobile networks.

U.S. officials have briefed allies that Huawei is ultimately at the beck and call of the Chinese state, while warning that its network equipment may contain "back doors" that could open them up to cyber espionage. Huawei says those concerns are unfounded. Tensions have been heightened by the arrest of Huawei's chief financial officer in Canada for possible extradition to the United States.

So the most developed markets of American security allies seem unattainable. Granted, that leaves plenty of other (non-aligned) countries free to buy Huawei gear. However, the examples of these major developed nations may mean others also doubting Huawei's intentions despite (presumably) having fewer trade secrets than these advanced countries.

Who will vouch for the safety of deploying Huawei gear other than these folks? It's probably up to Huawei itself to go beyond claiming its innocence by actually disclosing what's in its gear or at least explaining how it cannot be a backdoor for PRC infiltration. Otherwise, Australia, France, Germany and Japan will not be the last thinking it's better to be safe than sorry when it comes to Huawei gear.

Fears of US Treating Hong Kong as ‘China’

♠ Posted by Emmanuel in Americana,China,Security,Trade at 12/16/2018 04:50:00 PM

What makes Hong Kong still a global business hub may be under threat from Donald Trump.

With many Chinese cities having become nearly as developmentally advanced as Hong Kong, the question has always been what comparative advantage this "Special Administrative Region" still has. It used to be the gateway to the mainland, until mainland cities could pretty much do anything for foreigners what Hong Kong could. To cut a long story short, the "one country, two systems" idea has another differentiation that has continued Hong Kong's economic relevance.

You see, Hong Kong is regarded as a different entity from the PRC proper by the United States government. As such, it has some advantages the mainland does not such as trading privileges for "dual use" (civilian and military purposes) technologies. However, this unique status is being endangered by the Trump administration which is concerned that Hong Kong may be a backdoor for trading in these sensitive technologies on behalf of Communist China.

Is the United States soon going to lump Hong Kong with the rest of mainland China? Traders in Hong Kong fear this prospect:

Hong Kong business groups are starting to worry the Trump administration will open the door to ending the financial hub’s preferential trade status, rendering it “just another Chinese city” as its government gets closer to Beijing.

The U.S.-China Economic and Security Review Commission stoked fears last month with a recommendation that Congress reassess Hong Kong’s special trading status for some sensitive U.S. technology imports. It said Beijing’s statements and legislative actions “continue to run counter to China’s promise to uphold Hong Kong’s autonomy.”

If President Donald Trump acts on the recommendation, it would only impact dual-use technology with consumer and military applications -- like carbon fiber used to make both golf clubs and missile components -- that represent about 2 percent of U.S. exports to Hong Kong. But the blow to the city’s image may be irreparable.

Trump isn't exactly a stickler for democratic practices, but it's precisely Hong Kong's perceived kowtowing to the mainland that may land its status in trouble:

The U.S. Consulate in Hong Kong declined to comment when asked whether Trump was considering any action against the city. It pointed to a statement last month from Consul General Kurt Tong, who said “we are quite focused on the importance of the ‘one country, two systems’ framework” that allows Hong Kong to maintain a distinct economic, legal and political system.

In its annual May report on the city’s autonomy, the U.S. consulate said “certain actions” by China were inconsistent with its commitment to allow Hong Kong to exercise a high degree of self-governance. But it found that the city “generally” maintains a high degree of autonomy, “more than sufficient to justify continued special treatment.”

How independent is Hong Kong from mainland pressure? Given the cutthroat level of competition among Chinese cities, even the aforementioned 2% allowed trade in "dual use" technologies may be what sets it apart in this day and age and still means something. Trump, however, may have different ideas about Hong Kong's role in the world.

Small Island States & Climate Survival

♠ Posted by Emmanuel in Development,Environment at 12/14/2018 12:21:00 PM

Trying not to go underwater: Kiribati and company.

You sometimes have difficulty finding "good guys" at year-end UN climate negotiations. On one hand you have rich countries unwilling to cut emissions despite already being wealthy like the United States. They are largely indifferent to worsening the plight of poor countries which must bear the brunt of climate change, like those in sub-Saharan Africa. On the other hand, you also have developing countries that do not want to sacrifice anything to economic growth despite having among the world's most polluted cities on the face of the Earth. I'm talking about you, China and India.

But there are "good guys" here: Out of the sheer necessity of survival, small island nations at risk of being submerged by higher sea levels worldwide are leading the charge at climate negotiations to save them from literally disappearing off the map. Let's say their work is cut out against the likes of the United States--promoting coal at a climate conference, what a joke--and China and India who are quite callous to the plight of fellow developing countries. So much for third world solidarity...

The ongoing negotiations on how to implement the Paris Agreement aren’t going well. The world’s largest economies and top greenhouse emitters remain mired in decades-old arguments about who is responsible for addressing climate change and its impacts.

Now, a group of small island nations have stepped in to save themselves. Countries like Kiribati, Vanuatu and the Marshall Islands aren’t your typical geopolitical movers and shakers, but here at the United Nations climate change conference in Katowice, Poland these highly vulnerable countries have managed to reshape discussions with a simple but poignant reminder: if the world fails to halt global warming they may disappear for good.

“We are not prepared to die, and the Maldives have no intention of dying,” Mohamed Nasheed, the former president of the Maldives told reporters in Poland. “We are going to do everything in our power to keep our heads above the water.”

They try, but the message sometimes falls on deaf ears:

To do that, these countries have launched a last-minute blitz to rouse higher-emitting and slower-moving countries to action. They are pushing their counterparts to demand a more aggressive agreement in a series of closed-door bilateral discussions. And they’ve launched a messaging campaign to signal that they will not let other countries off the hook if they hold back.

I am obviously sympathetic to small island states, but I do have to scratch my head about what kind of political leverage they can apply to get what they want achieved during these international talks. Literally, they are the smallest of fishes in a very big pond.

On PRC Retaliation for Detained Huawei Exec

♠ Posted by Emmanuel in China,Technology,Trade at 12/10/2018 05:23:00 PM

"Free Meng Wangzhou" is the new PRC (technology) battle cry.

In case you missed, it, Canadian authorities have detained Huawei's CFO Meng Wanzhou due to American pressure over that Chinese company dealing with Iran in violation of US sanctions. She is due for extradition to the United States. This major diplomatic dust-up comes on top of massive uncertainty over the fate of world trade as the United States slaps China silly with tariffs. Whereas the tariffs deal with supposedly unfair Chinese trade practices, these efforts to cut Chinese technology firms down to size are part of an effort to slow China's technological advancement, which Trump and company would argue come from "stealing" American know-how anyway.

Just as China has retailated against US tariffs by slapping some of its own on American products, what's to stop the PRC from harassing American executives, too? More than one nation can play the trumped-up economic harassment game. Bloomberg offers the following nightmare scenarios for American investors in China:

Imagine you’re a product engineer for a U.S. device brand based in China. You’ve had to submit your passport for annual visa renewal.

Without it, you can’t travel. And with heightened concerns over security and a crackdown on VPNs (which enable users to bypass Chinese censorship of the internet) your company has decreed that all sensitive product discussions be done in-person back at HQ. But that visa renewal is taking a long time and you’re stuck in Shanghai, with your product cycle being extended by the day.

In Shenzhen, where your devices are assembled, the factory has just been raided for the third time that month. Inspectors are looking for breaches of occupational health and safety. You’ve worked hard to keep things up to code, though the rules seems to shift constantly. Minor rust on a pipe at the back of the site was all the authorities needed to shut you down pending a fix. Your site manager can’t even find any mention of rust in the regulations, and that pipe is in no worse condition than the previous two scheduled inspections. Now it’s a problem and production is halted.

Sounds fun, huh? Well, that's not the end of it...

A new focus on capital controls has frozen offshore remittances. Local profits can’t be sent overseas, and you’re having trouble getting money to suppliers in Japan and South Korea. They won’t ship to your China factory without it.

You could try to get a loan from a Japanese bank to cover, but that takes time and the holiday shopping season is approaching. You might be forced to source locally, but nothing made in China matches your specs. To get local suppliers up to standard you’d need to invest considerable time and money, and probably purchase equipment on their behalf.

I sympathize with China more on trying to move to more advanced, less polluting forms of production. As wages rise together with China's level of development, they will become less competitive with labor-rich countries cost-wise in making less-advanced products. It is only natural for the Chinese to attempt to move up in terms of development by making more advanced products. The Us stifling this understandable motive can have potentially dire consequences for the world economy.

To paraphrase a certain saying, if China cannot obtain technological advancement through peaceful means, then it may have to resort to using force--a scenarion I think we should all want to avoid. How China's self-described "peaceful rise" can be accommodated in the technological realm is certainly a pressing matter, and this Huawei imbroglio may have brought it to a head.

Warmer Planet: India Adopts Air-Conditioning

♠ Posted by Emmanuel in Environment,India at 12/07/2018 04:24:00 PM

Like many others, I am of two minds about this phenomenon. As with practically everywhere else on Earth, India is warming. Most of the country was already warm to begin with, but with climate change, it's only getting warmer. What's more, economic development in that country has made it more possible for more folks to afford relatively costly air-conditioning units and the electricity bills associated with them.

A downside to all this comfort, however, is obviously further demand for power:

With India's AC market expected to explode from 30 million to a billion units by 2050, the world's second-most populous country could become the planet's top user of electricity for cooling. India is already the number-three spewer of greenhouse gases, burning through 800 million tonnes of coal every year -- and the predicted AC boom could mean the country would have to triple its electricity production to meet demand, experts say.

But for the hundreds of millions of Indians enduring scorching, even deadly, summers, the air conditioners are a godsend. "Summers make our life miserable," said Kumar, a 48-year-old laundryman earning $225 a month who this year installed an AC unit in his two-room house in the town of Behror in the baking-hot desert state of Rajasthan.

The paradox we must confront with A/C, as with many other modern conveniences, is that we make the Earth less convenient overall by using these electricity-dependent appliances. The user may feel cooler, but the environment becomes warmer overall:

The irony is that as humans try to stay cool, the refrigerants inside AC units and the generation of electricity needed to power the appliances are exacerbating global warming. That is, unless India can switch out of highly polluting fossil fuels for power generation:

In addition, studies -- including by the World Health Organisation and UN-Habitat -- show that the heat-generating motors inside AC units can themselves push up temperatures in urban areas, where the appliances are widely used, by a degree or more.

As demand grows, the amount of energy consumed globally by AC units could triple by 2050, requiring new electricity capacity equivalent to the combined current capacity of the US, the EU and Japan, the International Energy Agency says.

India currently generates about two-thirds of its electricity with coal and gas, and despite ambitious plans for renewable energy the country is set to remain highly dependent on hydrocarbons for decades to come.

If there is anyplace on Earth where renewable energy is most needed, it will be India as its demand for air-conditioning soars together with ambient temperatures, electricity demand and the production of carbon dioxide.

China Aside, Trump's Many Other Trade Wars

♠ Posted by Emmanuel in Trade at 12/04/2018 02:33:00 PM

China may be the main "belligerent" identified by the US, but it's hardly the only one.

Trump and the Chinese government not being particularly known for their communicative openness and transparency, there is some confusion as to whether the US-China trade war is about to de-escalate or otherwise after Trump-Xi talks at the recently concluded G-20 meeting in Argentina. What's going to happen with regard to these two countries? Beats me, pal. Lest you think that China is the only victim of Trump's anti-trade mentality, rest assured that the rest of the world has been subject to aggressive action from the US government at Trump's obvious behest. But before we get to that, let's review what kinds of actions countries have typically used to sanction others' "unfair" trade practices:

A tariff is a tax on a foreign product designed to protect domestic producers in an effort to boost local economies. But under international trade laws, the US can't just implement them willy-nilly, they need to provide a reason why the tariff is necessary and investigate it fully. Until recently, the vast majority of US tariffs were justified as countervailing and antidumping duties.

Countervailing duties level the playing field when a foreign industry has been unfairly subsidised

Antidumping duties level the playing field when a foreign industry has been flooding the US market with its products

Not all investigations lead to tariffs - at some point during the process, the US may decide they don't have grounds to be implemented. But many do.

While we keep hearing about China all the time, note that it's practically everyone else also being hit by Trump's trade angst:

Under President Trump, the Department of Commerce has begun 122 investigations into anti-dumping/countervailing duties. These tariffs have targeted all corners of the globe, reaching 31 countries in total and affecting some $12bn (£9.4bn) in imports. China has borne the brunt of US scrutiny, with about 40% of countervailing/antidumping investigations targeting Chinese products ranging from aluminium alloy to rubber bands to silk ribbons. Other countries have found themselves in Mr Trump's crosshairs as well.

Aside from China, the countries hit by US trade actions range far and wide:

A far-reaching investigation into citric acid touched three continents, with tariffs issued for Belgium, Colombia and Thailand. The chemical compound mimics the sour tang of lemons and is used in a large amount of common candies and drinks, from Sour Patch Kids to 7Up...

Another massive investigation into biodiesel from Argentina and Indonesia led to tariffs being issued on $1.5bn of imports. The fuel, which is made from plants, is used in diesel cars and lorries, as well as airplanes and trains. The market has huge growth potential in the US, which is a major grower of corn and soybeans, and the tariffs could ostensibly help grow the industry.

Whereas American companies had to tell the government to investigate foreigner's alleged violations of trade rules, the Department of Commerce under Trump is now attacking all and sundry others even without corporate complaints. What's more, he's using traditionally taboo reasons for imposing sanctions since they give him more leeway--"national security" concerns being foremost of these against such national security "threats" like Canada, Mexico, etc.

And in a significant change in protocol, officials are no longer waiting for companies to petition for help. Last November, the Department of Commerce self-initiated investigations in Chinese common alloy aluminium.

It was the first time the department acted on its own regarding antidumping or countervailing duties, without a complaint from industry, in decades, and a sign of a shift in the department's policy under the new administration.

"[President Trump] isn't willing to wait for companies to come forward. He wants to do it himself, he wants to have the government decide," says Chad Bown, a senior fellow at the Peterson Institute for International Economics.

"So he starts self-initiating cases but also... he says we're going to start using other laws where there are much more presidential discretion." But by far the biggest shift in US trade policy has been Trump's willingness to buck with tradition if it will let him get tariffs through faster.

Rather than go through lengthy antidumping/countervailing investigations - and risk his tariffs being overturned - Trump has introduced hundreds of billions of tariffs under little-used aspects of trade law.

The upshot here is that even if US-China trade relations improve somewhat, there are so many other countries being targeted that it's hardly a cessation of the trade wars Trump is busy engaging in against practically the entire world.

Trump to Foreign Students: “Get Lost”

♠ Posted by Emmanuel in Americana,Education at 11/26/2018 03:19:00 PM

AMERICA FIRST = COLOREDS OUT in plain English...and that includes foreign students.

It should be of no particular surprise that the United States is becoming an increasingly unattractive place for foreign students to study in. On the financial side, a strong US dollar is making other Anglophone countries comparatively attractive like Australia, New Zealand, and Canada. I've always been bemused by Brexit plunging the British pound to recent depths and in the process benefiting UK educational institutions. On the security side, the mountebank President Trump's barely-concealed hatred for all things foreign--and foreigners themselves--has understandably caused apprehension among would-be students in the US. Recent numbers of new students tell the tale:

[T[he number of students enrolling for the first time at American colleges in fall 2017 dropped nearly 7 percent compared to the previous year, according to the 2018 Open Doors Report on International Educational Exchange, an annual survey taken by the Institute of International Education. New foreign student enrollment in the U.S. dropped by 3 percent during the 2016-17 school year.

American officials at the State Department [surprise!] emphasize competitive factors for the slowdown in new foreign students:

The authors of the report, which has been supported by the State Department since 1972, downplayed the role of politics — including Trump’s policies — in the slowdown. They instead blamed intensifying competition from universities in other countries and the rising cost of college in the U.S. “We’re not hearing that students feel they can’t come here,” said Allan Goodman, president and CEO of IIE. “We’re hearing that they have choices. We’re hearing that there’s competition from other countries.”

However, American universities are more willing to pin blame on the real culprit here: Trump and his xenophobic rhetoric and policies. To no one's real surprise, Anglophone competitors for international students are really happy about this state of affairs:

American colleges have largely blamed Trump because foreign competitors use the president’s anti-immigration rhetoric to aggressively recruit international students and faculty who would have typically come to the United States for their higher education. Universities in Canada, China, New Zealand, Japan and Spain all have seen gains.

Phil Honeywood — CEO of the international education association in Australia, one of America’s biggest competitors — told POLITICO earlier this year that “We don’t actually need to be negative about the American academy, as President Trump is doing more damage to ‘brand America’ on his own than any competitor country ever could.”

Make no mistake, big money is at stake here should Trump target foreign students directly like Chinese students accused of being spies for the PRC. As bad as things are for American universities no thanks to Trump, they can get even worse:

The new student enrollment slowdown could pose economic risks. International students at U.S. colleges and universities contributed $39 billion to the U.S. economy and supported more than 455,622 jobs during the 2017-18 school year, according to a separate report released Tuesday by NAFSA: Association of International Educators...

China yet again sent the most students in 2017 — 363,341, nearly a third of all international students in the U.S. That marked a 3.6 percent enrollment bump, even as the Trump administration has been especially aggressive toward China, going so far as to consider banning student visas for Chinese nationals.

The Great PRC Bum Rush to Beat Trump's Tariffs

♠ Posted by Emmanuel in China,Trade at 11/12/2018 03:51:00 PM

"In the Red[s] corner, the heavyweight exporting champion of the world..."

The veritable explosion of exports from the PRC to the United States is definitely related to the Trump administration's tariff-slapping ways. At the moment, the Yanks have applied 10% tariffs to $250B worth of China-made goods. At the start of 2019, if matters do not change substantively, these rates are scheduled to be raised to 25%. Having established supply chains deep in the PRC, what's an American importer to do? So far at least, may have decided to front-load imports while tariffs are still *only* 10%:

China’s imports into the U.S. hit a monthly record in September, with the fourth quarter setting up for more potential records. Along with container import and trucking demand data from U.S. import gateways, the trade figures show the first round of tariffs on $250 billion in Chinese goods have done little to dissuade U.S. customers.

Instead, they sparked a “pull forward” effect by shippers to beat deadlines for tariffs on Chinese goods. The effect has not been uniform across all imports, with only some segments showing unusual growth. But the effect could pick up speed though the rest of the year as higher tariffs start in 2019.

The total dollar value of Chinese goods imported into the U.S. hit $50 billion in September, according to Department of Commerce figures released last week, up 10% year-on-year. Year-to-date, the dollar value of Chinese goods coming to the U.S. are up 8% to $394.7 billion.

As front-loading implies, there will be hell to pay once this surge ends with the presumed imposition of 25% tariffs forthcoming as PRC-US trade dries up:

Analysts have said the practice by Chinese exporters of accelerating production and shipment now to avoid the upcoming tariff increase – or “front-loading” orders – is one probable reason behind China’s strong export performance since Washington started to levy its first round of tariffs on Chinese imports in early July.

The practice may be widespread, because Chinese exports of chemicals, non-ferrous metals, plastics and special industrial machinery were the fastest-growing Chinese export categories in September, according to Chinese customs data, despite all of them being included on US tariff lists. But fulfilling next year’s orders so far in advance could lead to a significant slowdown in future sales if US clients reduce their next orders accorditongly. China’s official purchasing manager’s index has shown new export orders have been contracting since June.

“Increased demand for shipments has pushed up shipping rates and some exporters are even having trouble finding any space on cargo ships,” Ding said. But the situation could quickly turn bad next year, he warned, as exporters face a double blow from fewer new orders and a sharp depletion of existing orders.

Where Chinese firms used to sending stuff Stateside will go to next if tariffs are hiked once more is an open question. For now, though, it's as though PRC concerns are making and shipping stuff to America like there's no tomorrow...or at least next to no orders come early 2019.

Depopulation R Us: Ending US Birthright Citizenship

♠ Posted by Emmanuel in Americana,Migration at 10/30/2018 03:22:00 PM

Maybe the white supremacist xenophobe Trump will soon ban multicultural baby dolls, too.

Hey, perhaps Trump is an IPE Zone reader, of all things possible in this strange world. Just yesterday, I discussed how Canada's "human stimulus" is allowing that country to keep up with rising interest rates Stateside as growth is being fueled in Canada by an influx of work-ready migrants. Apparently not content with keeping coloreds out in attempting to Make America White Again, Trump has a new plan to avoid citizenship privileges for those born in it.

As a new anti-immigration gimmick, Trump is signaling that he want to issue an executive order terminating birthright citizenship in the United States of America, or jus soli:

President Trump is planning to use an executive order to strip birthright citizenship from America's laws, rather than trying to change the Constitution through an act of Congress. The potential move, which would likely trigger numerous legal challenges, would seek to end the conferring of citizenship to children of non-citizens who are born in the U.S. — which is currently guaranteed by the 14th Amendment.

"It was always told to me that you needed a constitutional amendment. Guess what? You don't," Trump said. He discussed the plan in an interview with Axios on HBO that is slated to air Sunday.

The American constitution is pretty clear on this matter, though, so it's going to be a more difficult task than, say, starting multiple trade wars to deny citizenships to those born on U.S. soil:

Birthright citizenship is granted in the 14th Amendment's first sentence: "All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside."

The concept is based on jus soli — "right of the soil" — meaning that any child born in the U.S. has a claim to citizenship, even if their parents lack legal documentation to be in the country.

In any event, Trump claims he can single-handedly rescind the 14th Amendment:

To change the law, Sherry said, you would need to either amend the 14th Amendment through Congress or ask the Supreme Court to overturn their earlier interpretation of the law and limit its benefit to people who are in the U.S. legally.

The president says he has the power to act on his own. "You can definitely do it with an act of Congress," Trump said in the Axios on HBO interview. "But now they're saying I can do it just with an executive order." He added, "We're the only country in the world where a person comes in, has a baby, and the baby is essentially a citizen of the United States for 85 years, with all of those benefits. It's ridiculous. It's ridiculous, and it has to end."

To recap, the Trump administration is already using various means to significantly limit legal and illegal immigration to a country whose demographics are unpromising, with a birth rate well below the replacement rate of 2.1 births per woman. On top of that, Trump is proposing to disallow citizenship to a not-inconsequential number of those giving birth Stateside.

So, who's going to be left in America at this rate to pay for all the retirement benefits of these old, angry white Trump voters? Like Trump, they have no seeming appreciation of basic economics unless they intend to work till age 80. To draw retirement benefits, there must be persons of working age paying into the system. If natives aren't willing to have children doing so, and you limit non-natives from working who can do so--as well as their children--then the system is unsustainable.

Canada's 'Human Stimulus': Inward Migration

♠ Posted by Emmanuel in Migration at 10/29/2018 05:38:00 PM

Don't want to be treated like #$%^ because you aren't a white male 'Christian'? Then go to Canada, not Trump's America.

Bloomberg has an interesting report about how Canada is taking the opposite tack to what the United States is doing under Donald Trump. The current US president knows what got him elected: spewing barely-concealed hatred against everyone except white so-called 'Christian' males like him. You name it: women, people of color, people of different faiths, people of different sexual orientations have been singled out for Making America Worse Right Now compared to some fantastical golden age when white 'Christian' males ruled and all these inferiors knew their subordinate place in the US of A. As you would expect, restricting the inward migration of all these people--legal or otherwise--has become a Trump administration policy priority.

Fortunately, the United States' northern neighbors are not practicing discrimination to such an extent. Both are generally in the same boat since they have below replacement total fertility rates which imply population declines going forward absent further migration. That is, where will all the workers come from to replace those retiring...like all those aging white 'Christian' male Trump voters? Canada is way more open to migrants right now, and that's helping it hike interest rates to follow those of the United States:

The U.S. has its fiscal stimulus. The Canadian economy? Well, it has its human stimulus. The biggest population increase in six decades, driven by international migration, is one reason the Bank of Canada has been able to match the Federal Reserve hike-for-hike since June 2017 -- making the two easily the most hawkish central banks in the Group of Seven. In its latest increase Wednesday, the Ottawa-based central bank highlighted how the surge has bolstered consumption and housing activity.

“Labor income is being boosted by the larger population,” the Bank of Canada said in a report Wednesday that accompanied its decision to increase borrowing costs for a third time this year, keeping pace with the Fed’s three moves.

Under Prime Minister Justin Trudeau, Canada’s population has jumped by 1.4 percent over the past year, double the U.S. pace, driven by a surge in non-permanent residents like students and higher immigration levels. “We’ve called it the ‘human stimulus,’” Brett House, deputy chief economist at the Bank of Nova Scotia, said in a phone interview.

The larger point is that monetary stimulus--like Trump's tax cuts--boosts growth mostly in the short run. Say, two to three years in a significant way at most. How about human stimulus? In contrast, that should last closer to the working yeaers of the person brought into the country to stay for good. That these are young, well-educated folks helps too:

Stefane Marion, chief economist at National Bank of Canada, said it’s not just the sheer number of people entering Canada, but also the quality of immigrants the country has been able to attract: younger, more educated people who help drive household formation and contribute to the economy’s resiliency.

“Of all the OECD economies, Canada has the most aggressive immigration policy that brings in work-ready immigrants,’’ he said. “We didn’t get fiscal stimulus on the same scale, but we’re still benefiting from the multiplier effect of the type of people we’re able to get from overseas.’’

I am more sanguine on the future of Canada than that of the United States. Unsustainable budget deficits don't strike me as a long-term growth strategy, while bringing in young folks who can get the job done and enliven the economy in the process can.

Trade War Worries? Leave China for Southeast Asia

♠ Posted by Emmanuel in China,Southeast Asia at 10/22/2018 06:24:00 PM

"Made in China" gives way to "Made in Southeast Asia"?

The "balloon effect" is a demonstration of the phenomenon of displacement. Say you push down on manufactured exports emanating from China. Because demand for these goods still exists Stateside and in other destinations, other parts will inflate with the targeted activity. And so it is with American efforts to punish Chinese transgressors over supposedly unfair trade. Instead of these trades stopping altogether--or production moving back Stateside as Trump fantasizes--the end result is production moving to even lower-cost destinations elsewhere in Asia.

Among the beneficiaries of the trade war as a result of this "balloon effect" are countries of Southeast Asia that aren't hit with tariffs on PRC-made products, according to Bloomberg:

Southeast Asia is seeing a boom in foreign direct investment as the intensifying trade war between the US and China prompts companies to shift production to the region. Vietnam saw manufacturing inflows jump 18% in the first nine months of 2018, driven by investments including a $1.2 billion polypropylene production project by South Korea’s Hyosung Corp, according to a Maybank Kim Eng Research Pte note on Monday.

Supposedly, even the Philippines and its drug warrior of a president are benefiting:

Vietnam saw manufacturing inflows jump 18% in the first nine months of 2018, driven by investments including a $1.2 billion polypropylene production project by South Korea’s Hyosung Corp, according to a Maybank Kim Eng Research Pte note on Monday. In January through July, Thailand’s net FDI rose 53% from a year earlier to $7.6 billion, with manufacturing inflows surging almost five times, according to central bank data.

In the Philippines, net FDI into manufacturing surged to $861 million in the same period from $144 million a year earlier. “The US-China trade war may be attracting more firms to set up in Asean to circumvent the tariffs,” Maybank economists Chua Hak Bin and Lee Ju Ye said in the note. “Sectors such as consumer products, industrial, technology & telecom hardware, automotive and chemicals have indicated interest in Southeast Asia.”

While the Chinese may lose out here on the face of it, the status quo is largely the same for importers of these Asian-made goods insofar as multinationals are making the same things in the wider Asian region. Meanwhile, Southeast Asian countries stand to benefit indirectly from the trade war. I suppose China wanting to move up the value-added ladder means giving up these lower-value-added activities to others. Hence, American trade belligerence arguably just sped this inevitable process.

California Apart, the US Economy is Pretty Blah

♠ Posted by Emmanuel in Americana,Technology at 10/17/2018 06:10:00 PM

I was watching Bloomberg TV when they brought on one of their journalists to expound on the condition of the American economy. If you were to listen to Trump, the reason why the United States economy is doing better is because of ridding of all sorts of regulations, permitting unlimited pollution, detaching from the rest of the world via trade wars, deporting en masse people willing to work, embracing Stone Age technologies like coal, etc. That is, making America great again is a distinctly backward-looking activity from Trump's point of view.

Actually, the fact of the matter is this: If you separate supremely performing, high-technology, forward-looking California from the rest of the United States, the latter's economic performance is rather mediocre. The Golden State, which Trump hates with a passion (a sentiment California returns back), is buoying the rest of the US:

Trump attributes the prosperity of the U.S. economy during his 17 months as president to his evisceration of environmental regulations and other consumer protections, abandoning the Paris climate accord, aggressively deporting undocumented immigrants, prohibiting people from certain nations (mostly majority Muslim) from emigrating to the U.S., prosecuting sanctuary cities for protecting immigrants, cutting taxes most for corporations and the rich, and appointing a Supreme Court justice who just wrote the 5-4 decision limiting the rights of tens of millions of workers.

Evergreen California Governor Jerry Brown has taken the opposite tack to nearly everything Trump does. So, is California the American laggard? On the contrary, it's doing better than every other state:

Jerry Brown, California's longest-serving governor, takes the opposite approach, and his state thrives. California is the global leader among governments committed to safeguarding the planet from climate change. Corporate California's revenues from clean energy companies dwarf those of the other 49 states or any country. The state's auto emissions law, now contested by the Trump administration, is the nation's most stringent. The legislature voted to become a sanctuary state, preventing police from participating in federal enforcement or asking people about their immigration status. The same assembly also made California the first state to declare a $15-an-hour minimum wage and to require solar panels on new homes. Its citizens approved Proposition 30, temporarily raising personal income and sales taxes to fund education.

The implications are clear. Wouldn't gains be more evenly distributed Stateside if other states acted like California? By not following Trump, maybe everyone else in the US would be doing better too. It's not my place to tell Americans what to do, but weighing the votes of Trump-suopprting primitives instead of those actually driving progress does not seem to be the way forward:

Remove California from the job market and U.S. employment rose only 2.62 percent, a little better than Japan's 2.48 percent and less than Austria's 2.82 percent. The 19 countries that use the euro showed an increase of 2.41 percent. Subtract California's big and small companies from the rest of the nation's and something similar happens. During the same 22-month period, the market capitalization of the companies in the Russell 3000 Index of large, medium and small companies increased at an average rate of 46 percent. California's Russell 3000 companies appreciated 64 percent, according to data compiled by Bloomberg...

What do California and Illinois have in common aside from voting decisively against Trump? Their companies are committed to global trade. Among companies reporting sales in the Russell 3000, California firms received at least 48 percent and as much as 66 percent of revenues from their exports (accounting for disparities in corporate reporting) while Illinois-based companies got between 44 percent and 53 percent, according to data compiled by Bloomberg.

For reasons inherent in their political (electoral) system, the danger is that the Trump-voting primitives drag down California instead of California being allowed to pull up the rest of the laggards. Here California is showing an example of forward thinking...and the Trumpian cave-dwellers not only ignore it but try to bring it down to their level of barbarism.

10/18 UPDATE: Thinking about it more, on the balance, Trump's policies have likely hurt than help the United States. If the country is doing reasonably well, look at parts of it that are faring the best--like California. It's doing so despite rather than because of what Trump is doing.

World Trade War: Good for the Enviroment?

♠ Posted by Emmanuel in China,Trade at 10/08/2018 06:27:00 PM

Is Trump's trade war going to save the Earth? It depends...

It's generally recognized that carbon emissions dropped off during the Global Financial Crisis of 2008-09, making tanking the world economy "good for the environment." With some predicting even direr outcomes than the aftermath of the "beggar-thy-neighbor" 1930s as the United States has commenced slapping tariffs on its trade partners, who are retaliating in return, there is no telling how much worse things can get if this back-and-forth process continues unabated. Who knows? The end result could be a reduction in global economic activity even greater in percentage terms than what transpired during the global financial crisis.

In the meantime, though, the Sierra Club is warning that Trump's actions against the PRC are causing dislocations in environmentally beneficial forms of trade on the negative side of the ledger:

Plastic and cardboard recycling: For some time, China has been tightening up it standards on what raw material it will accept from the United States for recycling. The trade war has exacerbated this situation, with China planning to levy a 25 percent charge on corrugated cardboard, paper, scrap plastic, and other materials...

E-bikes: On August 23, the United States started charging 25 percent tariffs on electric bicycles and cycling computers from China. These include e-models from popular brands like Trek, Giant, and Pedego. The move could significantly slow the otherwise rapidly growing e-bike market that has been growing by double-digit numbers in recent years...

Teslas in China: The only U.S.-made electric vehicle sold in China is the Tesla, and it just got a lot more expensive for consumers there to buy. The price of a Model S in China just went up by 20 percent...

Water pollution: An unexpected environmental effect of a drop in soybean production [because of lost sales to China], according to a study by the Northeast Midwest Institute, could be increased nitrate pollution of drinking water sources. Nitrates enter the soil primarily as a result of fertilizers used on corn, but many farmers cycle it by also planting soybeans, which absorb the nitrates. No soybeans to absorb the nitrates, though, means more nitrate runoff into rivers and streams...

Expensive solar panels: In January, even before the trade war really got going, the Trump administration imposed a 30 percent tariff on Chinese solar panels. That was followed in June by an additional 25 percent levy. The effect has not been enormous, given that many U.S. solar installers saw the writing on the wall and stockpiled cheap units in advance of the trade spat...
-----------------------

It's not a fun thought, but is a worldwide economic slowdown even worse than the global financial crisis what we should hope in an age of Trump when the United States doesn't even acknowledge the existence of man-made climate change?

Sinopec's Shame is Caving In to Trump on Iran

♠ Posted by Emmanuel in China,Energy,Middle East at 10/03/2018 08:36:00 PM

Hey Sinopec, maybe your new slogan should be "Trump Threatens, Cower in Fear."

I almost forgot about this one: Sometime ago, I lauded China for stating that it would not stop buying crude oil from Iran despite the Trump administration's re-imposition of sanctions. These come despite Iran living up to its commitments under the Obama-era agreement JCPOA (which Trump unilaterally pulled the United States out of). Apparently, I had spoken too soon. Fast-forward a couple of months and, lo and behold, China's state-owned energy giant Sinopec has cut back on its Iran purchases by half ahead of a forthcoming tightening of American sanctions:

China’s Sinopec Corp is halving loadings of crude oil from Iran this month, as the state refiner comes under intense pressure from Washington to comply with a U.S. ban on Iranian oil from November, said people with knowledge of the matter.

The sources did not specify volumes, but based on the prevailing supply contract between the top Chinese refiner and the National Iranian Oil Company (NIOC), its loadings would be reduced to about 130,000 barrels per day (bpd).

Where did I go wrong in thinking that Beijing would live up to its word by not constraining its state-owned firm from purchasing from Iran? As it turns out, while Sinopec certainly does not conduct much energy-related trade with the United States, its shares are traded as an American depositary receipt (ADR) Stateside. That is, if it does not want to curtail this US-based capital-raising source, then it has to comply with American laws:

This would be 20 percent of China’s average daily imports from Iran in 2017, dealing a blow to Tehran, which has counted its top oil client to maintain imports while European and other Asian buyers wind down purchases to avoid U.S. sanctions.

The cut marks Sinopec’s deepest reduction in years as the Hong Kong and New York-listed state oil company faces direct pressure from a U.S administration determined to choke off the flow of petrodollars to the Islamic Republic.sin

It makes me wonder: If China's bluster about standing up to American bullying rings hollows on importing Iranian oil, will it also be the case with Trump imposing tariffs on more and more Chinese exports? Sinopec was rather lame; will Chinese leadership also be chicken out when threatened with ever-growing lists of goods hit with import taxes?

Trump's Plan to Supersize US Trade Deficit, Pt. II

♠ Posted by Emmanuel in Americana,Trade at 9/27/2018 05:51:00 PM

Up, up and away: the incredible exploding US trade deficit.

Contrary to his rhetoric, I noted some posts ago that Trump is actually doing all he can to widen the US trade deficit. The last GDP report for the second quarter for 2018 was artificially boosted by Americans trying to beat the imposition of tariffs on goods imported by China. However, we have passed that point. Now that tariffs are already beginning to be imposed, American importers no longer have the impetus to "beat" some tariff imposition deadline. Voila, today's trade deficit that was far larger than anticipated $-75.8B instead of $-70.8B--though humbly not be me.

So, what will drive the United States' trade balance in the age of trade war are likely two: First, American exports are being hit abroad by other countries' retaliatory tariffs on American goods. This is particularly the case with soybeans and other agricultural exports now being taxed more by the Chinese. Second, American imports continue to climb, demonstrating the ineffectiveness of tariffs in "reducing" trade deficits when domestic saving shortfalls are not addressed. If not China, then there are several other countries willing and able to supply America's fix of imported goods since the United States still needs to plug its current account deficit somehow.

The merchandise-trade deficit unexpectedly grew in August to $75.8 billion, the widest in six months, as exports of food, industrial supplies and autos declined, Commerce Department data showed Thursday.

While analysts said the trade deficit partly reflected an expected drop in soybean exports following a second-quarter surge ahead of Chinese-imposed tariffs [...], the numbers illustrate how the trade war is spurring volatility in the data. In addition, the widening deficit runs contrary to Trump’s aim of a narrower gap and underscores the challenges of achieving that goal amid strong domestic demand -- which tends to boost imports -- and retaliatory tariffs from abroad.

“The data are grim,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd., said in a note, referring to the August goods trade gap. “The administration’s narrative, that the second-quarter drop in the deficit was a result of their trade policies, has now fallen apart, as it was always likely to do.”

The bottom line is this: the Q2 GDP growth figure was artifactual, boosted as it was by American buyers stocking up on China-made goods ahead of tariffs being applied. Now that that tomfoolery is done with, we are beginning to see what the trade war-era pattern will be like. The trade deficit will likely increase, not decrease, since the United States domestic saving shortfall still keeps growing (via Trump's tax cuts). That the US dollar is gaining strength only makes the trade deficit worse as it makes imports more attractive to Americans and exports less attractive to the United States' trading partners.

Trade War Winner: PRC Leather Goods Counterfeiters

♠ Posted by Emmanuel in China,Marketing,Trade at 9/20/2018 03:51:00 PM

Trump [hearts] fakeries: of trade war and the rising attractiveness of counterfeits.

The folks over at the South China Morning Post have a long list of established and recognized Asian companies either benefiting or losing out from the escalating US-China trade war. However, it's not just these big names who we should consider when it comes to regional winners and losers from Trump's trade machinations. The Washington Post notes that, actually, PRC counterfeiters may stand to benefit from the ongoing tiff.

How might this be so? Those trading in legitimate leather goods will invariably register with US customs authorities and be hit by Trump's forthcoming 10% tariffs. On the other hand, the fakers will continue to try to sneak in their goods Stateside, further widening their price advantage over legitimate items:

Knockoffs of famous brands - Coach, Kate Spade and others - are mostly made in China and arrive at US shores through clandestine channels built to dodge authorities. The authentic purses and their components, also made in China, are shipped through official routes and would face Trump's proposed new duties of 10 per cent effective next Monday.

This all stacks up in favour of the counterfeit labels at every step of their illicit journey: from factory floors in China to street vendors in cities worldwide.

It's not that purveyors of genuine articles don't understand what's likely to happen; it's that Trump is too obstinate to care. End result? A possible windfall for counterfeiters;

The next wave of tariffs target another US$200 billion in Chinese imports, including handbags, leather and silk. This prospect alarms both American fashion designers and global authorities, because US firms already lose billions each year to counterfeiters. Officials also link knockoff sales to organised crime groups that exploit child labour.

"A tariff on a genuine bag is a subsidy for a fake," said Susan Scafidi, a New York fashion lawyer focused on intellectual property.

The global counterfeit trade for all items, from purses to electronics to software, is worth US$461 billion, according to the latest estimate by the Organisation for Economic Cooperation and Development. That is more than the global drug trade. And more than 85 per cent of the handbag replicas originate in mainland China and Hong Kong. A fifth of counterfeit busts worldwide involve American brands.

The end result is that trading in shady enterprises is made more attractive relative to earning an honest living. But then again, isn't that Trump's life story in a nutshell?

Yakety-Yak: Mnunchin the Useless Trade Negotiatior

♠ Posted by Emmanuel in China,Trade at 9/14/2018 04:41:00 PM

He only acts like the money man when he's actually very impotent in talking with the Chinese about trade wars.

Imagine having a boss who contradicts nearly everything you do that's of importance. Apparently, that's what's happening with White House senior officials in the Trump administration. Just when they think they've got a handle on things, their boss then contradicts them, setting back whatever they've been working on by days, weeks or months.

In this vein, have some sympathy for one Steven Mnuchin. Supposedly the Treasury secretary, whatever that person does (if anything) in the age of Trump, he's been thwarted at nearly turn in trying to fend off Trump's protectionist instincts. After (rather gullible) markets rallied on the back of news that the US would negotiate with China prior to another $200B of PRC imports being taxed, Trump "corrected" Mnuchin once more:

The day after financial markets around the world cheered the apparent good news that Treasury Secretary Steven Mnuchin was inviting his Chinese counterparts to sit down for further high-level negotiations, President Donald Trump undermined that very idea. “We are under no pressure to make a deal with China, they are under pressure to make a deal with us,” Trump said on Twitter on Thursday. “Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?”

The upshot of all this is that whomever these administration lackeys Trump sends out, their counterparts have little faith in since Trump would just contradict his own people anyway. Ditto for Mnuchin in the upcoming negotiations which are unlikely to yield any tangible positive results:

The move marked just the latest instance of Trump undercutting one of his senior China deal-makers in public and illustrates why Beijing has become increasingly frustrated with its interactions with the U.S. administration. It also comes as Trump has repeatedly signaled his desire to continue raising pressure on Beijing and is considering the details of new tariffs on $200 billion in Chinese imports or even more.

So even if Mnuchin or even Commerce Secretary Wilbur Ross are regarded as (somewhat) more pleasant people to talk to than Trump, it doesn't matter anyway because whatever the Chinese think they've agreed to will not be honored by Trump. That is, they are lame emissaries who do not have Trump's ear:

After last year’s Mar-a-Lago summit with Chinese President Xi Jinping, Commerce Secretary Wilbur Ross was given the task of negotiating a 100-day deal with China intended to be the first building block in a bigger deal.

Ross and his team, however, were quickly criticized for being too obsequious to the Chinese, especially after he hailed a reheated series of commitments by Beijing as a "Herculean" victory for the president. Since then, the commitments Ross has brought home to Trump have repeatedly been rejected by the president.

Likewise, just days after hosting Liu He, Xi’s top economic emissary, in the Oval Office in May, Trump made a very public U-turn by declaring that he would be proceeding with tariffs despite Mnuchin’s declaration that the trade war was “on hold.” The result has left Mnuchin discredited with Beijing as an interlocutor, according to people who have met with senior Chinese officials in recent weeks.

If Trump sends these same neutered folks out to meet the Chinese to discuss tamping down the trade war over and over, it really makes sense to believe nothing will happen. It's the equivalent of negotiating in bad faith since you know the outcome already--Trump will say "no deal." The trade war's proportions will just continue to grow and grow.

Get Out! Malaysia's Mahathir Spurns PRC Infrastructure

♠ Posted by Emmanuel in China,Development,Southeast Asia at 9/03/2018 04:58:00 PM

Behold, Mahathir's "hit list" of PRC-supported Malaysian infrastructure projects.

A standard narrative you'll hear in developing countries is that China butters up their leaders by offering infrastructure development projects. These projects are usually funded by the Chinese extending loans without much regard for Westerner's usual concerns about good governance, human rights, or the rest of that white man's phooey.

Well, perhaps that's the story in most instances. Consider the nonagenarian Mahathir Mohamed regaining power in Malaysia. Politically speaking, he has every incentive in the world to disown the China-sourced mega-projects that disgraced former PM Najib Razak signed up for. The explanation for doing so on his part would be simple: Razak was corrupt. These projects with the Chinese were arranged via opaque means. Therefore, reducing corruption means discontinuing PRC projects in Malaysia.

Indeed, that appears to be Mahathir's line of argument nowadays as Chinese infrastructure deals come under fire from him:

But where Malaysia once led the pack in courting Chinese investment, it is now on the front edge of a new phenomenon: a pushback against Beijing as nations fear becoming overly indebted for projects that are neither viable nor necessary — except in their strategic value to China or use in propping up friendly strongmen.

At the end of a five-day visit in Beijing, Malaysia’s new leader, Mahathir Mohamad, said on Tuesday that he was halting two major Chinese-linked projects, worth more than $22 billion, amid accusations that his predecessor’s government knowingly signed bad deals with China to bail out a graft-plagued state investment fund and bankroll his continuing grip on power.

His message throughout his meetings with officials, and in public comments, has been unambiguous. “We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries,” Mr. Mahathir said on Monday at the Great Hall of the People in Beijing after meeting with Premier Li Keqiang.

What you have to remember is that, during the Eighties and Nineties, Mahathir was actually one of the Asian leaders at the forefront of welcoming China to participate in regional affairs. To counterbalance Western influence, "non-alignment" meant grooming alternative champions...like China. Fast-forward to the present time and you now have concerns that their engagement with the rest of the world--no longer just Asia--is too lopsided in their favor. That is, China has become too influential for its own good in using it to corrupt others:

Chinese infrastructure projects could be axed amid concerns over economic viability, suffocating debt (US$250 billion), transparency of the contracts and domestic political pressure. As a result, Malaysia, a top trading and investment partner of China, has surprisingly emerged as a new vortex of scepticism and resistance against Beijing’s growing influence in Southeast Asia.

Initially, many thought that Mahathir’s tough statements on Chinese investments were either election sloganeering to besmirch his China-friendly predecessor or part of a deliberate strategy to renegotiate large-scale infrastructure projects with Beijing for more favourable terms.

What’s becoming increasingly clear, however, is that Malaysia’s new government is revisiting the whole development blueprint of its predecessor and is intent on reconfiguring overall relations with China.

Mahathir appears to have left behind his PRC-accommodating days long behind after seeing the true costs of letting the PRC run rampant. They hardly show signs of being better than the Westerners that preceded them for all their talk about mutual development. Leave lackey-ism for gullible clowns like the Philippines' Rodrigo Duterte; Mahathir's done with that sycophancy act--or at least that's what he wishes to convey.

Having set the trend of sucking up to China, will Mahathir's budding apostasy signal a newer trend of quitting it?

Trump's Plan to Balloon the US Trade Deficit

♠ Posted by Emmanuel in Americana,Trade at 8/29/2018 05:03:00 PM

Inside Trump's plan to blow up [and not send down] the US trade deficit to kingdom come.

Trump claims that his various trade wars--against Europe, Asia, North America, and pretty much everybody else--are intended to bring down the US trade deficit. While it's true that the US trade deficit is large, many have argued that it's not really the result of unfair trading practices of the United States' trade partners but rather the Americans' woeful lack of savings. At any rate, despite all Trump's huffing and puffing, the United States' trade deficit for July exploded upwards:

The Commerce Department said on Tuesday the goods trade gap surged 6.3 percent to $72.2 billion last month. Exports of goods dropped 1.7 percent to $140.0 billion, weighed down by a 6.7 percent plunge in shipments of food, feeds and beverages...

Last month, there were also decreases in exports of capital and consumer goods, though motor vehicle exports rose. Imports of goods increased 0.9 percent to $212.2 billion in July, boosted by imports of food, industrial supplies and capital goods.

Why is it that the US trade deficit looks like ballooning instead of narrowing despite all the American demagoguery aimed at virtually all of its trading partners? Phil Levy at Forbes offers a succinct explanation as to why the Trump administration's actions are precisely the opposite of what you'd do to decrease the American trade deficit:

If there were a three-part plan to increase the trade deficit, the first part would attempt to boost investment in the United States while trimming national saving...The trick to expanding the trade deficit would be to make sure that federal budget deficits increase. Unless there is an offsetting move in other domestic saving, this should cut national saving. The combination of investment incentives and government dissaving would be a strong start toward growing the trade deficit.

You'd also verbally undermine others' economies, thus reducing their demand for imports from countries like the US:

The second part of the plan would be to undercut growth in major trading partner economies...the trick would be to instill doubt and foster economic turmoil in partners such as the European Union and China. If the United States could effectively destabilize those economies, U.S. exports should fall. If you pair that with rapid U.S. growth, it should also grow the U.S. trade deficit.

And, for the coup de grace, you'd engineer a currency crisis in other countries that drives up the value of the dollar relative to other currencies:

The third and final element would be to try and stoke a currency crisis of some sort. Perhaps find an emerging market that is teetering and see if you can push it over the edge. Not only will this directly affect trade with the target country – as its currency falls, its goods look cheaper for the United States to import and U.S. goods look more expensive for export.

By blasting China's economy as "weak" and stoking a holy war with predominantly Islamic Turkey over a detained American pastor that's driving the Turkish lira down, Trump and his minions are certainly doing all of these things. Don't be surprised, then, if the US trade deficit continues marching upwards since Trump certainly appears to be doing all these things designed to do so.