Trump’s Inner Conflict: Tariff Man v Dow Man

♠ Posted by Emmanuel in 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. 
Read More

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

♠ Posted by Emmanuel in , 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.
Read More

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.

Read More

Fears of US Treating Hong Kong as ‘China’

♠ Posted by Emmanuel in ,,, 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.
Read More

Small Island States & Climate Survival

♠ Posted by Emmanuel in , 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.
Read More

On PRC Retaliation for Detained Huawei Exec

♠ Posted by Emmanuel in ,, 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. 
Read More

Warmer Planet: India Adopts Air-Conditioning

♠ Posted by Emmanuel in , 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.
Read More

China Aside, Trump's Many Other Trade Wars

♠ Posted by Emmanuel in 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.  
Read More