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· China's U.S debt talk reveals weak trade-war hand
· As Trump begins his second year, analysts see rising risks of a U.S. trade war with China
China's U.S debt talk reveals weak trade-war hand
By Christopher Beddor, Reuters
via Nasdaq - January 10, 2018
NEW YORK, Jan 10 (Reuters Breakingviews) - China's wherewithal to play rough in a trade war with the United States is not as strong as it looks. Beijing is mulling whether to slow or halt purchases of U.S. Treasuries, Bloomberg reported on Wednesday. The reason may simply be to diversify assets. But as the largest foreign holder of Uncle Sam's liabilities with $1.2 trillion, China also appears to have some leverage as the administration of President Donald Trump mulls imposing tariffs. As with other retaliatory measures, however, ditching Treasuries would end up costing China.
The cost of selling echoes a broader theme: while Chinese officials have many options with which to retaliate against potential U.S. tariffs, they have few good ones.
Take agriculture, which made up nearly a fifth of all U.S. goods exported to China in 2016. Strict and effective enforcement of tariffs levied on staple goods such as soybean and pork would hurt American farmers in upper Midwest swing states. But it also risks generating higher inflation on the mainland. Looser de facto enforcement of product origins - more likely for commodities - would simply reroute supply chains through a third country. That keeps consumer prices in check, but it also renders the tariffs largely symbolic, as happened after Beijing slapped retaliatory tariffs on U.S. chicken parts in 2010, according to Brad Setser of the Center on Foreign Relations.
To be sure, Beijing is likely to retaliate if the Trump administration uses pending reports on steel, aluminum and intellectual property to impose tariffs. But based on past experience, these will largely be tit-for-tat.
The most painful measures might instead be informal harassment of U.S. firms operating in China...
As Trump begins his second year, analysts see rising risks of a U.S. trade war with China
Don Lee, Los Angeles Times
Jan 10, 2018
For years, one bright spot in the United States’ massive trade imbalance with China has been the Asian nation’s soaring appetite for American agriculture.
But this month, China abruptly imposed stricter requirements on billions of dollars of American soybeans in a way that threatens to curb the exports and punish a wide swath of the U.S. heartland.
And that could be just the beginning, if President Trump follows through on his oft-repeated promise to get tough with Beijing on trade.
Although Chinese media attributed the new policy to quarantine officials who reported finding mildew contamination in some shipments, the tactic was all too familiar and the message unmistakably clear.
“It was kind of a warning shot that they’re not going to take things lying down, and that there will be pain for U.S. exporters” should Trump levy trade sanctions on China, said David Loevinger, a former senior Treasury Department official for China affairs and now an analyst for TCW Emerging Markets Group in Los Angeles.
“Beans and Boeing,” quipped Derek Scissors, a China specialist at the American Enterprise Institute, listing the two most likely targets of Chinese retaliation. Soybeans and airplanes are America’s top two exports to China, and farmers in particular have long held sway on Capitol Hill.
After a relatively quiet first year on China trade, the Trump administration is gearing up to announce several actions, including possible tariffs stemming from investigations into a range of Chinese behaviors that it views as distorting trade and hurting U.S. firms and workers.
Among these are allegations of intellectual property theft and forced technology transfer in which U.S. companies wanting to do business in China must turn over their tech and production secrets, which Chinese competitors then adopt. Trump officials launched the probe by dusting off an old provision of U.S. trade laws that gives the president broad powers to apply punitive measures.
The Trump administration also has taken the rare step of initiating a dumping claim against imports of Chinese aluminum sheets, even though no U.S. firms have filed a complaint about the practice. And it has pending a separate case on Chinese steel, claiming that such imports may constitute a threat to America’s national security.
“Whatever you think the degree of trade friction was last year, it’s going to be much more frictional and much more tit-for-tat in the coming year,” said David M. Lampton, director of China studies at the Johns Hopkins School of Advanced International Studies in Washington...
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