Posts Tagged ‘Trade Wars’

 

In his trade war with China, President Donald Trump wields one seeming advantage: The United States could ultimately slap tariffs on more than $500 billion in imported Chinese goods. Beijing has much less to tax: It imported just $130 billion in U.S. goods last year.

Yet that hardly means China would be powerless to fight back once it ran out of U.S. goods to penalize. It possesses a range of other weapons with which to inflict pain on the U.S. economy.

Indeed, China’s Commerce Ministry has warned of “comprehensive measures” it could take against the United States. It has given no details but possible tactics could include harassing automakers, retailers or other American companies that depend on China to drive revenue to selling U.S. government debt or disrupting diplomatic efforts over North Korea.

Some of those steps might harm China’s own interests. But Beijing might still be willing to deploy them, at least temporarily, if its trade war with Washington were to drag on.

On Friday, Washington imposed its first tariffs in response to complaints Beijing steals or pressuring companies to hand over technology. China swiftly announced retaliatory tariffs on a similar amount of U.S. goods.

A look at some of China’s options:

TARGET AMERICAN COMPANIES

China’s state-dominated and heavily regulated economy gives authorities an arsenal of tools to disrupt U.S. companies by withholding licenses or launching tax, anti-monopoly or other investigations.

Also open to retaliation are services such as engineering and logistics in which the United States runs a trade surplus.

“The U.S. focus is on goods, while China could very well look at services, as well as the operation of U.S. companies in China,” said Taimur Baig, chief economist for DBS Group.

In one prominent case, U.S. chipmaker Qualcomm Inc. has waited for months for word on whether Chinese regulators will accept its proposed $44 billion acquisition of NXP Semiconductors. All other major governments have approved the deal.

China’s entirely state-controlled media have encouraged consumer boycotts against Japanese, South Korean and other products during previous disputes with those governments.

Last year, Beijing destroyed Korean retailer Lotte’s business in China after the company sold land in South Korea to the Seoul government for an anti-missile system opposed by Chinese leaders.

Beijing closed most of Lotte’s 99 supermarkets and other outlets in China. Seoul and Beijing later mended relations, but Lotte gave up and sold its China operations.

FINANCIAL LEVERAGE

Nationalists point to China’s $1.2 trillion holdings of U.S. government debt as leverage. Beijing might suffer losses if it sold enough to influence U.S. debt financing costs — but such sales might become necessary.

China’s yuan has sagged against the dollar this year, which might require the central bank to intervene in currency markets.

To get the dollars it needs, the People’s Bank of China might “become a net seller of U.S. Treasurys,” said Carl B. Weinberg of High-Frequency Economics in a report.

“Punishing the U.S. Treasury market is one of the tactics China has available to retaliate against unilateral U.S. tariffs,” said Weinberg.

DIPLOMATIC PRESSURE

Beijing can appeal for support to U.S. allies that are miffed by Trump’s “America first” approach and the U.S. withdrawal from the Paris climate pact.

Trump’s unilateral actions have allowed China to position itself as a defender of free trade despite its status as the most-closed major economy. That could help Beijing win over governments that have criticized Trump for acting outside the World Trade Organization.

“China could strike a common ground with the EU, Canada, Japan and other economies impacted by the U.S. tariffs,” said Citigroup economists Li-Gang Liu, Xiaowen Jin and Xiangrong Yu in a report.

Chinese leaders have tried, so far without success, to recruit European and other governments as allies.

More broadly, Chinese commentators have suggested Beijing also could disrupt diplomatic work over North Korea’s nuclear and missile programs or other initiatives. But political analysts say that would risk setting back work Chinese leaders see as a priority.

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As if there weren’t enough crises to worry about in the world already, from shooting rampages to accelerating species loss, the US and NATO continue to ‘poke the bear’ and risk an outbreak of war with Russia.

I wish this were idle speculation. But if you haven’t been paying close attention, you’ll probably be shocked at just how much direct military and diplomatic provocation has been going on between NATO/US and Russia over the past several years — and in recent weeks, in particular.

Even more shocking is that no one in power can provide us with a compelling reason for exactly why these tensions are flaring. It seems that Russia’s main sin is in not entirely, completely and immediately giving the US/NATO anything and everything they request.

In other words, it’s imperial hubris and petulance that seems to be driving the ship of state. That’s a dangerous thing.

I’ve written extensively on the dangers of war with Russia as my concerns have mounted ever since the situation in Ukraine devolved in 2014.

There have been plenty of chances to dial down the rhetoric and mend fences, but they’ve all come and gone without healing. In fact, as we detail below, quite the opposite has happened.

The bottom line is this: If you’re not already mentally and physically prepared for the prospect of a NATO/US war with Russia, you really should be.

Perhaps the chances of outright war are still low on a relative scale, but the costs would be catastrophically high — making this worthy of your attention. A low risk of a catastrophic outcome is the very reason we all buy insurance – life, auto, and home.  Not because we wish things to go wrong in our lives, but because they sometimes do nonetheless.

A Russian Warning

The list of aggressive provocations by NATO that have been received as belligerent acts by Russia is quite long. It stretches back several years and continues to grow rapidly, making the chance for an ‘accident’ or unplanned incident quite high.

I was impressed with a recent piece penned and signed by eight prominent writers and blogger with Russian heritage. Titled A Russian Warning, it ran on a wide variety of blogs knowledgeable about the Russian situation including Dmitry Orlov’s and The Saker’s. I encourage you to read the whole thing. Right now, if you’ve got the time. I can wait.

To cut to the chase, the harsh conclusion of the piece is this: If there is going to be a war with Russia, then the United States will most certainly be destroyed, and most of us will end up dead.”

Russia is, of course, a major nuclear power with a long history of surviving being attacked by outsiders. But for some reason, US/NATO military and diplomatic efforts have all been geared at further encroaching upon and/or isolating Russia.

They note:

 The US leadership has done everything it could to push the situation to the brink of disaster. First, its anti-Russian policies have convinced the Russian leadership that making concessions or negotiating with the West is futile. It has become apparent that the West will always support any individual, movement or government that is anti-Russian, be it tax-cheating Russian oligarchs, convicted Ukrainian war criminals, Saudi-supported Wahhabi terrorists in Chechnya or cathedral-desecrating punks in Moscow.

 

Now that NATO, in violation of its previous promises, has expanded right up to the Russian border, with US forces deployed in the Baltic states, within artillery range of St. Petersburg, Russia’s second-largest city, the Russians have nowhere left to retreat. They will not attack; nor will they back down or surrender.

Imagine for a moment that Russia had positioned its military less than 100 miles from New York City and installed armored battalions with artillery. How would we in the US respond to that provocation? Probably with outrage, anger and defiance — and rightly so. So why are we expecting Russia to act any differently?

The conclusion:

The sole reason why the USA and Russia have found themselves on a collision course, instead of defusing tensions and cooperating on a wide range of international problems, is the stubborn refusal by the US leadership to accept Russia as an equal partner: Washington is dead set on being the “world leader” and the “indispensable nation,” even as its influence steadily dwindles in the wake of a string of foreign policy and military disasters such as Iraq, Afghanistan, Libya, Syria, Yemen and the Ukraine.

 

Continued American global leadership is something that neither Russia, nor China, nor most of the other countries are willing to accept. This gradual but apparent loss of power and influence has caused the US leadership to become hysterical; and it is but a small step from hysterical to suicidal. America’s political leaders need to be placed under suicide watch.

The summary here is that Russia feels surrounded by an increasingly belligerent NATO/US military presence. It can find little common ground with diplomats from NATO generally and the US specifically. If fully backed into a corner, once it perceives it is out of other options, Russia will defend herself. I’m not sure how anybody could deny or begrudge her that right.

If the West, meaning the US and Europe, decide to further goad Russia, war is likely inevitable. (I’m leaning heavily here on the historically-dependable formula: Time + Shit Happens = Conflict).  Sooner or later, Russia will have to switch from response mode to reaction mode. I’ve written about that precition here, here and here.

The Provocations – Neocon Central

Here’s a very short and incomplete list of the provocations that have been undertaken against Russia. Again, just try to imagine what the reaction would be by the West were the roles reversed:

2014

2015

In return, Russia has been busy fighting its ‘isolation’ by inkling major energy deals, openly testing its nuclear weapons platforms, and railing against the double standards of the West:

You get the idea: both sides are settling into a pattern of escalating responses. The trajectory is alarming.

What’s alarming is the above selection of headlines is a miniscule sampling of the possible ones I could have picked. The evidence is everywhere.

Now let’s fast forward to 2016 where things are really heating up.

2016

The US and NATO have been putting increasing emphasis on placing more military hardware and training exercises in the Baltic and Black seas as well as the Mediterranean ocean.  In one incident, Russian jets flew within yards of a key US naval asset over and over again in a provocation that John Kerry said the US “would have been justified” in shooting those jets down.

U.S. issues formal protest to Russia over Baltic Sea incident

Apr 14, 2016

 

(CNN) White House Press Secretary Josh Earnest says the U.S. Embassy in Moscow has communicated formal concerns to the Russian government about the incident in the Baltic Sea this week in which fighter jets flew very close to the USS Donald Cook.

A U.S. official described the Russian maneuver as “strafing runs” without firing any weapons. The unarmed Russian aircraft swooped in over the deck in the same flight profile that would have been used if an attack was underway.

(Source)

Here’s a video of that flyby:

And, no, the US would not have been justified in shooting down those Russian jets. Kerry is being clearly belligerent with that statement.

A more level response comes to us from a retired Navy commanding officer:

“Well, we’re not at war with Russia,” Capt. Rick Hoffman said. “It would be one thing to be operating and have a threatening attack profile from someone who might not recognize me — that’s not the case here.”

 

If you have visual identification of the jet, can see it isn’t carrying weapons, and don’t detect any electronic emissions suggesting there was a missile lock on the ship, there’s nothing to be done.

 

And ultimately, the rules of engagement allow the CO to take defensive action if they feel they safety of their vessel is in danger, according to U.S. European Command spokesman Capt. Danny Hernandez told Navy Times. In this case the CO did not feel threatened, he added.

 

“You don’t get to kill people just because they’re being annoying,” said Hoffman, who commanded frigate DeWert and cruiser Hue City.

(Source – Navy Times)

Thankfully there are saner minds in the military, even if the State Department is itching for a fight.

Which brings us to the most insane head scratcher of them all.

State Department Loses Its Cool

In yesterday’s Wall Street Journal (6/16/2016) came the bizarre revelation that 51 internal State Department officials signed a document protesting Obama’s lack of direct military engagement with Assad’s government forces in Syria:

U.S. State Department Officials Call for Strikes Against Syria’s Assad

Jun 16, 2016

 

BEIRUT—Dozens of State Department officials this week protested against U.S. policy in Syria, signing an internal document that calls for targeted military strikes against the Damascus government and urging regime change as the only way to defeat Islamic State.

 

The “dissent channel cable” was signed by 51 State Department officers involved with advising on Syria policy in various capacities, according to an official familiar with the document. The Wall Street Journal reviewed a copy of the cable, which repeatedly calls for “targeted military strikes” against the Syrian government in light of the near-collapse of the ceasefire brokered earlier this year.

(Source)

Now just reflect on that a moment. But as you do, be sure to recall that Russia is fighting alongside Assad’s forces. In other words, these State Department officials are asking for military action to be taken against Syria’s allied forces fighting to preserve the current government’s hold on power.

In other words, there are 51 insane people (a least) in the US State Department that think attacking Russia directly would be a swell idea. All in the interest of promoting a foreign policy of regime change that has not worked out well in the Mideast countries where we’ve recently tried it. Iraq and Libya are unmitigated disasters, especially for the citizens left living with the aftermath.

I would certainly love to know the names of those 52 individuals. I’d bet good money that the list is heavily stocked with neocons.

Also be sure to recall that Russia moved the s400 antiaircraft missile system into Syria last year. This battery is widely respected and feared by pilots due to its enormous reach:

(Source)

So not only are these State Department folks agitating for direct military engagement with Russian forces by agitating for US airstrikes against Syrian targets, they are seemingly either unaware of or uncaring about the extreme risk US pilots would face in trying such a move.

Most likely the US would lose a fair number of planes if such action was attempted. I suspect, though, that would play to the hands of the neocons at State. Dead heroes would provide exactly the sort of justification they’d need to expand the war they’ve been itching for all along.

But just in case a regular shooting war doesn’t break out, NATO is busy laying the groundwork to justify one along other channels.

Expanding the Definition of “War”

Recently, NATO has expanded the definition of “war”. Let’s remember that NATO exists as a collective defense treaty organization. An attack on one member country is treated an attack on all.  NATO allies are obligated to come to each other’s defense.

Here’s the language:

Collective defence – Article 5

(Last updated Mar 2016)

The principle of collective defence is at the very heart of NATO’s founding treaty. It remains a unique and enduring principle that binds its members together, committing them to protect each other and setting a spirit of solidarity within the Alliance.

  • Collective defence means that an attack against one Ally is considered as an attack against all Allies.
  • The principle of collective defence is enshrined in Article 5 of the Washington Treaty.
  • NATO invoked Article 5 for the first time in its history after the 9/11 terrorist attacks against the United States.
  • NATO has taken collective defence measures on several occasions, for instance in response to the situation in Syria and in the wake of the Russia-Ukraine crisis.
  • NATO has standing forces on active duty that contribute to the Alliance’s collective defence efforts on a permanent basis.

(Source)

Now you and I might think that, if one member nation were invaded, that would meet the definition of “war”. But NATO, clearly not happy with that limitation, has recently proposed expanding that to include – get this – cyberwarfare:

NATO adds cyber to operation areas

Jun 14, 2016

 

BRUSSELS (AP) — NATO agreed Tuesday to make cyber operations part of its war domain, along with air, sea and land operations, and to beef up the defense of its computer networks.

 

NATO Secretary-General Jens Stoltenberg said the decision to formally consider cyber operations a military domain is not aimed at any one country. He says the allies need to be able to better defend themselves and respond to attacks on their computer networks.

 

The decision has been long in coming, particularly amid rising tensions with Russia, which has proven its willingness to launch computer-based attacks against other nations.

 

Russian hackers have been blamed for a breach into an unclassified Pentagon computer network and for a breach of NATO’s computer network two years ago.

 

In 2014, after years of debate, NATO finally agreed that a cyberattack could rise to the level of a military assault and could trigger the Article 5 protections, which allow the alliance to go to the collective defense of another member that has been attacked.

(Source)

Got that?  Now a cyberattack could be used as justification to invoke Article V and bind everyone to engage the enemy in an actual ‘boots on the ground’ war.

Now that makes sense on some level. After all if a hostile nation took down your electrical grid by a cyberattack (which is entirely possible, by the way), that would be a threat to national security.

But in this world of electronic cat and mouse, creating a false-flag cyberattack that seems to originate from a hostile country could be initiated from anywhere, including the “attacked” country.  But the time all that had been sorted out, the bullets would likely have already been flying.

Conclusion

OK, that was a lot to read through. Thanks for persisting to this point. The punchline to it all is: War with Russia is a distinct possibility, and US and NATO are increasing that risk through escalating provocation.

Should a war break out, it could be along a variety of dimensions which are outlined in Part II below.

For now, it should be (hopefully) sufficient for you to take the threat seriously and to make whatever provisions seem prudent to you. To my European readers, such preparations seem even more necessary because you will be close to the front lines of any direct, conventional hostilities that break out.

In Part 2: How To Prepare For War, we explain how conflict can take many forms: trade wars, energy wars, financial wars, cyberwar, shooting wars, and nuclear war. We lay out in great detail the steps we, as individuals, can do to prepare for each.

And fortunately, this preparation comes with an upside: as many of these precautions will be life-enhancing steps even if — hopefully, if — tensions de-escalate from here.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

 

Protectionists are on the cusp of a “Pyrrhic victory” over China.

No one will like the results when it happens.

A huge global trade war is on the horizon, regardless of whether Hillary or Trump wins the election.

The die is cast: US Steel Given Green Light to Seek China Import Ban.

The US has given the go-ahead for the country’s largest steel producer to seek a ban on imports from Chinese rivals, in the first known case in which trade sanctions could be used in retaliation for alleged China government-backed hacking of commercial secrets.

 

In a decision last week the US International Trade Commission gave the go-ahead for the case to proceed, setting the stage for a legal battle that experts say will probably take more than a year for an administrative judge to decide.

 

This timeframe could lead to a decision related to arguably the US’s most important commercial relationship early in the next president’s first term. Under the law, US presidents are given 60 days to block ITC decisions on Section 337 cases, although according to the ITC “such disapprovals are rare”.

 

“We strongly believe that Chinese steel producers have engaged in illegal unfair methods of competition, which have created a force with which no market economy can compete,” Mario Longhi, the company’s president and CEO, said in a statement welcoming the ITC decision. “We remain confident that the evidence will prove the Chinese steel producers engaged in collusion, theft and fraud and we will aggressively seek to stop those responsible for these illegal trade actions.”

 

Trade experts say that the case also represents the potential escalation of what has been a creeping protectionism in recent years with steel a growing target of anti-dumping cases.

 

But a wholesale ban on US imports of Chinese steel would be materially different and could set a protectionist tone for the next US presidency, said Simon Evenett, a professor of international trade at the University of St Gallen in Switzerland, who oversees the Global Trade Alert, a monitoring service for protectionist measures.

 

“The big thing is really the potential scale of this case versus the pin pricks that we have seen unleashed over the past nine months,” Mr Evenett said.

 

“This should be setting off alarm bells,” he said. “It is really a nuclear option.”

Nuclear Option

US Steel

Stacked Deck

A total ban would indeed be a nuclear option. Trump would embrace it. Hillary would support it.

The US even greased the wheels in advance. On May 30, the US refused to accept the reappointment of a South Korean judge who the US fears may rule in favor of China in trade disputes.

I wrote about greased wheels in Stacked Deck: US Bullies WTO, TPP Revisited.

European Trade Mess

The EU is still coming to grips with inane sanctions on Russia that did more harm to the EU than Russia. Austria, France, Italy, Hungary, Greece, and Portugal have had enough of sanctions that have backfired due to a collapse in exports.

For details, please see Merkel Ready to Kiss and Make Up with Putin?

Stunning Idiocy

Also see Pater Tenebrarum’s exceptional post on the Stunning Idiocy of Steel Tariffs.

Candlemakers Petition

The statement by Mario Longhi, US Steel CEO “We strongly believe that Chinese steel producers have engaged in illegal unfair methods of competition, which have created a force with which no market economy can compete,” is nothing but a self-serving lie for the benefit of US Steel and the detriment of everyone else, especially consumers and the US auto industry.

If China is “dumping” steel at cheap prices we should be thankful. Free steel would be even better. Everyone’s standard of living would immediately rise.

Trade protectionists are just like candle makers bitching and moaning about free energy from the sun.

The Candlemakers’ petition is a well-known satire of protectionism written and published in 1845 by the French economist Frédéric Bastiat as part of his Economic Sophisms. In the Candlemakers’ petition, the candlemakers and industrialists from other parts of the lighting industry petition the Chamber of Deputies of the French July Monarchy (1830–1848) to protect their trade from the unfair competition of a foreign power: the Sun.

The entire debate over “fair trade” is intellectually dishonest. Fair trade is free trade. Period.

Election Campaign Flashback

In 2011, the US put huge tariffs on Chinese-made tires (to the detriment of consumers and the auto industry). China responded with anti-dumping tariffs on GM.

I wrote about that in Proposal to Stop “Free Sunlight” Gains Support From Mitt Romney.

Here we go again, this time with Donald Trump, Hillary Clinton, and President Obama all waving protectionist flags.

Should the US carry through with the plan, expect a “Pyrrhic victory” over China.