Replies to post #330381 on Tornado Alley (PROG)

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China trade deal is on track despite Trump signing Hong Kong bill

"China Doubts Long-Term Trade Deal Possible With Trump"

President indicated his displeasure to keep Xi Jinping happy

William Pesek December 02, 2019 03:00 JST


A protestor holds a poster appealing to Donald Trump during a march in central Hong Kong; Trump did Xi a favor. © AP

U.S. President Donald Trump's decision last week to sign the Hong Kong Human Rights and Democracy Act pleased China more than either the city's protesters or investors seem to realize.

On the surface, all the protesters' renditions of U.S. national anthem "The Star-Spangled Banner" paid off for Hongkongers. In recent months, many took to the street signaling their hope for Trump's support by waving America's flag and singing the anthem. Last week, the U.S. president appeared to respond.

Investors, meantime, worried immediately that the U.S.-China trade deal was suddenly dead. In their defense, President Xi Jinping's spin doctors fanned those flames with talk of how Trump's "erroneous act" was a "blatant hegemonic move" with grave consequences.

A closer reading suggests both conclusions are wrong. Last week was actually a win for Xi -- and prospects for a phase one trade deal remain on track.

Trump had no choice. The pro-Hong-Kong bill he signed on November 27 had overwhelming support from both Republicans and Democrats. With Trump weakened by impeachment proceedings, there was talk that lawmakers would override a veto.

While begrudgingly putting pen to legislative paper, Trump did Xi a favor. He added a signing statement noting, rather cryptically, that "certain provisions" of the bill "would interfere with the exercise of the president's constitutional authority to state the foreign policy of the United States." Memo to Xi: "Never mind the bill."

Rightfully so, Beijing seized on that wording as a signal that the most commercially transactional leader in U.S. history has Xi's back. As if to add an exclamation point to his signing statement, Trump stressed he was acting "out of respect" for Xi.

More to the point, though, Trump has his own back in mind as a bull market in scandals jeopardizes his chances of reelection come next November. As the impeachment process intensifies, Trump is eager to achieve even a limited deal with China.

Odds are, China will agree to buy another $50 billion or so of U.S. goods. It might even agree, in vague and nonbinding terms, to work harder to police intellectual property rights. The game, though, is to craft a face-saving victory -- one Trump can sell to his base and Xi can hawk in Communist Party circles in Beijing.

Trump can forget a phase two deal that fundamentally remakes U.S.-China trade dynamics. One reason is what's afoot in Washington. One the one hand, China is bracing for Trump's Democratic rivals -- including Senators Bernie Sander and Elizabeth Warren -- to aim more political shade China's way.

Xi knows his presidency will outlive Trump's, but also that American anti-China sentiment will too. This sentiment has arguably grown more intense among Democrats heading into 2020, but is also an area of rare consensus in an otherwise polarized Washington.


Supporters hold up signs as Trump speaks at a campaign rally in Louisiana on Nov. 14: Xi knows that
anti-China sentiment will outlive Trump's presidency. © AP

Look no further than Republican Senator Tom Cotton, a hard line conservative, joining hands with Democrat Senator Charles Schumer, a New York liberal, against TikTok. They want national security officials to probe the ubiquitous video app owned by China's ByteDance. It is emblematic of Washington's efforts to curb Huawei and other giants at the heart of Xi's Made in China 2025 program.

The wild card is how Trump responds when he realizes there is no phase two.

Trump would, after all, have some explaining to do. Farmers in states he needs for his reelection -- in Iowa, Michigan, Missouri, Wisconsin and elsewhere -- will wonder what the last two years of tariffs and near-bankruptcy were all about. Last week, Trump went around Congress to send another $20 billion worth of bailouts to farm states.

Still, Trump will be looking to throw fresh red meat at his supporters. If that entails increased China tariffs or engineering a weaker dollar, Asia will be in for a rough 2020.

That certainly goes for Japan. The deal Trump hammered out with Prime Minister Shinzo Abe made barely a ripple in the global media or markets. Now, Congress is holding up passage with questions about Trump whether overstepped his negotiating authority. Might Trump, frustrated by gridlock, impose the 25% taxes on imports of cars and auto parts he has long threatened?

Abe has other reasons to fear any further talks, considering Trump's shenanigans with South Korea. Trump, according to press reports, is angling to shake Seoul down for an additional $5 billion to host U.S. troops -- an increase of roughly 400% in 2020. Might Tokyo get a similar request, particularly if Abe demurs on additional concessions?

And, really, would anyone be willing to bet that Trump, in private talks with Xi, would not throw Hong Kong -- or Taiwan -- under the proverbial bus to get a bigger deal? I sure would not.

The best-case scenario is that Trump and Xi sign a phase one deal, declare victory and move on. Yet there is always the risk Trump responds badly to Xi's recalcitrance -- and his own political peril at home.

The worst case would be for the two to fuse together in Trump's mind. That means escalating trade tensions -- increased economic pain for an Asian region that hoped things could not get any worse.

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."

https://asia.nikkei.com/Opinion/China-trade-deal-is-on-track-despite-Trump-signing-Hong-Kong-bill

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Why Is Trump a Tariff Man?

"China Doubts Long-Term Trade Deal Possible With Trump"

It’s all about the power — and the cronyism.

By Paul Krugman
Opinion Columnist

Dec. 5, 2019


President Trump at the Economic Club of New York last month. Anna Moneymaker/The New York Times

Almost exactly one year has passed since Donald Trump declared, “I am a Tariff Man ..

....I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN

— Donald J. Trump (@realDonaldTrump) December 4, 2018

.” Uncharacteristically, he was telling the truth.

At this point I’ve lost count of how many times markets have rallied in the belief that Trump was winding down his trade war, only to face announcements that a much-anticipated deal wasn’t happening or that tariffs were being slapped on a new set of products or countries. Over the past week it happened again: Markets bet on an outbreak of trade peace between the U.S. and China, only to get body slammed by Trump’s declaration that there might be no deal before the election .. https://www.nytimes.com/2019/12/03/business/economy/trump-china-trade.html .. and by his new tariffs on Brazil and Argentina .. https://www.nytimes.com/2019/12/02/business/economy/trump-tariffs-brazil-argentina-metal.html .

[Insert: Trump adds new front to trade war with metal tariffs on Brazil and Argentina
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=152568088]

So Trump really is a Tariff Man. But why? After all, the results of his trade war have been consistently bad, both economically and politically.

I’ll offer an answer shortly. First, however, let’s talk about what the Trump trade war has actually accomplished.

A peculiar aspect of the Trump economy is that while overall growth has been solid, the areas of weakness have come precisely in those things Trump tried to stimulate.

Remember, Trump’s only major legislative accomplishment was a huge tax cut for corporations that was supposed to lead to a surge in investment. Instead, corporations pocketed the money, and business investment has been falling .. https://fred.stlouisfed.org/graph/fredgraph.png?g=pF4Z .

At the same time, his trade war was supposed to shrink the trade deficit and revive U.S. manufacturing. But the trade deficit has widened .. https://fred.stlouisfed.org/series/BOPGTB , and manufacturing output is shrinking .. https://fred.stlouisfed.org/graph/?g=pF4K.

["I will bring back factory jobs and rescue the manufacturing industry" -Donald Trump, 2016
Manufacturing Is Now Smallest Share of U.S. Economy in 72 Years
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=152022962]

The truth is that even economists who opposed Trump’s tax cuts and tariffs are surprised by how badly they’re working out. The most commonly given explanation for these bad results is that Trumpian tariff policy is creating a lot of uncertainty .. https://www.nytimes.com/2019/08/07/opinion/tariff-tantrums-and-recession-risks.html , which is giving businesses a strong incentive to postpone any plans they might have for building new factories and adding jobs.

In that case, however, why doesn’t Trump do what the markets keep wrongly expecting him to do, and call it quits? His continuing tariff obsession seems especially strange given growing evidence that it’s hurting him politically.

It’s important to realize that Trumpian protectionism wasn’t a response to a groundswell of public opinion. As best as I can tell from the endless series of interviews with white guys in diners — who are, we all know, the only Americans who matter — these voters are driven more by animosity toward immigrants and the sense that snooty liberals look down on them than by trade policy.

And public opinion seems to have become far less protectionist even as Trump has raised tariffs, with the percentage of Americans saying that free trade agreements .. https://www.people-press.org/2019/07/30/climate-change-and-russia-are-partisan-flashpoints-in-publics-views-of-global-threats/ .. are a good thing as high as it’s ever been.

So Trump’s trade war is losing, not gaining, support. And one recent analysis finds that it was a factor hurting Republicans in the 2018 midterm elections, accounting for a significant number of lost congressional seats .. https://www.piie.com/blogs/trade-and-investment-policy-watch/trumps-trade-war-cost-republicans-congressional-seats-2018 .

Nevertheless, Trump persists. Why?

One answer is that Trump has long had a fixation on the idea that tariffs are the answer to America’s problems, and he’s not the kind of man who reconsiders his prejudices in the light of evidence. But there’s also something else: U.S. trade law offers Trump more freedom of action — more ability to do whatever he wants — than any other policy area.

The basic story is that long ago — in fact, in the aftermath of the disastrous Smoot-Hawley tariff of 1930 — Congress deliberately limited its own role .. https://ustr.gov/about-us/policy-offices/press-office/blog/2014/June/Eighty-years-of-the-Reciprocal-Trade-Agreements-Act .. in trade policy. Instead, it gave the president the power to negotiate trade deals with other countries, which would then face up-or-down votes without amendments.

It was always clear, however, that this system needed some flexibility to respond to events. So the executive branch was given the power to impose temporary tariffs under certain conditions .. https://fas.org/sgp/crs/row/IN10943.pdf : import surges, threats to national security, unfair practices by foreign governments. The idea was that nonpartisan experts would determine whether and when these conditions existed, and the president would then decide whether to act.

This system worked well for many years. It turned out, however, to be extremely vulnerable to someone like Trump, for whom everything is partisan and expertise is a four-letter word. Trump’s tariff justifications have often been self-evidently absurd — seriously, who imagines that imports of Canadian steel threaten U.S. national security? But there’s no obvious way to stop him from imposing tariffs whenever he feels like it.

And there’s also no obvious way to stop his officials from granting individual businesses tariff exemptions, supposedly based on economic criteria but in fact as a reward for political support. Tariff policy isn’t the only arena in which Trump can practice crony capitalism — federal contracting is looking increasingly scandalous .. https://www.nytimes.com/aponline/2019/12/03/business/ap-us-border-wall-fox-news-pitch.html — but tariffs are especially ripe for exploitation.

So that’s why Trump is a Tariff Man: Tariffs let him exercise unconstrained power, rewarding his friends and punishing his enemies. Anyone imagining that he’s going to change his ways and start behaving responsibly is living in a fantasy world.

https://www.nytimes.com/2019/12/05/opinion/trump-trade-tariffs.html