New US tariffs kick in on $16 billion of Chinese goods

[El_Machinae]

Lol. Yes. Thanks. Fixed.

 

[FriendlyFire]

Trump's base shops at Wal-Mart so they will feel the pain. China is already moving it's lost cost production to Vietnam and India so the tariffs will only accelerate that transition. China is making the same move Japan did decades ago. Another losing move by the Donald.

These are the same people that elected G.W.Bush Twice, Trump should be able to keep the con going with another round of tax cuts and more farm bailouts
It will take a while for the pain from the tarrifs to start to ripple through, farmers for example are use to losing money during a bad year, most will be happy to eat soy as long as the stock market is at an all time high.

 

[Hrothbern]

Just noting that in the tariffs "tit for tat", China is still making the smaller "tat" response in absolute amount, also because there is less US import..... but have not yet touched export tariffs on rare earth elements.
China produces roughly 80% of these rare earth elements and 80% of the US imports come from China.
And yes... rare earth elements are not really rare, but the barrier to set up production is quite big.

 

[FriendlyFire]

Not sure China will want to open up on banning exports, as the US can also retaliate with similar measures such as banning microprocessors exports which production is centered in the US
Chinese currency has lost around 7% of its value with the start of the trade war which has helped with its exports while the US dollar has strengthened making US imports more expensive anyways
The Chinese can of course boycott specific US companies, they did it with South Korea Hyundai even though its Chinese operation is partly Chinese owned shows that the chinese are prepared to take economic losses over diplomatic stance. China also needs foreign investments so it cannot just make a lot of problems for foreign companies.

Then there is the Final solution of dumping all of the US treasuries, that will probably be MAD as the Chinese will have to take a big hair cut in order to flood the market and who knows how important these hard currencies reserves are for the Chinese banking system. It will send shockwaves through both China and the US economies.

The Chinese already announced they are preparing for a 20-30 year trade war. It seems both sides are digging in with things set to escalate.

 

[Hygro]

If you think that the US will be in recession by early 2019, you're not paying attention. He's running 3% deficits. Trickle-down, sure, but the dollar repatriation and wealth effect itself is generating more spending by people who think their stock portfolios have increased in value over the long run.

The wealth effect causes leverage and leverage destabilizes. I'm on private record but I'll risk eating my words out loud here, I think we'll have a (relatively) mild recession, summer 2019.

Watch for when investment outpaces savings, and then wait (months to a few years).

 

[Hrothbern]

Not sure China will want to open up on banning exports, as the US can also retaliate with similar measures such as banning microprocessors exports which production is centered in the US
Chinese currency has lost around 7% of its value with the start of the trade war which has helped with its exports while the US dollar has strengthened making US imports more expensive anyways
The Chinese can of course boycott specific US companies, they did it with South Korea Hyundai even though its Chinese operation is partly Chinese owned shows that the chinese are prepared to take economic losses over diplomatic stance. China also needs foreign investments so it cannot just make a lot of problems for foreign companies.

Then there is the Final solution of dumping all of the US treasuries, that will probably be MAD as the Chinese will have to take a big hair cut in order to flood the market and who knows how important these hard currencies reserves are for the Chinese banking system. It will send shockwaves through both China and the US economies.

The Chinese already announced they are preparing for a 20-30 year trade war. It seems both sides are digging in with things set to escalate.

I do not think China is aiming for banning exports or other drastic things. I think they aim at de-escalating without losing face and building up a pool of actions that can be used again for mutual steps down when the tension relaxes to a steady state armistice.

Those rare earthes are a special case (solar cells, batteries, displays, many new hi-tech emerging techs) and there has been a kind of OPEC price war going on where China aims at getting and keeping the world price at a high level.
Basically China wants to sell less of the raw minerals and more of the goods where rare earthes are being used, to get more out of the value chain of these minerals in their own GDP.
The US used the WTO to fight back this monopoly/kartel like behaviour of China.
But the potential for higher world market prices is limited because too high prices would make it again commercially interesting for other countries to mine it. It is the enormous Climate demand for solar cells and batteries that give China potential for some decades.

On dollar dumping. China needs I think those big USD reserves to stabilise the Yuan when needed. After all the export to the US is only 20% of the total Chinese export and export to other countries is helped by a more stable Yuan.

The Chinese already announced they are preparing for a 20-30 year trade war. It seems both sides are digging in with things set to escalate.

Yes
Less export to the US will anyway mean less new USD to China as well. That will already have an impact in the Chinese financial system.
And you don't shoot your USD reserve ammo fast if you think in long term like China does. In such time periods & IF the US continues a more isolated trading volume position, the process whereby the USD as most usual reserve currency is more and more replaced by a basket of other currencies will only continue, mature.

The US could have handled the competition with China much better when they had already started strategic actions, aimed at locking in China in the lower levels technologies, in a less drastic way in 2000 or so. But they didn't.
China is now developed much farther in hi-techs and is rapidly building up the Belt and Road, adding big low cost labour countries in an increasingly integrated trading block. And building up their own machine building industry as well with these Belt and Road countries as export market. They will not yet have the superior quality of German and Japanese machine building, but good enough for the lower and medium level needed in developing and emerging countries, and pre scale size base to build for their own industry the top notch machines that combine high technical quality with high throughput (better value chains and better capital effeciency). Very important imo.

 

[EnglishEdward]

Those rare earthes are a special case (solar cells, batteries, displays, many new hi-tech emerging techs) and there has been a kind of OPEC price war going on where China aims at getting and keeping the world price at a high level.
Basically China wants to sell less of the raw minerals and more of the goods where rare earthes are being used, to get more out of the value chain of these minerals in their own GDP.
The US used the WTO to fight back this monopoly/kartel like behaviour of China.
But the potential for higher world market prices is limited because too high prices would make it again commercially interesting for other countries to mine it. It is the enormous Climate demand for solar cells and batteries that give China potential for some decades.

I don't disagree, but I also think that the Chinese have some genuine issues wth their rare earth production.

I believe that they became the dominant world supplier primarily because they (a) employed cheap labour, (b) did little to protect the labour aginst the various hazards
of mining and processing and (c) even less to protect the evironment at a time when the US and other western countries were moving away from those practices.

Having become more wealthy China is no longer prepared to suffer such costs. Yet providing ever increasing amounts of rare earths safely and without
pollution and paying their labourers more is a rather difficult challenge and must put costs up a lot. Probably easier to do so in Africa on untapped sources.

 

[Zelig]

Not sure China will want to open up on banning exports, as the US can also retaliate with similar measures such as banning microprocessors exports which production is centered in the US

What are you referring to? A lot of R&D and IP rights rest in the US, but China (and other non-US places, particularly Germany, Singapore, Japan) has plenty of fabs of bigger process nodes. Of cutting edge process nodes, Intel is the only one with significant US fab presence. TSMC is nearly entirely in Taiwan, Samsung is mostly in South Korea.

 

[Hrothbern]

What are you referring to? A lot of R&D and IP rights rest in the US, but China (and other non-US places, particularly Germany, Singapore, Japan) has plenty of fabs of bigger process nodes. Of cutting edge process nodes, Intel is the only one with significant US fab presence. TSMC is nearly entirely in Taiwan, Samsung is mostly in South Korea.

And if ASML, a relatively small hi-tech, USD 9 Billion revenue company, stops delivering machines for manufacturing computer chips, nobody in the world can continue increasing capacity in the hi-end chips.

ASML Holding NV (Veldhoven, The Netherlands) increased its dominance of the semiconductor lithography market in 2017, according to The Information Network (TIN).
ASML had 85.4 percent revenue share compared with Nikon's 10.3 percent and Canon's 4.3 percent, TIN said.
In terms of unit systems sales ASML's share of the market was lower at 60 percent but this is because ASML sells more expensive systems. ASML is the only company selling extreme ultraviolet (EUV) lithography systems which cost in over $100 million, TIN said.
Intel, Samsung Electronics, TSMC, and Globalfoundries are all planning on introducing EUV at the 7nm technology node to reduce multi-patterning process steps required of immersion deep UV lithography. The replacement of immersion deep UV by EUV will reduce deposition, etch, and metrology steps, impacting other equipment suppliers.
In 2012 TSMC, Samsung and Intel collectively invested billions of dollars in ASML to accelerate development of EUV lithography. TSMC sold its stake in 2015, Samsung halved its stake to in 2016 and Intel halved its stake to 7.5 percent in 2017.
http://www.eenewsanalog.com/news/asml-increases-dominance-lithography-market

 

[innonimatu]

A bit outdated, Globalfoundries quit the 7nm node investment. But your point is very good, who makes the tools is very important.

 

[FriendlyFire]

Not only has Navarro been telling everyone that it was China that requested the trade talks and not the US, But Trump has already announcing that China is losing the trade war which is another slap in the face. Of course the Chinese has no choice but to cancel trade talks.

When the 25% Tariffs kick in and the counter tariffs also kick off thats when things will start to hurt
But with Trump constantly gaslighting everyone its going to be interesting to see if any deals can be done at all.

Report: China cancels trade talks with U.S.
China officially canceled plans for upcoming trade negotiations with the U.S., the Wall Street Journal reports.
Why it matters: There were previous reports that Beijing would skip out on negotiations, but the most recent round of tariffs escalated tensions between the world’s two biggest economies.

https://www.axios.com/report-china-...-us-678173d9-049b-41fe-95d9-f6830019b398.html

 

[FriendlyFire]

Stop complaining about getting it from the US tariffs and the Chinese tariffs
You should be enjoying getting it from both ends.

As tariffs on Chinese goods go into effect on Monday, tech companies are warning that America’s dominance is at risk.

Mr. Trump’s next round of tariffs on $200 billion worth of Chinese goods goes into effect on Monday, hitting thousands of consumer products from handbags to refrigerators to bicycles. The tariffs will also hit the tech and telecom companies that provide much of the gear that powers the internet, mobile networks, data storage and other technology. United States customs will begin collecting a tax on circuit boards, semiconductors, cell tower radios, modems and other products made and assembled in China and exported into America.

Those tariffs, Intel warned in a letter last month, are “a game changer for the American consumer.” The tariffs begin at a rate of 10 percent and increase to 25 percent next January.

Intel .... has warned, saying “it is too expensive to relocate established and integrated supply chains.”
Google, Dell, IBM and others say the tariffs will increase costs for companies and consumers, hindering America’s ability to dominate the next generation of technology, like 5G wireless networks. Rising prices, the industries say, will slow business growth, increase costs for consumers and put other nations, like China, in a more competitive position to dominate tech.

“If we are going to impose tariffs on Chinese goods, we should impose them on items that hurt the Chinese, not us.”

Tech companies agree that China has long pressured American companies to hand over valuable technology to do business in China or engaged in outright theft of intellectual property. But they argue that using tariffs as a retaliatory measure will hurt American companies while doing little to change China’s ways.

https://www.nytimes.com/2018/09/23/...tion=click&module=Top Stories&pgtype=Homepage

 

[Timsup2nothin]

I'm boning out to Central America and looking to be on the receiving end of some good Chinese investment money. Is that what you mean by "getting it"?

 

[innonimatu]

Those poor, poor tech and telecom companies. Why their CEOs may be unable to keep increasing their bonuses yoy, their huge profits may stagnate, without cheaper outside sources. In some 15 years of sitting on its cash pile and producing nothing even Apple might go bankrupt! Because it will be so, so hard, night impossible, to produce stuff elsewhere.

Pathetic regurgitations of corporate propaganda disguised as concerned news.

Now, this is worth reading. The mass media would be getting its panties in a knot if Russia was paying full page propaganda on its pages. But China, those are welcome - the owners of the media are "members of the club" that benefits from trade. "Foreign interference" is welcome when it pays a lot.

 

[FriendlyFire]

Those poor, poor tech and telecom companies. Why their CEOs may be unable to keep increasing their bonuses yoy, their huge profits may stagnate, without cheaper outside sources. In some 15 years of sitting on its cash pile and producing nothing even Apple might go bankrupt! Because it will be so, so hard, night impossible, to produce stuff elsewhere.

Pathetic regurgitations of corporate propaganda disguised as concerned news.

Now, this is worth reading. The mass media would be getting its panties in a knot if Russia was paying full page propaganda on its pages. But China, those are welcome - the owners of the media are "members of the club" that benefits from trade. "Foreign interference" is welcome when it pays a lot.

If Trump were a stable genius, he would have prepared the US economy and key industries for this Trade war
If Republicans were concerned about CEO Wages they would have passed a new tax specificly targetting excessive wages

As for Asia being a massive manufactoring electronics factory, you have to go back decades to when Japan was rebuilding and establishing itself as innovative electronics industry and automobile leaders. How many decades, subsidies, investments and innovations were centered in Japan with all the neighbouring counties each specialising in manufactoring to support Japans booming industry. Then this simply moved over to China with its cheeap labour and ability to scale up for specific electronic runs
And the US was getting it arse handed to it, so the US electronic industries also moved its production ot China to compete internationaly. Apple might be able to afford to move back to the US and research automation but the rest about to get scewed.

 

[innonimatu]

So let me see if I get this straight: your opinion is that the US industry has been screwed by China, therefore the US government should keep the sames rules going so that its country can continue to screwed by China. Because trying to change that will cause the country to be... screwed by china?

Just keep taking those job losses and keep transfer industry and technology to a rival because the rival is big and scary? Roll over and die?

I know the australians can serve either master. And personally I don't care, being on the opposite side of the world. But I can see how some americans might care, and why this idea of tariffs came about.

 

[FriendlyFire]

So let me see if I get this straight: your opinion is that the US industry has been screwed by China, therefore the US government should keep the sames rules going so that its country can continue to screwed by China. Because trying to change that will cause the country to be... screwed by china?
Just keep taking those job losses and keep transfer industry and technology to a rival because the rival is big and scary? Roll over and die?

I know the australians can serve either master. And personally I don't care, being on the opposite side of the world. But I can see how some americans might care, and why this idea of tariffs came about.

Yeah there was the TPP which Obama spent nearly eight years putting together
Then there was the Obama tax for companies that were being outscoured to be taxed
But we already know what happened

You think this Trade war is going to bring back low skilled manufactoring jobs ?
Maybe Mexico will soon pay for a wall, coal jobs are the future and tax cuts to the rich will pay for themselves
Keep slashing spending on infrastructure, education and research because that is a winning stratergy ?

Start even more trade wars, more tarriffs, gaslight your allies more ? MAGA ?

 

[uppi]

Google, Dell, IBM and others say the tariffs will increase costs for companies and consumers, hindering America’s ability to dominate the next generation of technology, like 5G wireless networks.

These tariffs certainly won't help, but even without them America is not even close to a position where it could think about dominating the wireless network market. This is an extremely strange example to cite.

 

[FriendlyFire]

Both the EU and Japan which are export based economies are vulnerable especially the auto industry, the good news is that BMW and Toyota plants are located in Republican states, so new tariffs are going to give it to the Republicans good and hard
A free trade agreement wont fix US trade deficits, or low skill jobs being off-shored

Trump's Next Trade War Target: Japan

You wouldn’t want to be in Wilbur Ross’s shoes right now.

At the behest of President Trump, The Commerce Secretary’s underlings are researching the extent to which auto imports threaten national security. They don’t, of course, but Trump is counting on a finding to the contrary, so he can make good on his threats to impose a 25% tariff on them.

An auto tariff would be particularly hard on Japan, whose cars and trucks account for about 47% of the U.S. market

Trump is using Section 232 as a cudgel to intimidate other countries into negotiating trade terms that are more favourable to the United States. What he wants from Abe is an agreement to negotiate a bilateral free trade agreement. Abe reportedly doesn’t want to do that. Japan and the U.S. and 10 other countries came to terms on a free trade agreement, the Trans-Pacific Partnership, but Trump threw that in the trash during his first week in office.

Trump thinks trade deficits result from unfair treatment of the United States by its trade partners. In the case of Japan, two facts are worth noting:

One, Japan has no car tariffs. All foreign cars enter the Japanese market duty-free.
Two, Japanese automakers make better cars than American automakers. Everyone knows this, but no American politician or auto industry executive or United Auto Workers member will ever say it.

https://www.forbes.com/sites/johnbr...mps-next-trade-war-target-japan/#737b98ba696c

 

[Zelig]

"Two, Japanese automakers make better cars than American automakers. Everyone knows this, but no American politician or auto industry executive or United Auto Workers member will ever say it."

I'd have disagreed a few years ago on the basis of Ford making really quite competitive cars, but they're literally abandoning the entire American car market, while Volvo is killing it under their new Geely ownership, and Jaguar Land Rover is doing quite well under Tata.

I drive a Ford now, but once Ford is out of the market, there isn't a single American auto manufacture who'll be making anything of interest to me. I think I'd even take Nissan's moribund offerings over anything American.