Markets are closed in Beijing, the workday is over, and there no official reports in local media of an actual trade deal, that is because, as we explained on Thursday night, the language of the deal will never be made public and there would be no signing event between President Trump and President Xi. One may ask if there is even a "deal"?
As the WSJ writes this morning, China indicated that a near-term trade agreement with the U.S. has yet to be completed despite President Trump’s signoff, highlighting the unpredictability of a negotiation process that has rattled global markets and businesses.
Trump on Thursday approved a so-called phase-one trade pact that will scale back existing tariffs on Chinese imports and eliminate new levies scheduled to take effect on Sunday, in exchange for a written pledge from Beijing to buy tens of billions of dollars worth of U.S. farm products, among other concessions.
While Mr. Trump was “upbeat and enthusiastic about this breakthrough,” in the words of Michael Pillsbury, an adviser to the president during the trade talks, the mood in Beijing has been decidedly more sober.
As noted above, none of China’s state-owned media outlets or economic agencies involved in the trade negotiations made any public statement on Friday about the deal which according to Trump was finalized.
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DAILY BUSINESS REPORT - Financial Updates, International Markets and Business News
Showing posts with label Trade. Show all posts
Showing posts with label Trade. Show all posts
December 10, 2019
Small Business Optimism Surges As Plans To Raise Worker Compensation Soar Most In 30 Years
After stagnating for much of the past year following its 2018 all time highs, small business optimism posted the largest month-over-month gain in 19 months, since May 2018, rising 2.3 points to 104.7 in November, up from 102.4, and beating the consensus estimate of 103.0.
The "exceptional" Optimism Index reading was bolstered by seven of the 10 Index components advancing, led by a 10-point improvement in earnings.
Owners reporting it is a good time to expand increased by 6 points and those expecting better business conditions increased by 3 points. The NFIB Uncertainty Index fell 6 points in November to 72, adding to the 4-point drop in October and the lowest reading since May 2018.
In other words, US small business were swept by the same euphoria they felt when Trump was first elected.
“This historic run may defy the expectations of many, but it comes as no surprise to small business owners who understand what a supportive tax and regulatory environment can do for their companies,” said NFIB Chief Economist William Dunkelberg, who added what will come as music to Trump's ears: “As the two-year anniversary of the Tax Cuts and Jobs Act’s passage approaches this month, small businesses, the world’s third largest economy, are using those savings to power the American economy.”
Earnings, or the frequency that owners report positive profit trends, rose 10 points, 1 point below the record set in May 2018, to a net 2 percent reporting quarter on quarter profit improvements.
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The "exceptional" Optimism Index reading was bolstered by seven of the 10 Index components advancing, led by a 10-point improvement in earnings.
Owners reporting it is a good time to expand increased by 6 points and those expecting better business conditions increased by 3 points. The NFIB Uncertainty Index fell 6 points in November to 72, adding to the 4-point drop in October and the lowest reading since May 2018.
In other words, US small business were swept by the same euphoria they felt when Trump was first elected.
“This historic run may defy the expectations of many, but it comes as no surprise to small business owners who understand what a supportive tax and regulatory environment can do for their companies,” said NFIB Chief Economist William Dunkelberg, who added what will come as music to Trump's ears: “As the two-year anniversary of the Tax Cuts and Jobs Act’s passage approaches this month, small businesses, the world’s third largest economy, are using those savings to power the American economy.”
Earnings, or the frequency that owners report positive profit trends, rose 10 points, 1 point below the record set in May 2018, to a net 2 percent reporting quarter on quarter profit improvements.
Read the entire article
November 21, 2019
Futures Spike After China's Top Trade Negotiator Says "Cautiously Optimistic" About Phase 1
Futures slumped for just over three hours amid fears that the US-China trade deal was hopelessly lost and in anticipation of Chinese retaliation for Congress voting unanimously to support Hong Kong protesters, before a burst of optimism was injected. Only there was a surprise twist: instead of the optimism coming from Kudlow, or Ross, or even a Trump tweet, this time it was China that did what it could to push up US equity futures.
As Bloomberg reported, China’s chief negotiator and vice premier Lie He, said Wednesday night that he was “cautiously optimistic” about reaching a phase one trade deal with the U.S., even as tensions over Hong Kong soar while trade talks continue to stretch out without even a meeting date still agreed upon.
How do we know this? Because as Bloomberg reports, "Liu He made the comments in a speech in Beijing" although not in public, but rather to an Impeachment-style whistleblower, i.e., "according to people who attended the dinner and asked not to be identified."
It was unclear why, if Liu He was truly "cautiously optimistic", officials wouldn't say so in public, and instead we would have to rely on a deep throat Bloomberg source, who refused give his name. This unnamed source said that He also explained China’s plans "for reforming state enterprises, opening up the financial sector, and enforcing intellectual property rights -- issues which are at the core of U.S. demands for change in China’s economic system."
And while algos focused exclusively on the flashing red Bloomberg headline, reading a bit further into the article reveals that Blomberg's unnamed "source" Lie He told one of the attendees that he was “confused” about the U.S. demands... but was confident the first phase of an agreement could be completed nevertheless.
Credible or not, the Bloomberg report was enough to send S&P futs spiking back over 3,100 now that if not order, then at least trade optimism has been (somewhat) restored...
Read the entire article
As Bloomberg reported, China’s chief negotiator and vice premier Lie He, said Wednesday night that he was “cautiously optimistic” about reaching a phase one trade deal with the U.S., even as tensions over Hong Kong soar while trade talks continue to stretch out without even a meeting date still agreed upon.
How do we know this? Because as Bloomberg reports, "Liu He made the comments in a speech in Beijing" although not in public, but rather to an Impeachment-style whistleblower, i.e., "according to people who attended the dinner and asked not to be identified."
It was unclear why, if Liu He was truly "cautiously optimistic", officials wouldn't say so in public, and instead we would have to rely on a deep throat Bloomberg source, who refused give his name. This unnamed source said that He also explained China’s plans "for reforming state enterprises, opening up the financial sector, and enforcing intellectual property rights -- issues which are at the core of U.S. demands for change in China’s economic system."
And while algos focused exclusively on the flashing red Bloomberg headline, reading a bit further into the article reveals that Blomberg's unnamed "source" Lie He told one of the attendees that he was “confused” about the U.S. demands... but was confident the first phase of an agreement could be completed nevertheless.
Credible or not, the Bloomberg report was enough to send S&P futs spiking back over 3,100 now that if not order, then at least trade optimism has been (somewhat) restored...
Read the entire article
October 25, 2019
Don't Blame The Global Slowdown On Trump's Trade War
Ever since last year, nothing has grabbed economists' attention as much as the whipsawing evolution of the US-China trade war. Just last week, the IMF downgraded its global growth forecast for 2020, citing trade and geopolitical tensions.
But economic forecasters are misunderstanding the primary cause of the current global slowdown, which means that they'll also miss what's coming next.
In hindsight, it's clear that actual global industrial production growth started slowing at the end of 2017. In other words, the year-over-year pace of increase in the world's total industrial output began a sustained decline in late 2017. That's the definition of a global industrial slowdown.
Most analysts focus on the global purchasing managers' index (PMI) data for their read on global growth because it's published each month about a month and a half before the actual production data. While the global PMI generally has a positive correlation with global industrial production growth, it doesn't measure actual industrial production, as it's based on a survey of purchasing executives about conditions facing their companies. It's really a proxy for industrial production growth, which measures real output for all companies within the manufacturing, mining and utilities industries.
In this case, while the global manufacturing PMI also started easing at the end of 2017, its decline didn't become evident until a few months into 2018, when the sustained nature of the downturn became increasingly difficult to dismiss as meaningless "noise." Coincidentally, that's just about when President Trump began his trade war, slapping tariffs on washing machines and steel and aluminum imports. Because the trade war was front and center, economists thought it was to blame for the drop in PMI and global industrial growth.
Read the entire article
But economic forecasters are misunderstanding the primary cause of the current global slowdown, which means that they'll also miss what's coming next.
In hindsight, it's clear that actual global industrial production growth started slowing at the end of 2017. In other words, the year-over-year pace of increase in the world's total industrial output began a sustained decline in late 2017. That's the definition of a global industrial slowdown.
Most analysts focus on the global purchasing managers' index (PMI) data for their read on global growth because it's published each month about a month and a half before the actual production data. While the global PMI generally has a positive correlation with global industrial production growth, it doesn't measure actual industrial production, as it's based on a survey of purchasing executives about conditions facing their companies. It's really a proxy for industrial production growth, which measures real output for all companies within the manufacturing, mining and utilities industries.
In this case, while the global manufacturing PMI also started easing at the end of 2017, its decline didn't become evident until a few months into 2018, when the sustained nature of the downturn became increasingly difficult to dismiss as meaningless "noise." Coincidentally, that's just about when President Trump began his trade war, slapping tariffs on washing machines and steel and aluminum imports. Because the trade war was front and center, economists thought it was to blame for the drop in PMI and global industrial growth.
Read the entire article
September 18, 2019
EU's Growing Trade Deficit With China Bodes Poorly For The Future
While we read a great deal about the huge trade deficit America runs with China it is important to understand we are not the only one. Other countries also have this problem.
Europe as a whole runs a solid trade deficit with China. In some ways, this is balanced by the EU having a surplus with America. Still, in many ways, a growing trade deficit with China bodes poorly for the EU as they look down the road.
Reuters reports the European Union’s trade surplus in goods with the United States and its deficit with China both increased in the first seven months of 2019. Eurostat, the EU statistics office, reported the European Union’s surplus with the United States grew to 100.8 billion dollars in Jan-July 2019 from 88.6 billion in the same period of 2018. During that time the EU’s trade deficit with China expanded to 120.9 billion dollars from 109.2. This comes at a time that trade figures are adding extra strain to global tensions.
This brings up the importance of what countries buy and sell to each other. If a county's exports are not centered around products where they have a core advantage over time they can see them erode. I contend part of the problem the EU has going forward is that much of the EU is simply uncompetitive. This means unless it takes strong action to halt the importation of cheap Chinese consumer goods it will be flooded with them in coming years. Since Europe does not sell China much in the way of "raw goods" it has little to balance this trade.
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Europe as a whole runs a solid trade deficit with China. In some ways, this is balanced by the EU having a surplus with America. Still, in many ways, a growing trade deficit with China bodes poorly for the EU as they look down the road.
Reuters reports the European Union’s trade surplus in goods with the United States and its deficit with China both increased in the first seven months of 2019. Eurostat, the EU statistics office, reported the European Union’s surplus with the United States grew to 100.8 billion dollars in Jan-July 2019 from 88.6 billion in the same period of 2018. During that time the EU’s trade deficit with China expanded to 120.9 billion dollars from 109.2. This comes at a time that trade figures are adding extra strain to global tensions.
This brings up the importance of what countries buy and sell to each other. If a county's exports are not centered around products where they have a core advantage over time they can see them erode. I contend part of the problem the EU has going forward is that much of the EU is simply uncompetitive. This means unless it takes strong action to halt the importation of cheap Chinese consumer goods it will be flooded with them in coming years. Since Europe does not sell China much in the way of "raw goods" it has little to balance this trade.
Read the entire article
September 2, 2019
US Slaps New Tariffs On China; One Minute Later China Retaliates
The biggest reason for last week's torrid stock market rally was rekindled "optimism" that the escalating trade war between the US and China may be on the verge of another ceasefire following phone conversations, fake as they may have been, between the US and Chinese side. This translated into speculation that a new round of tariffs increases slated for this weekend may not take place or be delayed.
However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, "a trade deal is imminent."
Only, it isn't, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support - factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.
The 15% U.S. duty hit consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods - including laptops and cellphones - will be hit with 15% tariffs on Dec. 15. China, meanwhile, began applying tariffs of 5 to 10% on U.S. goods ranging from frozen sweet corn and pork liver to bicycle tires on Sunday.
The slated 15% U.S. tariffs on approximately $112 billion in Chinese goods may affect consumer prices for products ranging from shoes to sporting goods, the AP noted, and may mark a turning point in how the ongoing trade war directly affects consumers. Nearly 90% of clothing and textiles the U.S. buys from China will also be subjected to tariffs.
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However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, "a trade deal is imminent."
Only, it isn't, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support - factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.
The 15% U.S. duty hit consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods - including laptops and cellphones - will be hit with 15% tariffs on Dec. 15. China, meanwhile, began applying tariffs of 5 to 10% on U.S. goods ranging from frozen sweet corn and pork liver to bicycle tires on Sunday.
The slated 15% U.S. tariffs on approximately $112 billion in Chinese goods may affect consumer prices for products ranging from shoes to sporting goods, the AP noted, and may mark a turning point in how the ongoing trade war directly affects consumers. Nearly 90% of clothing and textiles the U.S. buys from China will also be subjected to tariffs.
Read the entire article
August 21, 2019
China Wants To Build A Grains "Superhighway" In Argentina
China has stepped away from US agriculture imports and said it would bid on a project that could create a grains superhighway in Argentina, reported Reuters.
Chinese state-owned construction company (CCCC) is readying a bid that would allow it to dredge Argentina's Parana River, the country's only river that acts as a waterway for bulk vessels that transport soybean and corn from the Pampas farm belt to the South Atlantic.
China has increased agriculture purchases from Argentina since trade tensions between Washington and Beijing erupted last year.
Representatives of CCCC and its Shanghai Dredging unit have already held meetings with Argentine government and local port officials to design a plan that would allow larger bulk carriers to navigate the Parana River to and from the Argentine farm belt, to the South Atlantic, then to China, according to Reuters' sources.
CCCC is the top Chinese firm to lead international efforts in modernizing global transport hubs and shipping lanes to secure sustainable food supplies for China.
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Chinese state-owned construction company (CCCC) is readying a bid that would allow it to dredge Argentina's Parana River, the country's only river that acts as a waterway for bulk vessels that transport soybean and corn from the Pampas farm belt to the South Atlantic.
China has increased agriculture purchases from Argentina since trade tensions between Washington and Beijing erupted last year.
Representatives of CCCC and its Shanghai Dredging unit have already held meetings with Argentine government and local port officials to design a plan that would allow larger bulk carriers to navigate the Parana River to and from the Argentine farm belt, to the South Atlantic, then to China, according to Reuters' sources.
CCCC is the top Chinese firm to lead international efforts in modernizing global transport hubs and shipping lanes to secure sustainable food supplies for China.
Read the entire article
August 15, 2019
Why The Dollar Rules The World - And Why Its Reign Could End
President Donald Trump wants a lower US dollar. He complains about the over-valuation of the American currency. Yet, is he right to accuse other countries of a “currency manipulation”? Is the position of the US dollar in the international monetary arena not a manipulation in its own right? How much has the United States benefitted from the global role of the dollar, and is this “exorbitant privilege” coming to end? In order to find an answer to these questions, we must take a look at the monetary side of the rise of the American Empire.
Trump is right. The American dollar is overvalued. According to the latest version of the Economist’s “ Big Mac Index,” for example, only three currencies rank higher than the US dollar. Yet the main reason for this is not currency manipulation but the fact that the US dollar serves as the main international reserve currency.
This is both a boon and a curse. It is a boon because the country that emits the leading international reserve currency can have trade deficits without worrying about a growing foreign debt. Because the American foreign debt is in the country’s own currency, the government can always honor its foreign obligations as it can produce any amount of money that it wants in its own currency.
Yet the international reserve status comes also with the curse that the persistent trade deficits weaken the country’s industrial base. Instead of paying for the import of foreign goods with the export of domestic production, the United States can simply export money.
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Trump is right. The American dollar is overvalued. According to the latest version of the Economist’s “ Big Mac Index,” for example, only three currencies rank higher than the US dollar. Yet the main reason for this is not currency manipulation but the fact that the US dollar serves as the main international reserve currency.
This is both a boon and a curse. It is a boon because the country that emits the leading international reserve currency can have trade deficits without worrying about a growing foreign debt. Because the American foreign debt is in the country’s own currency, the government can always honor its foreign obligations as it can produce any amount of money that it wants in its own currency.
Yet the international reserve status comes also with the curse that the persistent trade deficits weaken the country’s industrial base. Instead of paying for the import of foreign goods with the export of domestic production, the United States can simply export money.
Read the entire article
July 15, 2019
China Reports Slowest GDP Growth On Record, As Retail Sales, Industrial Output And Fixed Investment All Beat
The Chinese goalseek-o-tron was in perfect working order on Monday morning, when moments ago Beijing reported that China's Q2 Y/Y GDP rose at 6.2%, once again precisely as consensus had expected, down from 64% in Q1 and the lowest since "modern" records started to be kept 27 years ago in 1992, dipping below even the financial crisis low of 6.4$
Additionally, 2Q cumulative GDP rose 6.3% y/y, also matching the consensus estimate, and down from 6.4% in Q1.
"We expect Beijing to ramp up stimulus measures in the second half despite more limited policy room, though markets should not put too high expectations on the scale and duration of these stimulus measures,” Nomura's China economist Lu Ting wrote in a recent research note. “Domestic policies will to a large extent be dependent on the U.S.-China trade tensions.”
The disappointing GDP print comes just day after another miss, this time in the value of exports, which sharnk by 1.3% in dollar terms in June, after inching up in May despite the tensions with the US.
Property investment moderated to 10.9 per cent in the first six months, compared with growth of 11.2 per cent in the year to May. Strong property sales helped brighten the economy into April, but the sector lost momentum in the second quarter.
But while the record Chinese slowdown was widely as expected, there was an unexpected silver lining to the lowest Chinese GDP print on record, as all three core June economic indicators - retail sales, industrial output and fixed investment - beat sharply lowered expectations, to wit:
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Additionally, 2Q cumulative GDP rose 6.3% y/y, also matching the consensus estimate, and down from 6.4% in Q1.
"We expect Beijing to ramp up stimulus measures in the second half despite more limited policy room, though markets should not put too high expectations on the scale and duration of these stimulus measures,” Nomura's China economist Lu Ting wrote in a recent research note. “Domestic policies will to a large extent be dependent on the U.S.-China trade tensions.”
The disappointing GDP print comes just day after another miss, this time in the value of exports, which sharnk by 1.3% in dollar terms in June, after inching up in May despite the tensions with the US.
Property investment moderated to 10.9 per cent in the first six months, compared with growth of 11.2 per cent in the year to May. Strong property sales helped brighten the economy into April, but the sector lost momentum in the second quarter.
But while the record Chinese slowdown was widely as expected, there was an unexpected silver lining to the lowest Chinese GDP print on record, as all three core June economic indicators - retail sales, industrial output and fixed investment - beat sharply lowered expectations, to wit:
Read the entire article
July 9, 2019
30% Of The Companies In The Russell Are Unprofitable
Today we have 3 suggestions for portfolio positioning in 2H 2019. First, overweight US equities; ever more negative global interest rates over recent weeks are a warning sign. Second, expect more volatility from late July (post Fed meeting) through October; seasonality and fundamentals align on this point. Lastly, be cautious on US small caps; they are more cyclical than large caps and are levered to financial conditions.
From a fundamental standpoint, nothing much good happened in the first half of 2019. Specifically:
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From a fundamental standpoint, nothing much good happened in the first half of 2019. Specifically:
- We didn’t get a US-China trade deal, and based on current press accounts we’re further away now than we were on January 1st. Moreover, bilateral tariffs are higher now than just a few months ago and apply to more goods.
- Corporate earnings growth has been slipping. For example, first quarter S&P 500 earnings were slightly negative as compared to last year. Analysts expect the same for Q2, and margins are lower than a year ago for both quarters.
- Slowing global growth. The export-driven German economy, long a bright spot in the Eurozone, likely slipped into contraction in Q2. Japan’s economy managed to post +2.2% GDP growth in Q1, but Q2 will almost certainly be slower. China’s economy has benefited from some easing of financial conditions, but trade tensions are clearly taking a toll as we start Q3.
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July 3, 2019
HP, Dell & Amazon Join Manufacturing Exodus Leaving China
Though China wasn't the only Asian nation where manufacturing activity slumped last month, according to a slate of almost unilaterally disappointing PMI readings released earlier this week, the tend over the past year is increasingly clear: The trade war is President Trump's to win, as more tech companies resolve to move at least some production outside of the mainland.
And in the latest warning to Beijing that the trade war is having a real, and perhaps irreversible, impact, Nikkei Asian Review reports that HP, Dell and Amazon are joining the wave of consumer-electronics manufacturers who are planning to shift production elsewhere.
The burgeoning exodus, which also reportedly includes a half-dozen Apple suppliers (most notably Foxconn), Nintendo, Sony and others is threatening China's status as the global manufacturing hub.
HP and Dell, the world's No. 1 and No. 3 laptop manufacturers, who are responsible for a combined 40% of the world's production, are planning to shift 30% of their production elsewhere.
Lenovo Group, Acer and Asustek Computer are also evaluating plans to shift production elsewhere. And Amazon is planning to shift at least some of the production for its Kindle e-reader and Echo assistant. For all of these companies, the focus would mostly be on products bound for the US.
Read the entire article
And in the latest warning to Beijing that the trade war is having a real, and perhaps irreversible, impact, Nikkei Asian Review reports that HP, Dell and Amazon are joining the wave of consumer-electronics manufacturers who are planning to shift production elsewhere.
The burgeoning exodus, which also reportedly includes a half-dozen Apple suppliers (most notably Foxconn), Nintendo, Sony and others is threatening China's status as the global manufacturing hub.
HP and Dell, the world's No. 1 and No. 3 laptop manufacturers, who are responsible for a combined 40% of the world's production, are planning to shift 30% of their production elsewhere.
Lenovo Group, Acer and Asustek Computer are also evaluating plans to shift production elsewhere. And Amazon is planning to shift at least some of the production for its Kindle e-reader and Echo assistant. For all of these companies, the focus would mostly be on products bound for the US.
Read the entire article
June 12, 2019
Nintendo Reportedly Moved Switch Production Out Of China Over Trump's Tariff Threats
Offering yet another example of the trade war will inevitably drive more companies to move manufacturing out of mainland China and to Taiwan or Vietnam instead, Nintendo is shifting production of one of its most popular gaming consoles to limit the impact of US tariffs.
Per WSJ, Nintendo is moving some of its production of its Switch hand-held console to Southeast Asia from China to limit the impact of US tariffs on Chinese-made electronics. This comes as the company plans to update the popular Switch console with two new models later this year.
Since videogame console makers tend to sell their devices at thin margins, in the hopes of earning higher profits on sales of more lucrative games, the move suggests Nintendo is trying to avoid selling its Switch handheld consoles at a loss. Over the next two holiday seasons, Nintendo is facing stiff competition from Microsoft, with both companies offering competing devices.
The fact that Nintendo's decision comes just a day after a senior Foxconn executive said Apple's biggest manufacturing partner had the capacity to move its production outside of China presents an interesting and important message about how quickly global supply chains will change as the trade spat with China intensifies, said Bill Blain of Mint Partners.
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Per WSJ, Nintendo is moving some of its production of its Switch hand-held console to Southeast Asia from China to limit the impact of US tariffs on Chinese-made electronics. This comes as the company plans to update the popular Switch console with two new models later this year.
Since videogame console makers tend to sell their devices at thin margins, in the hopes of earning higher profits on sales of more lucrative games, the move suggests Nintendo is trying to avoid selling its Switch handheld consoles at a loss. Over the next two holiday seasons, Nintendo is facing stiff competition from Microsoft, with both companies offering competing devices.
The fact that Nintendo's decision comes just a day after a senior Foxconn executive said Apple's biggest manufacturing partner had the capacity to move its production outside of China presents an interesting and important message about how quickly global supply chains will change as the trade spat with China intensifies, said Bill Blain of Mint Partners.
Read the entire article
June 10, 2019
Chinese Exporters Dodge US Tariffs With Fake 'Made In Vietnam' Tags
Chinese exporters who are hoping to evade tariffs as high as 25% on some of their goods are hoping to capitalize on the explosion of exports from Vietnam to the US - and not by simply and legally routing their products through Vietnam as a legal transshipment point, but by masking their true origins, provoking fears that the US might seek to punish the Vietnamese for failing to crack down on this type of fraud.
On Sunday, Vietnam released a statement pledging to increase penalties on trade-related fraud. It was one of the first times an Asian government has ever alleged such misbehavior, and comes after Vietnamese authorities found dozens of fake product origin certificates and illegal transfers presumably by Chinese companies trying to sidestep US tariffs on everything from agriculture to textiles, according to Bloomberg.
The crackdown comes as Vietnam has emerged as one of the fastest growing sources of American imports.
One member of the Vietnamese national assembly's economic committee said the government is worried it could provoke the wrath of the US if it doesn't crack down on the flow of mislabeled Chinese products. The sheer magnitude of the jump in Vietnamese exports has prompted some to question how much of this could possibly be due to legitimate commerce.
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On Sunday, Vietnam released a statement pledging to increase penalties on trade-related fraud. It was one of the first times an Asian government has ever alleged such misbehavior, and comes after Vietnamese authorities found dozens of fake product origin certificates and illegal transfers presumably by Chinese companies trying to sidestep US tariffs on everything from agriculture to textiles, according to Bloomberg.
The crackdown comes as Vietnam has emerged as one of the fastest growing sources of American imports.
One member of the Vietnamese national assembly's economic committee said the government is worried it could provoke the wrath of the US if it doesn't crack down on the flow of mislabeled Chinese products. The sheer magnitude of the jump in Vietnamese exports has prompted some to question how much of this could possibly be due to legitimate commerce.
Read the entire article
May 31, 2019
"This Is A Black Swan Event": Markets Turmoil As Trump Unleashes Tariffs On Mexico "Until Illegal Immigration Stops"
Amid negotations and escalations in the process of moving USMCA through Congress, Trump has decided to go after one on America's closest trade partners: "On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied, at which time the Tariffs will be removed. Details from the White House to follow."
The White House warning that it will hike Mexico tariffs to 25% by October 1, if the border crisis persists, as Trump is activating a scorched earth approach whereby he will "punish" any offshore nation that he believes is transgressing, by imposing tariffs.
Meanwhile, moments after Trump's shock tweet, the Mexican deputy foreign minister Seade said that if President's threat to impose tariffs is carried out, "it would be disastrous", and Mexico would "respond strongly", adding that "we will not remain with out arms folded" before the tariff deadline "to see if it is serious."
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The White House warning that it will hike Mexico tariffs to 25% by October 1, if the border crisis persists, as Trump is activating a scorched earth approach whereby he will "punish" any offshore nation that he believes is transgressing, by imposing tariffs.
Meanwhile, moments after Trump's shock tweet, the Mexican deputy foreign minister Seade said that if President's threat to impose tariffs is carried out, "it would be disastrous", and Mexico would "respond strongly", adding that "we will not remain with out arms folded" before the tariff deadline "to see if it is serious."
Read the entire article
May 23, 2019
World Trade War I: US Asks South Korea To Join Anti-Huawei Campaign
The bilateral trade war between the US and China is gradually becoming a global trade war of global geopolitical and commercial dominance between the US and Chinese spheres of influence.
Shortly after the two largest mobile phone companies in the UK decided against launching Huawei-built 5G phones this morning, and roughly around the time a bevy of Japanese tech and telecom companies including ARM Holdings, Panasonic and SoftBank all imposed a boycott on supplying Huawei with mission critical components joining Australia, and New Zealand as major US allies to end commercial relations with Huawei following the US decision to crack down on the Chinese telecom giant (see "Huawei Feels U.S. Squeeze in U.K., Japan as Partners Curb Business") the White House is now pressuring another critical Chinese trading partner - South Korea - to cease ties with Huawei.
According to the Chosun Ilbo newspaper, the US recently asked South Korean government to support and join its anti-Huawei campaign.
Forcing Seoul to pick sides in a fight it would rather stay out of - especially since both sides still bear a distinct grudge from the Korean war - the US delivered a message several times to S. Korea’s Foreign Ministry that "using Huawei products may cause security problems" and as a result, the US requested S. Korea’s "active" support of US policy toward China as South Korea is seen as an American ally.
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Shortly after the two largest mobile phone companies in the UK decided against launching Huawei-built 5G phones this morning, and roughly around the time a bevy of Japanese tech and telecom companies including ARM Holdings, Panasonic and SoftBank all imposed a boycott on supplying Huawei with mission critical components joining Australia, and New Zealand as major US allies to end commercial relations with Huawei following the US decision to crack down on the Chinese telecom giant (see "Huawei Feels U.S. Squeeze in U.K., Japan as Partners Curb Business") the White House is now pressuring another critical Chinese trading partner - South Korea - to cease ties with Huawei.
According to the Chosun Ilbo newspaper, the US recently asked South Korean government to support and join its anti-Huawei campaign.
Forcing Seoul to pick sides in a fight it would rather stay out of - especially since both sides still bear a distinct grudge from the Korean war - the US delivered a message several times to S. Korea’s Foreign Ministry that "using Huawei products may cause security problems" and as a result, the US requested S. Korea’s "active" support of US policy toward China as South Korea is seen as an American ally.
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May 22, 2019
Yuan, Futures Slide On Reports Trump Administration Expands China Tech Blacklist
US equity futures are sliding as Asian markets open after a NYTimes report that the Trump administration is considering limits to a Chinese video surveillance giant’s ability to buy American technology.
Hangzhou Hikvision Digital Technology, a company controlled by the Chinese government, is now the world's largest supplier of video surveillance equipment, with internet-enabled cameras installed in more than 100 countries.
The move would effectively place the company on a United States blacklist, and as NYT notes, it also would mark the first time the Trump administration punished a Chinese company for its role in the surveillance and mass detention of Uighurs, a mostly Muslim ethnic minority.
And this escalation has sparked selling in stocks...
Congress and the administration have responded with other measures that may clamp down on Hikvision’s business. Congress included a provision in its 2019 military spending authorization bill that banned federal agencies from using Chinese video surveillance products made by Hikvision or Dahua.
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Hangzhou Hikvision Digital Technology, a company controlled by the Chinese government, is now the world's largest supplier of video surveillance equipment, with internet-enabled cameras installed in more than 100 countries.
The move would effectively place the company on a United States blacklist, and as NYT notes, it also would mark the first time the Trump administration punished a Chinese company for its role in the surveillance and mass detention of Uighurs, a mostly Muslim ethnic minority.
And this escalation has sparked selling in stocks...
Congress and the administration have responded with other measures that may clamp down on Hikvision’s business. Congress included a provision in its 2019 military spending authorization bill that banned federal agencies from using Chinese video surveillance products made by Hikvision or Dahua.
Read the entire article
May 21, 2019
Beijing Warns Of "Unwavering Resolve" In Huawei Fight, Accuses Washington Of "Bullying & Blackmail"
As the anti-American sloganeering reaches an unprecedented level of froth (there's now an unofficial trade war 'fight song') across China, the Commerce Department has softened its anti-Huawei stance, calling for a 90-day reprieve to allow American broadband companies more time to work out a 'Plan B'.
The delay will cover continued operation of existing networks and equipment, as well as support to existing handsets and other limited actions, according to Bloomberg.
But that's not even the biggest trade headline of the morning, as analysts wonder how Beijing will retaliate for the war on Huawei. Anyone who thinks Beijing won't respond is being naive, China's ambassador to the EU warned Tuesday. China will provide a "necessary response" to Washington's "wrong behavior."
"This is wrong behavior, so there will be a necessary response," Zhang Ming, China’s envoy to the EU, said in an interview in Brussels on Monday. "Chinese companies’ legitimate rights and interests are being undermined, so the Chinese government will not sit idly by."
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The delay will cover continued operation of existing networks and equipment, as well as support to existing handsets and other limited actions, according to Bloomberg.
But that's not even the biggest trade headline of the morning, as analysts wonder how Beijing will retaliate for the war on Huawei. Anyone who thinks Beijing won't respond is being naive, China's ambassador to the EU warned Tuesday. China will provide a "necessary response" to Washington's "wrong behavior."
"This is wrong behavior, so there will be a necessary response," Zhang Ming, China’s envoy to the EU, said in an interview in Brussels on Monday. "Chinese companies’ legitimate rights and interests are being undermined, so the Chinese government will not sit idly by."
Read the entire article
May 17, 2019
Trade Optimism Fizzles As China Says No Plans For More Talks
Well, it looks like President Trump finally did it. He finally pushed Beijing so hard on Huawei that they had no choice but to respond.
The Chinese weren't kidding when they warned that Washington's latest aggression toward Huawei - adding the Chinese telecoms giant to a blacklist that will make it extremely difficult, if not impossible, for Huawei to buy components from American companies - might crash trade talks.
Because after the Commerce Department formally added Huawei to the blacklist, the Chinese media and Chinese officials turned up the rhetoric, warning that there are no plans for another round of talks. Markets didn't take this well: Chinese stocks plunged 2.5% overnight on Friday - a big drop, though still not as bad as the 3% decline from last Monday,the market's worst day in three years. European shares didn't fare much better because, as one analyst explained to Bloomberg...
"The China state media commentaries fueled concerns that the U.S.-China trade disputes will prolong, deterring risk-taking," said Koji Fukaya, chief executive officer at FPG Securities Co. in Tokyo. "This issue will probably be one of the major market drivers for a while as U.S.-China trade war influences global economic conditions."
Read the entire article
The Chinese weren't kidding when they warned that Washington's latest aggression toward Huawei - adding the Chinese telecoms giant to a blacklist that will make it extremely difficult, if not impossible, for Huawei to buy components from American companies - might crash trade talks.
Because after the Commerce Department formally added Huawei to the blacklist, the Chinese media and Chinese officials turned up the rhetoric, warning that there are no plans for another round of talks. Markets didn't take this well: Chinese stocks plunged 2.5% overnight on Friday - a big drop, though still not as bad as the 3% decline from last Monday,the market's worst day in three years. European shares didn't fare much better because, as one analyst explained to Bloomberg...
"The China state media commentaries fueled concerns that the U.S.-China trade disputes will prolong, deterring risk-taking," said Koji Fukaya, chief executive officer at FPG Securities Co. in Tokyo. "This issue will probably be one of the major market drivers for a while as U.S.-China trade war influences global economic conditions."
Read the entire article
May 16, 2019
China's Huawei, 70 Affiliates Blacklisted By US Commerce Department
Reuters reports that the U.S. Commerce Department is adding Huawei Technologies Co Ltd and 70 affiliates to its so-called "Entity List" - a move that will make it much more difficult for the telecom giant to buy parts and components from U.S. companies. U.S. officials said the decision would also make it difficult for Huawei to sell some products because of its reliance on U.S. suppliers.
Department of Commerce Announces the Addition of Huawei Technologies Co. Ltd. to the Entity List
WASHINGTON – Today, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced that it will be adding Huawei Technologies Co. Ltd. and its affiliates to the Bureau’s Entity List. This action stems from information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest. This information includes the activities alleged in the Department of Justice’s public superseding indictment of Huawei, including alleged violations of the International Emergency Economic Powers Act (IEEPA), conspiracy to violate IEEPA by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of those alleged violations of U.S. sanctions.
The sale or transfer of American technology to a company or person on the Entity List requires a license issued by BIS, and a license may be denied if the sale or transfer would harm U.S. national security or foreign policy interests. The listing will be effective when published in the Federal Register.
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Department of Commerce Announces the Addition of Huawei Technologies Co. Ltd. to the Entity List
WASHINGTON – Today, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced that it will be adding Huawei Technologies Co. Ltd. and its affiliates to the Bureau’s Entity List. This action stems from information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest. This information includes the activities alleged in the Department of Justice’s public superseding indictment of Huawei, including alleged violations of the International Emergency Economic Powers Act (IEEPA), conspiracy to violate IEEPA by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of those alleged violations of U.S. sanctions.
The sale or transfer of American technology to a company or person on the Entity List requires a license issued by BIS, and a license may be denied if the sale or transfer would harm U.S. national security or foreign policy interests. The listing will be effective when published in the Federal Register.
Read the entire article
May 15, 2019
China 'Green Shoots' Are Dead - Retail Sales, Industrial Production, & FAI Slump
On the back of one better than expected soft survey PMI print, the world became convinced that as green shoots emerged, China was about to be reborn into magnificent credit-fuelled expansion and would save the world.
Tonight, that narrative died - everything missed expectations:
Retail sales rose just 7.2% (against +8.7% in March) - lowest since May 2003 (the 7.2% year-on-year rise in retail sales is actually weaker than all the estimates. The lowest was 7.5%, and the median was 8.6%)
Industrial Production growth slumped from a hope-filled +6.5% YTD YoY in March to 6.2%.
Fixed Asset Investment slowed to just 6.1% YoY.
Not green shoot-y!
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Tonight, that narrative died - everything missed expectations:
Retail sales rose just 7.2% (against +8.7% in March) - lowest since May 2003 (the 7.2% year-on-year rise in retail sales is actually weaker than all the estimates. The lowest was 7.5%, and the median was 8.6%)
Industrial Production growth slumped from a hope-filled +6.5% YTD YoY in March to 6.2%.
Fixed Asset Investment slowed to just 6.1% YoY.
Not green shoot-y!
Read the entire article
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