US, China hike tariffs as trade row intensifies
By JOE McDONALD
AP Business Writer
Monday, September 24
BEIJING (AP) — China and the United States imposed new tariff hikes on each other’s goods Monday and Beijing accused Washington of bullying, giving no sign of compromise in an intensifying battle over technology that is weighing on global economic growth.
U.S. regulators went ahead with a planned 10 percent tax on a $200 billion list of 5,745 Chinese imports including bicycles and furniture. China’s customs agency said it responded at noon by beginning to collect taxes of 5 or 10 percent on a $60 billion list of 5,207 American goods, from honey to industrial chemicals.
The conflict stems from U.S. President Donald Trump’s complaints Beijing steals or pressures foreign companies to hand over technology.
American officials say Chinese plans for state-led development of global competitors in robotics and other technologies violate its market-opening obligations and might erode U.S. industrial leadership.
China’s leaders offered to narrow their politically sensitive, multibillion-dollar trade surplus with the United States by purchasing more natural gas and other American exports. But they have rejected pressure to change industry plans the communist leadership sees as a path to prosperity and global influence.
Monday’s tariff hike follows a report by The Wall Street Journal that Chinese officials pulled out of a meeting to discuss possible talks proposed by Washington. The Chinese government had given no public indication whether it would accept the invitation.
Envoys last met Aug. 22 in Washington but reported no progress.
With no settlement in sight, forecasters say the conflict between the two biggest economies could trim global growth through 2020.
On Monday, the ratings agency Fitch cut its forecasts for next year’s Chinese and global economic growth by 0.1 percentage points to 6.1 percent and 3.1 percent, respectively.
“The trade war is now a reality,” said Fitch’s chief economist, Brian Coulton, in a report. “The downside risks to our global growth forecasts have also increased.”
Earlier, the two sides imposed 25 percent penalties on $34 billion of each other’s goods in July and another $16 billion in August. Business groups say American companies also report Chinese regulators are starting to disrupt their operations through slower customs clearance and more environmental and other inspections.
The first American tariffs targeted goods Washington said benefit from improper Chinese industrial policies. American regulators tried to limit the public impact by focusing on industrial machinery and components, but the latest $200 billion list includes bicycles, wooden furniture and other consumer goods.
Chinese regulators have tried to cushion the blow on their own economy by targeting American goods such as soybeans, natural gas, fruit, whisky and automobiles that are available from Europe, Latin America and other Asian countries.
Trump threatened last week to add $267 billion in Chinese imports to the target list if Beijing retaliated for the latest U.S. taxes. That would cover nearly everything China sells to the United States.
On Monday, the Chinese government accused the Trump administration in a report of “trade bullyism” and of preaching “economic hegemony.”
The toughly worded report said Beijing wants a “reasonable solution” but gave no indication of possible concessions.
It affirmed China’s stance that it is a developing country, a claim that rankles Washington, Europe and other trading partners.
They point to China’s status as a major manufacturer and a growing competitor in smartphones and other technology. They say Beijing is no longer entitled to concessions it was granted when it joined the World Trade Organization in 2001, such as the right to limit access to its finance, energy and other markets.
Chinese leaders have tried without success to recruit as allies German, France, South Korea and other trading partners that echo U.S. complaints about Chinese market barriers and industry plans but criticize Trump’s approach.
The Trump administration has “has brazenly preached unilateralism, protectionism and economic hegemony, making false accusations against many countries and regions, particularly China, intimidating other countries through economic measures such as imposing tariffs, and attempting to impose its own interests on China through extreme pressure,” the official Xinhua News Agency said.
Chinese leaders have announced changes this year including tariff cuts and plans to end ownership limits in their auto industry. But businesspeople who have met senior planners say they express no willingness even to discuss changes to technology development plans.
As the fight intensifies, China is running out of U.S. imports for retaliation.
Imports of American goods last year totaled $153.9 billion while the United States bought Chinese goods worth $429.8 billion, according to Chinese customs data. Monday’s increase leaves Beijing with about $40 billion of goods for penalties while the Washington has almost $200 billion.
The next cold war? US-China trade war risks something worse
September 24, 2018
Associate Professor of Political Science, Georgia State University
Disclosure statement: Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
Partners: Georgia State University provides funding as a founding partner of The Conversation US.
President Donald Trump is making good on his pledge to escalate the trade war with China by imposing tariffs on US $200 billion of Chinese goods. The Chinese government, for its part, is already retaliating with new taxes on $60 billion of American imports.
If you’re curious why China’s sanctions don’t match Trump’s, there’s an easy explanation. As a number of commentators have correctly pointed out, Beijing is running out of American products to target. Americans bought $375 billion more stuff from China than the Chinese bought from the U.S. last year, which means Trump has a lot more to punish.
While this may mean that China’s leverage on trade is limited, it doesn’t mean that Trump can easily win this confrontation.
That’s because China has many other ways to retaliate, such as dumping its considerable holdings of U.S. debt or making it harder for Trump to get a nuclear deal with North Korea. In these and other areas, Beijing has enormous leverage. This has led some to suggest that the trade war may soon turn into a “new cold war.”
Could the U.S. and China really be on the verge of the kind of geopolitical stalemate that dominated the second half of the 20th century?
Much will depend on how China responds to the latest tariffs. I believe that this response could take four forms.
First, China could choose to de-escalate the confrontation. This could be done quickly by negotiating some resolution with the Trump administration – though the president’s terms for ending the trade war remain unclear.
Alternatively, China could let the conflict simmer by keeping the fight in the trade arena, allowing it to continue to retaliate while appearing “reasonable.” This approach would avoid any major embarrassment for China while kicking the dispute down the road in the hope that the November elections, or the 2020 presidential elections, will soften American policy. In fact, China has already said that it won’t negotiate until after the midterms.
A conciliatory strategy might be attractive to moderates in Beijing who are keenly aware that China needs the U.S. as much as the U.S. needs China. It would also reassure China’s other trading partners that it is serious about honoring its commitments.
Another option for China is to escalate the confrontation by using its substantial economic leverage outside of trade.
The most obvious way that China could retaliate would be by reducing its purchases of American Treasuries or by selling some of the $1.18 trillion in its possession. Overall, China owns almost a fifth of the U.S. national debt currently held by foreign countries.
Though it would probably be less apocalyptic than is sometimes assumed, a Chinese policy of reducing its holdings would substantially drive up the cost of many of the goods that Americans buy every day.
The problem with this approach for China is that it would also strengthen the yuan and make Chinese goods more expensive for foreigners. Such a form of financial retaliation may not be a credible option for Beijing.
A more feasible strategy would be to target U.S. companies operating in China with more regulations and interference. While such targeting would be contrary to international law, it would be fairly easy for Beijing to deny responsibility.
Indeed, there is reason to believe that China has used this approach before with South Korean corporations – and there are indications that it has already begun delaying license applications from American companies.
The U.S. relationship with China is multifaceted, a fact that could allow China to retaliate outside the economic arena altogether.
One way would be to use its influence with North Korea to undermine U.S. efforts to disarm Kim Jong Un, perhaps by not enforcing U.S. sanctions.
Or China could confront the U.S. in the South China Sea, probably the most dangerous strategic flashpoint in East Asia. As Beijing rushes to claim more islands and seaways south of its coast, a falling out with the United States over trade could encourage it to become even more belligerent.
Other options would be to ramp up its attempts to isolate Taiwan, deepen ties with Russia as a counterbalance to the U.S. or accelerate its military buildup.
Hegemony on steroids
Finally, China could take America’s aggressive approach on trade as a reason to speed up its efforts to establish regional hegemony and greater economic independence.
The China 2025 program, a set of industrial policies aimed at moving the country closer to the technological frontier, could get a boost from the confrontation. China’s famous “Belt and Road Initiative,” an enormous economic corridor funded by Beijing, could be expanded, as could the country’s efforts to grow its influence in Africa. China could also pump more cash into its alternative to the World Bank, the Asian Infrastructure Development Bank.
Of course, China has sought to grow its influence, using all of the mechanisms discussed above, for some time. A more aggressive United States, however, could add to China’s sense of urgency.
What will China do?
The most likely Chinese response, in my judgment as a political economist, is some mixture of all four options.
Keeping the confrontation limited to trade – at least on the surface – is the safest bet for China’s leaders. And so I expect that Beijing will reserve its overt retaliation for tariffs. At the same time, I anticipate that China will engage in other noticeable but more informal and deniable actions against U.S economic and security interests – from causing headaches for American companies to building up its military.
In short, the Chinese government will seek to expand its powers so that it is able to deter future threats like these from the United States.
A different kind of cold war
In other words, President Trump is playing a risky game of whack-a-mole. In trying to tackle the trade deficit with a sledgehammer, he’s creating a host of other serious challenges to U.S. interests that may persist for years to come.
The enormous and persistent U.S. trade deficit with China needs a solution, but tariffs aren’t it. A wiser American approach would be to use the existing mechanisms of the international order to resolve its legitimate trade grievances with China.
And there are other ways to reduce the trade deficit and mitigate its ill effects, such as by encouraging higher savings rates, cutting the federal deficit (made worse by Trump’s tax cuts) and promoting competitiveness through job retraining and investment.
But back to our original question, are we heading for a new cold war?
In short, no, at least not the kind fought between the U.S. and Soviet Union after World War II. The Cold War may have been frozen in Europe, but it led, directly or indirectly, to terrible conflicts in Korea, Vietnam and beyond. It also divided the world into two mutually antagonistic blocs constantly struggling for the upper hand.
Certainly, a growing conflict between the world’s two largest powers could again encourage the formation of opposing spheres of influence. But the economic interdependence between the U.S. and China – as well as the existence of other major powers – would make such a “cold war” quite different, and probably milder, than the previous one.
Nevertheless, it is better for the U.S. to avoid a confrontational relationship with China altogether. It’s natural to defend one’s interests, but an escalating fight, leading who knows where, would benefit no one.
Wails, vows of revenge at Iran funeral after parade attack
By MOHSEN GANJI and NASSER KARIMI
Monday, September 24
AHVAZ, Iran (AP) — Amid wails and vows of revenge, thousands of Iranians on Monday attended a mass funeral service for victims of a weekend attack targeting a military parade that killed at least 25 people.
The dead from Saturday’s attack in the southwestern city of Ahvaz, blamed on Arab separatists, ranged from a disabled war hero to a four-year-old boy. The assault killed members of Iran’s elite Revolutionary Guard, including conscripts, wounded over 60 others and further ratcheted up tensions across the Persian Gulf ahead of this week’s United Nations General Assembly.
The father of 4-year-old victim Mohammad Taha lay atop his son’s flag-draped coffin sobbing, a public display of grief near the Sarallah Mosque in Ahvaz, the capital of Iran’s oil-rich province of Khuzestan.
Women in long black chadors held back tears while rhythmically striking their chests, a traditional way of showing grief. Mourners also played drums, cymbals and horns, according to local customs.
Of the 25 killed, 12 were from Ahvaz and the rest from elsewhere in Khuzestan.
As crowds flowed down Ahvaz’s streets, cries of “Death to America” and “Death to Israel” rose from the mourners. While a traditional chant in the years since Iran’s 1979 Islamic Revolution, they have taken on a new meaning as Iranian officials have blamed the U.S. and its regional allies for backing the separatists, who carried out the assault while disguised in military uniforms.
Supreme Leader Ayatollah Ali Khamenei said the attack showed Iran has “a lot of enemies,” according to remarks posted on his website, in which he linked the attackers to the U.S., Saudi Arabia and the United Arab Emirates.
“Definitely, we will harshly punish the operatives” behind the terror attack, he added.
Speaking at the funeral, the Guard’s acting commander, Gen. Hossein Salami, vowed revenge against the perpetrators and what he called the “triangle” of Saudi Arabia, Israel and the United States.
“You are responsible for these actions; you will face the repercussions,” the general said. “We warn all of those behind the story, we will take revenge.”
Intelligence Minister Mahmoud Alavai told the mourners that his agency had identified many suspects involved in the attack and “a majority of them were detained.” He did not elaborate.
“We will punish the terrorists, one by one,” he promised the crowd.
Saturday’s attack targeted one of many parades in Iran marking the start of the country’s long 1980s war with Iraq, part of a commemoration known as “Sacred Defense Week.” The attacks in Ahvaz sent women and children fleeing alongside the soldiers once marching in the parade.
Arab separatists in the region claimed the attack and Iranian officials have blamed them for the assault. The separatists accuse Iran’s Persian-dominated government of discriminating against its ethnic Arab minority. Khuzestan province also has seen recent protests over Iran’s nationwide drought, as well as economic protests.
President Hassan Rouhani has accused an unnamed U.S.-allied regional country of supporting the attackers. Iran’s Foreign Ministry also summoned Western diplomats and an envoy from the UAE, accusing them of allegedly providing havens for the Arab separatists.
Rouhani’s remarks could refer to Saudi Arabia, the UAE or Bahrain — close U.S. military allies that view Iran as a regional menace, in part because of its support for militant groups across the Middle East. Saudi-linked media immediately carried claims of responsibility by the separatists after the attack and have widely covered their previous attacks on oil pipelines.
The Islamic State group also claimed Saturday’s attack, initially offering incorrect information about it and later publishing a video of three men it identified as the attackers. The men in the video did not resemble images of two dead attackers published by Iranian media in the aftermath of the attack. Iranian officials say four men carried out the assault. Iranian state media has not acknowledged the IS claims.
The attack comes as Iran’s economy reels in the wake of the U.S. re-imposing sanctions lifted by Tehran’s nuclear deal with world powers. While Iran still complies with the accord, President Donald Trump withdrew America over the deal in part due to Tehran’s ballistic missile program, its “malign behavior” in the Mideast and its support of militant groups like Hezbollah.
Iran’s national currency has gone from trading at 62,000 rials to one U.S. dollar to as much as 150,000. Economic protests and other demonstrations have spiked across Iran, putting new pressure on Rouhani’s government.
At Monday’s funeral, however, those attending rallied around the Iranian government and its soldiers. Cries and wails erupted at the sight of the casket of a local hero, 54-year-old Hossein Monjazi, a disabled war veteran and Revolutionary Guard member who had lost a leg and a hand in the Iraq-Iran war. A photo of his crumpled body out of his wheelchair after the attack shocked the country, as did the death of the four-year-old boy.
Mahmoud Falaki, a teacher attending the funerals, said the ceremony showed Iranians “are always ready to sacrifice ourselves for our country. The terrorists are a bunch of cowards.”
Another Ahvaz resident, Ghaseem Farhani, said: “Just look at the crowd, with no fear, people are gathered here to see their soldiers and martyrs off to heaven.”
Associated Press cameraman Mohsen Ganji reported from Ahvaz, Iran. Karimi reported from Tehran, Iran, and Associated Press writer Jon Gambrell in Dubai, United Arab Emirates, contributed.
Brexit backers advocate alternative economic plan
By PAN PYLAS
Monday, September 24
LONDON (AP) — Brexit advocates unveiled Monday a new economic plan for Britain’s departure from the European Union as official figures emerged showing the country’s increasingly deteriorating trade in goods relationship with the bloc.
One of the biggest advantages that many Brexit supporters see in leaving the EU is the chance to strike new trade deals around the world, free of the bloc’s regulations and politics.
The Institute of Economics Affairs, a free-market think tank that has supported Brexit, said in a report that the opportunity before Britain as a result of Brexit is “huge.”
“If we squander it, the ‘new normal’ of limited economic growth will prevail, with an EU system that is failing to respond to the challenges of the modern economy,” it said.
The IEA urged the government to seek a “basic” free trade agreement for goods and pursue “regulatory freedom and trade independence.” The report, entitled “Plan A+: Creating a prosperous post-Brexit U.K.” was backed by many prominent Brexit politicians, including former Brexit secretary David Davis, and is being presented as an alternative to the plan being proposed by Prime Minister Theresa May.
May’s plan, which was dismissed as unworkable by the EU last week at a stormy summit in the Austrian city of Salzburg, would involve Britain remaining in the EU’s single market for goods in return for abiding by a “common rulebook.”
Despite last week’s setback, May hopes her plan will prove to be the basis of a deal in the next few weeks. That would give EU member states’ parliaments the time to vote on the deal ahead of Britain’s formal exit in March.
Shankar Singham, who co-authored the report, called on ministers to rethink their Brexit strategy and said the government’s plan will “absolutely preclude” a free trade agreement with the U.S. and that it would deny a “more prosperous future” for the U.K.
“If we continue on the present course, Brexit will be a small damage limitation exercise which will weaken the U.K. and be largely unnoticed by the rest of the world,” he said.
Brexit opponents argue that an abrupt EU exit would jeopardize the British economy, undermining supply chains and the cross-border operations of many businesses. They note that seven of the top 10 destinations for British exports in 2017 were EU countries and that EU countries accounted for almost 50 percent of British goods exports.
Britain’s independent statistics agency revealed Monday the extent of Britain’s deteriorating trade in goods position with the rest of the EU.
The Office for National Statistics said Britain’s total trade in goods deficit widened from 14.7 billion pounds ($19.1 billion) in 1998 to 130.7 billion in 2017 in real terms, primarily due to trade with the EU. From 1998 to 2000, Britain had an average 3.5 billion-pound trade in goods surplus with the EU. In 2001, the surplus turned into a deficit and that totaled 93.7 billion pounds last year.
The agency noted that deficit grew most with Germany, the Netherlands and Belgium, largely because of rising imports of cars and chemicals and fewer exports of fuel.
The agency conceded that its report does not show the whole picture as it does not look at services, which accounts for about 80 percent of British economic output and is in surplus with the EU. The agency said it will provide more details on services in November.
‘Donor-Based Government’: Foreign Money Tied to Climate Lawsuits
By Erin Mundahl
Newly publicized documents show state and local governments that oppose Trump administration energy policy are using private money — including from sources abroad — to fund lawsuits in the United States.
According to records obtained by the Competitive Enterprise Institute, major environmental groups pursuing lawsuits against Exxon Mobil and other oil companies received donations from foundations in Europe. This includes legal action on behalf of local governments that are pursuing these cases.
The records, which are a result of years of research, document “an extensive and elaborate campaign using elective law enforcement offices, in coordination with major donors and activist pressure groups, to attain a policy agenda that failed through the democratic process,” according to CEI.
Starting in 2012, environmentalist groups began flying staff members from state attorneys general offices to special briefings “with ‘prospective funders’ about ‘potential state causes of action against major carbon producers.’” While this meeting has long been reported, the information uncovered by CEI reveals how this system morphed into one where private donors funded a network of “pro bono” attorneys and public relations services.
The legal non-profit representing the city and county of Boulder, Colorado, and San Miguel County, Colorado, in their suits against Exxon Mobil and other oil companies received donations from foundations based in Europe, the documents show. In New York, billionaire and liberal activist Michael Bloomberg, for example, paid to hire special research fellows to work with state prosecutors on environmental cases. The New York state attorney general’s office defended the practice, saying that additional resources were needed because of the “non-litigation advocacy” it was performing.
This “advocacy” includes the filing of common law nuisance cases against industries that supposedly are causing global warming. In its application for the grants, the state explained that it “needs additional attorney resources to assist with this project.”
“This is the most dangerous example of a modus operandi we have found: it uses nonprofit organizations as pass-through entities by which donors can support elected officials to, in turn, use their offices to advance a specific set of policies favored by said donors,” writes environmental attorney Christopher Horner, a senior fellow at CEI. “It also uses resources that legislatures will not provide and that donors cannot legally provide directly. The budget for climate policy work alone is in the tens of millions of dollars per year.”
Climate lawsuits in the United States are also being funded by Oak Foundation, a private foundation with headquarters in Switzerland and led by U.K.-native Alan M. Parker. According to reporting by freelance journalist Kevin Mooney, the Oak Foundation committed $100 million to its climate justice initiative between 2015 and 2020. This money was then distributed in grants of between $600,000 and $75 million.
The Oak Foundation donates to many environmental legal groups, including the Center for International Environmental Law, where Matt Pawa, one of the recurring names in the climate change lawsuits, sits on the board. It also donated to EarthRights International, the legal nonprofit representing the city and county of Boulder in their lawsuits.
“The grants raise serious questions about why a British billionaire’s Swiss foundation is supporting a litigation campaign against U.S. oil companies,” Mooney wrote.
Both through grant money and by providing fully funded assistants, private donors both domestically and abroad are seeking to change the direction of American environmental policy. Their connections to the sprawling public nuisance cases against major oil companies show a sinister side to what had, at times, been presented as bold, independent acts by local officials.
It also raises concerns about if the law is being applied equitably. Other special interest groups have not been given such access to state attorneys general.
“The extension of this billion-dollar per year climate industry to privately fund AG investigations sets a dangerous precedent,” CEI’s Horner says in the report. “It represents private interests commandeering the state’s police powers to target opponents of their policy agenda and to hijack the justice system as a way to overturn the democratic process’s rejection of a political agenda.”
Even after a year of legal defeats, the quest to win a major environmental lawsuit, preferably against an energy company, continues. Unfortunately, so does what Horner calls “donor-based government.”
ABOUT THE WRITER
Erin Mundahl is a reporter with InsideSources.com.