Trade War

[GeneChing]

I usually steer clear of politics here, but the potential U.S/P.R.C. Trade War has already impacted our industry. The bulk of martial arts equipment distributed in the U.S. - not just Chinese but Korean and Japanese too - even MMA - is manufactured in China. We've already felt some impact and are trying to keep prices down, but this may bode poorly for U.S. martial arts suppliers and consequently, U.S. martial arts. We know where our competitors get their merch. It's not like there are that many martial arts manufacturers in the world. Prices are rising across the nation.

Trump's Base In Panic Over 25% Tariffs On China Goods
Kenneth Rapoza
Senior Contributor
I write about business and investing in emerging markets.

The only way tariffs do not go up is if Liu He, China's chief trade negotiator, delivers a deal Trump cannot refuse.

The Trade Partnership forecasts 29,000 job losses in Ohio and 32,000 in Pennsylvania.


President Donald Trump arrives to speak at a rally at Aaron Bessant Amphitheater, Wednesday, May 8, 2019, in Panama City Beach, Fla. (AP Photo/Evan Vucci) photo credit: ASSOCIATED PRESS

Tonight's the night. And in Trump's baseland -- the farm belt and the small to mid-sized business owner -- everything is not all right.

Suffice it to say, they are in panic mode. Tariffs of 10% on some $200 billion worth of Made in China goods will go to 25% at midnight tonight. The only way tariffs do not go up is if Liu He, China's chief trade negotiator, delivers a deal Trump cannot refuse.

Clearly, no one is betting on it. The Dow is down nearly 400 points and China's A-shares, as represented by the CSI-300 Index, is down over 3%.

"I don't think people really understand what is at stake," says Alex Camera, CEO of Audio Control, a privately held, small business manufacturing audio sound equipment near Seattle, Washington. He imports electronic components from China and makes things like power amplifiers for cars. They design it and put it together in Washington. "Trump says China is paying these tariffs, but they are not. I am. U.S. companies are paying it at the port."

Tariffs are port taxes due at the time of delivery and paid to the U.S. government. At best, companies like Audio Control can renegotiate its contract with its China supplier in order to lower -- or in some cases -- zero out the impacts of the current 10% port duty. But the hike to 25% is the real game changer. To say the business community, long seen as one of the key voter bases of the Republican Party, are terrified of an escalating trade war would not be an understatement.

"The 10% tariff required us to curtail some of our investments," Camera says. "The potential of a 25% tariff from tonight would have a major impact on our investment and on our pricing. It frustrates me a little bit about how people see tariffs as an attack on the Chinese economy. Tariffs are an attack on my ability to use my cash to grow my business."


Both Nancy Pelosi and Chuck Schumer, high ranking Democrats, agree with Trump's tough stance on China. Trump's tariffs, however, have also helped the Democrats win back the House of Representatives as farm counties hit with China's retaliatory tariffs voted Republicans out of office in November 2018. (AP Photo/Andrew Harnik, File) photo credit: ASSOCIATED PRESS

Trump's weekend threat to raise tariffs on China came after he was told by his top trade negotiators, led by U.S. Trade Representative Robert Lighthizer, that China reneged on earlier promises. Lighthizer warned the market this week that tariffs were going up on Friday.

Bill Adams, senior international economist for PNC Financial said the tangible and unpredictable effect will be on business investment, to which Camera's claim serves as testimony.

"Tariff advocates have argued that they will divert investment into the United States so that businesses can maintain tariff-free access to U.S. consumers, but we haven't seen that," Adams says.

It hasn't been an overnight shift, but supply chains are definitely shifting out of China. Tiffany Zarfas Williams, owner of retail firm The Luggage Shop in Lubbock, Texas says she is looking for luggage and travel bags that are not Made in China. "We are looking to shift our supply chain," she said, begrudgingly, during a conference call with reporters on Thursday.

The China trade war is more complex than simply protecting manufacturing jobs, or reducing the trade gap between the two countries. It's a long game. And one of the goals of the game is to force U.S. companies to look outside of China for manufacturing. Some items are only made in China. Others, like toys and consumer electronics, are dominated by China. The KitchenAid blender is made in China. Nearly everything Mattel sells is Made in China. The fancy store bags and boxes shoppers at J.Crew use are only made in China.

continued next post

[GeneChing]

Supporters of President Donald Trump cheer as he arrives to speak at a rally at Aaron Bessant Amphitheater, Wednesday, May 8, 2019, in Panama City Beach, Fla. Trump's electoral college sweep of Hillary Clinton was won by narrow margins in once Democratic Party states. He will need those old Obama voters that turned to him in order to get re-elected. Tariffs are seen costing key states like Ohio and Pennsylvania tens of thousands of jobs. (AP Photo/Evan Vucci) photo credit: ASSOCIATED PRESS

In some cases, like electronics components, China suppliers are still cheaper than rivals in Taiwan and South Korea even with a 25% tariff thanks to cheaper labor, lower taxes, and less stringent regulations.

China knows they are indispensable to U.S. business. It drives many in Washington crazy. The question many people are asking now is if China opts to wait out the Trump presidency and just deal with the tariffs, in hopes they do not lose too much business to the Americans. Trump said that China really prefers dealing with "weak Democrats", calling out Obama's vice president and presidential candidate Joe Biden in particular. He might be right. Maybe China would prefer dealing with Biden, who is currently ahead in the Democratic Party primary polls.

Laura Baughman, president of The Trade Partnership is anti-tariff. She thinks the U.S. should work with countries in the EU to apply non-tariff barriers against China. This was Obama's tactic. He used the World Trade Organization to go after certain items coming from China.

Many American diplomats in Beijing have told me that the tactic was not enough. Most American businesses in China hate tariffs but admit that without them China would continue with its mercantilist policies and eventually railroad the U.S. economy, beating American companies in Asia.

Still, the trade war has a price for Trump.

Net job losses if tariffs go up to 25% depends on the state, but The Trade Partnership forecasts 29,000 job losses in Ohio and 32,000 in Pennsylvania. Both states voted for Trump in 2016.

"If 25% duties are eventually imposed on all China goods, and then you consider a Chinese retaliation, we estimate it would result in over 2 million jobs lost in the U.S. over the next one to three years," Baughman says.

Global investors in China are hopeful for a deal.

This week, Nomura Securities said the likely outcome from this week's trade talks is a 25% hike on Friday with an agreement to keep talking and signs of progress. Signs of progress could mean, in an ideal world, that tariffs retreat back to base. Tariffs are unlikely to go back to pre-trade war levels.

"Our core scenario is that we get a deal in the second quarter," says Ed Al-Hussainy, a currency analyst for Columbia Threadneedle. "But it will lack substantive content and the threat of tariffs will remain live."


In this April 10, 2019 photo, flood waters from the Missouri River destroyed grain silos and washed soybeans out of them, on a farm in Bellevue, Nebraska. Low commodity prices and destructive weather have made the tariff impacts even worse. Just another major headache for American farmers. (AP Photo/Nati Harnik) photo credit: ASSOCIATED PRESS

Welles Orr, senior international trade advisor for Miller & Chevalier says the doubling of tariffs will hurt companies that serve the middle-class consumer. "Our clients that have been subject to the 10% tariffs have been able to deal with it either by passing on costs to end-users or making cuts here and there," he says. "When it goes to 25%...that's going to be a big deal."

Orr thinks both sides need a deal. "It'll be a new ball game if Trump cuts this deal. China would be acknowledging that they need to have a more predictable commerce system," he says, adding: "I think the odds of a deal are better than 50/50."

Indiana farmer Brent Bible is anxious.

"We are operating at a loss now. Since Trump announced the increased in tariffs on Sunday, we have seen a price reduction in our crops coming up for sale in the summer that equates to around a $50,000 loss for us," he says. China has tariffs on U.S. soybeans. But China being China, they don't really pay it. "Our soybeans are still going there," he says. "They are purchased through the government so they can avoid the tariffs."

American companies cannot avoid tariffs on China goods. Over 50,000 U.S. companies have asked for exemptions from tariffs so far. They're still waiting for relief.



For media or event bookings related to Brazil, Russia, India or China, contact Forbes directly or find me on Twitter at @BRICBreaker
Kenneth Rapoza
Senior Contributor

I've been avoiding posting on this topic, but it's time now. We are starting to feel the impact now, and that will trickle down to martial arts across the nation.

[GeneChing]

...buy your martial arts gear now before the effects of this trade war impact prices.

MAY 12, 2019 / 6:57 AM / UPDATED 18 MINUTES AGO
China to impose tariffs on U.S. goods despite Trump warning
Makini Brice, Ben Blanchard
4 MIN READ

WASHINGTON/BEIJING (Reuters) - China said on Monday it would impose higher tariffs on a range of U.S. goods, striking back in its trade war with Washington shortly after U.S. President Donald Trump warned it not to retaliate.

China’s finance ministry said it plans to set import tariffs ranging from 5 percent to 25 percent on 5,140 U.S. products on a target list worth about $60 billion. It said the tariffs will take effect on June 1.

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The announcement came less than two hours after Trump warned Beijing not to retaliate after China said it “will never surrender to external pressure.”

The White House and U.S. Trade Representative’s office did not immediately return a request for comment.

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Global equities fell sharply on Monday as hopes of an imminent trade deal between the world’s two largest economies were crushed. Major U.S. stock index futures were down about 2 percent. [MKTS/GLOB]

The trade war escalated on Friday after Trump hiked tariffs on $200 billion worth of Chinese goods, saying China had reneged on earlier commitments made during months of trade negotiations.

Beijing had vowed to respond to the latest U.S. tariffs. “As for the details, please continue to pay attention. Copying a U.S. expression - wait and see,” Foreign Ministry spokesman Geng Shuang told a daily news briefing on Monday.

Trump warned China not to intensify the trade dispute and urged its leaders, including President Xi Jinping, to continue to work to reach a deal. “China should not retaliate-will only get worse,” he said on Twitter.

“I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries,” Trump wrote.


STEADY DRUM BEAT

Trump last week also ordered U.S. Trade Representative Robert Lighthizer to begin imposing tariffs on all remaining imports from China, a move that would affect an additional $300 billion worth of goods.

Asked about the threat, Geng said: “We have said many times that adding tariffs won’t resolve any problem ... We have the confidence and the ability to protect our lawful and legitimate rights.”

Chinese state media kept up a steady drum beat of strongly worded commentary on Monday, reiterating that China’s door to talks was always open, but vowing to defend the country’s interests and dignity.

In a commentary, state television said the effect on the Chinese economy from the U.S. tariffs was “totally controllable.”

“It’s no big deal. China is bound to turn crisis to opportunity and use this to test its abilities, to make the country even stronger.”

Before high-level talks last week in Washington, China tried to delete commitments from a draft agreement that Chinese laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers. That dealt a major setback to negotiations.

Trump has since defended the U.S. tariff hike and said he was in “absolutely no rush” to finalize a deal.

Top White House economic adviser Larry Kudlow said on Sunday there was a “strong possibility” Trump will meet China’s Xi at a G20 summit in Japan in late June.

Reporting by Ben Blanchard; Additional reporting by Makini Brice in Washington; Writing by Michael Martina; Editing by Darren Schuettler, Jeffrey Benkoe and Paul Simao

[MightyB]

I wouldn't expect a long and drawn out trade war with China. They're putting on a brave face, but the US supply chain has been steadily shifting to places like Vietnam in the last couple of years as China's markets have been maturing and thus getting more expensive. This is an old article written during the Obama administration, but it lays out the ground work for why the US is in a strong position. https://www.cfr.org/expert-brief/us-...ng-facts-myths

[GeneChing]

China is a ‘kung fu master’ and can deliver ‘deadly punch’ to US economy in trade war, ex-official says
China has many options for retaliating against the US and is likely to implement tariffs that go beyond trade in goods, a former top government official says
Wei Jianguo, a former vice-minister in the Ministry of Commerce, says China has the ‘willingness to act to fight a prolonged war’
Orange Wang
Published: 11:52am, 13 May, 2019


Liu He, China's vice-premier, departing negotiations in Washington on Friday after a meeting with US Trade Representative Robert Lighthizer (foreground right) and US Treasury Secretary Steven Mnuchin. Photo: Bloomberg
China has many options for retaliating against the United States and is likely to implement sanctions that go beyond tariffs on trade in goods, a former top government official said.
Wei Jianguo, a former vice-minister at the Ministry of Commerce (Mofcom) responsible for foreign trade, said China still had abundant tools in its armoury and has already prepared a contingency plan to deal with the escalation of the trade war.
“China will not only act as a kung fu master in response to US tricks, but also as an experienced boxer and can deliver a deadly punch at the end,” Wei told the South China Morning Post, adding that the world’s second largest economy is prepared for an extended trade war with the US.
US agriculture products would be a natural primary target for retaliation, especially wheat, corn and pork, Wei said. These would directly target a key part of US President Donald Trump's electoral base in the run-up to the 2020 election.
“China has not only the determination and capability, but also willingness to fight a prolonged war,” Wei said. “The decision makers already fully understand the pattern of the US in the trade talks.”
China could also place sanctions on US planes and vehicles, he said, making it more difficult for these products to enter the Chinese market.
The jewel in the crown of the US aviation market, Boeing, was expected to be a beneficiary of a US-China trade deal. It was reported that China was preparing to buy 100 Boeing planes worth more than US$10 billion, in a bid to satisfy US desires to narrow the trade deficit.
China could move beyond the goods trade and target services, particularly in the finance, tourism and cultural sectors, Wei said. It had been expected that a trade deal would nudge China towards liberalising some of its services markets, particularly financial sector industries.
Wei warned that Washington made a strategic mistake in raising tariffs on US$200 billion worth of Chinese goods from 10 per cent to 25 per cent last Friday. The move might backfire because “extreme pressure” would not force China to capitulate.


Wei Jianguo, vice-minister of commerce from 2003 to 2008, before which he was vice-minister in the Ministry of Foreign Trade and Economic Cooperation, a predecessor of Mofcom. Photo: Handout

“If [the US] does not realise its mistake, it will create problems of a historic nature,” he said.
Wei was a vice-minister at Mofcom from 2003 to 2008, before which he was vice-minister in the Ministry of Foreign Trade and Economic Cooperation, a predecessor of Mofcom. In the current Mofcom administration, there are four vice-ministers, each with a different portfolio. He is now vice-chairman of the China Centre for International Economic Exchanges, a think tank linked to the Chinese government.
Analysts have also warned that a national security review process for foreign investments in China might enable Beijing to freeze out US investment to an even greater extent than before, as another form of retaliation.
In China, “economic security” has become a top item on the government agenda, following a notice posted in April by the state planner, the National Development and Reform Commission, stating that its public service department would start accepting applications for national security reviews of foreign investment deals because of an “adjustment of departmental responsibility”.


The National Development and Reform Commission (NDRC) headquarters in Beijing. The NDRC has made “economic security” its top policy agenda. Photo: Simon Song

China’s national security review process for foreign investments may have become more opaque as the country steps up its efforts to protect its economic security, a top agenda item for the current government.
While the US has used “national security” as the justification for rolling out Section 232 tariffs on products such as steel and aluminium, and is considering using the same rationale for levying duty on the global car industry, it is not thought to have the same leverage to act in this manner as Beijing’s central planners.
Over the weekend, Trump and his team of advisers took to social media and television to defend the tariff increase, which went into effect on Friday.
“We have to change the trading relationship between two countries for the benefit of the US and its workforce and its ranchers and farmers and so forth. We have to do this,” White House economic adviser Larry Kudlow said in an interview on Fox News Sunday. “The relationship has been too unbalanced.”
Kudlow broke with Trump’s long-term line that Chinese exporters pay tariffs, a claim that has long since been debunked: tariffs are paid by importers to release products from the dock when they enter a country.
“In fact, both sides will pay. Both sides will pay in these things,” Kudlow admitted.
Trump himself took to Twitter on multiple occasions, saying that China “broke the deal” and that the US will be “taking in tens of billions of dollars in tariffs from China”, adding that “buyers of product can make it themselves in the USA (ideal) or buy it from non-tariffed countries”.


US Trade Representative Robert Lighthizer is thought to be ready to impose tariffs on the remainder of China’s exports. Photo: Reuters

On Friday, the Office of the United States Trade Representative (USTR) issued a notice confirming the tariff increase to 25 per cent, but also saying that the president “also ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at around US$300 billion”.
“The process for public notice and comment will be published soon in the Federal Register. The details will be on the USTR website on Monday as we begin the process before a final decision on these tariffs,” read the note.

I wouldn't expect a long and drawn out trade war with China.

Depends how you define 'long and drawn out' there MightyB. We first felt the negative impact of this with our FALL 2018 issue, a direct result of what was then just tariff posturing. For a small niche market print magazine like us, a year is a long time. We'll see how much the next containers cost for Tiger Claw.

[GeneChing]

I didn't foresee this thread getting so on topic with the metaphors...

American boxing vs Chinese tai chi: Strength of tradition will win
By Li Qingqing Source:Global Times Published: 2019/5/9 18:58:40


Illustration: Liu Rui/GT

Foreign media noted how clam most Chinese media were over US President Donald Trump's tariffs threats against China's exports in the last two days. Some even doubted whether China could find a suitable solution. Perhaps after they heard that the Chinese delegation was leaving for Washington on Thursday to continue the negotiations, they might grasp the real meaning of that silence.

Silence is golden and in the Chinese language the word "silence" associates with being steady. The current controversy between China and the US might be compared to American boxing and Chinese tai chi. Any street park tai chi practitioner can tell you the ingenuity of the Chinese sport: Four ounces can move a thousand pounds.

Why can China cope calmly with the US threat? Because the country firmly sticks to its own path without being distracted. This is the foundation of resisting external pressure and also the motivation to create development opportunities for the country.

On Wednesday, another story related to China attracted some foreign media's attention. China's National Development and Reform Commission (NDRC) issued a notice saying that China will launch subsidies to support green development projects in the Yangtze River Economic Belt. This is China's latest move to fight pollution and boost investment, as well as an example of China's economic transformation.

Combining this news with China's silence can help a reader understand the country's steady calm. Environmental protection investment is only one aspect of economic transformation. In fact, China has already accelerated its transformation since 2018 as external economic pressure started to increase.

In 2008, the Chinese government launched a 4 trillion yuan ($586 billion) stimulus package to save the country's economy from the global financial crisis. This is somewhat similar to China's current measures and yet completely different in essence: After 11 years, China does not only aim at economic stimulus, but more importantly, a transformation. Through economic transformation, China stimulates its domestic demand.

China has been promoting transformation of its growth model, and the China-US trade war only accelerates such a transformation. We Chinese are successfully turning external pressure into internal motivation.

Many of China's achievements seem impossible to some Western economists. They are surprised: How could China survive the US-initiated trade war? In fact, such success is based on the extraordinary advantage of China's system and governance.

"If you fight extreme wars, the Chinese political system is going to come out at the top just because they have this capability of withstanding massive economic shocks," said Huang Yasheng, a professor at the Massachusetts Institute of Technology, in March.

In addition to the ability to withstand shocks, it is more important that the Chinese system can also release vitality. There is another famous saying in tai chi: "If he takes no action, I take no action. But once he takes even the slightest action, I have already acted."

It can be hard for the West to fully understand China's system. Some do not know why China's political model can guarantee the stable development of policies in the long run, such as reform and opening-up.

Compared with Western countries, China's system provides more effective leadership, political stability, policy consistency and an open state of mind. Thanks to these advantages, China can remain calm and firmly stick to its purpose when major changes happen in the international environment. There may be fewer opportunities, but China can create more through its internal power.

In other words, China uses its unique advantages in its system to counterbalance against the trade war and other difficulties. The more intense the situation, the more powerful and effective China's system may become. By sticking to its fundamental system, China can cope with shifting events in the world.

The author is a reporter with the Global Times. opinion@globaltimes.com.cn

[GeneChing]

Alibaba: There's a trade war going on? Could've fooled us – just check out these swollen digits
Cloud biz still dwarfed by retail but everything's up
By Paul Kunert 16 Aug 2019 at 17:00



Alibaba, China's nearest equivalent to Amazon, is weathering the "uncertain economic" landscape caused in part by the "trade war" between the US and Middle Kingdom governments.

The group reported Q1 revenues of ¥114.924bn ($16.751bn) for the three months to 30 June fiscal '20, up a whopping 42 per cent year-on-year. There was an upward swing recorded across all of its divisions, though the online retail, food delivery services and cloud services were the big growth drivers.

The Core division – comprised of China retail, wholesale, international commerce, logistics and local consumer services – was up 44 per cent to ¥99.544bn ($14.133bn/ £11.63bn). The retail element brought in ¥75.601bn ($11.013bn/ £8.835bn)

The relatively affluent middle class in China, 300 million people living in large cities, continues to be one of the "big secular" trends that Alibaba has tapped into, said exec chairman Joe Tsai on an earnings call.

"We have talked about the desire by these consumers to upgrade the quality of product they buy, especially the pursuit of brand and imported goods," he added.

Clearly Apple might have something to say about that, having watched its iPhone sales drop by double digits in the first half of its year. But that's another story.

Tsai also spoke of the "rise of urbanisation" happening in third, fourth and fifth-tier cities in China, with roughly 500 million people in these locales with a consumption economy of $2.3 trillion that is forecast to rocket to $7 trillion by the end of 2030. Chinese companies tend to plan for the longer term rather than being driven by the whims of Wall Street.

Alibaba had 674 million active monthly users in its Core unit, up 20 million on the prior quarter.

Cloud Computing remains a fraction of the retail operation but is growing fast, up 66 per cent year-on-year to ¥7.787bn ($1.105bn). This was based on "an increase in average revenue per customer," said Alibaba CEO Daniel Zhang.

The fourth largest cloud provider worldwide didn't break out public-versus-private cloud sales figures, but said private jumped 250 per cent year-on-year.

Zhang said the work is to boost "high-valued added service while rationalising... commodity products". He added that it is still beefing up investment in "talent and technology infrastructure".

Alibaba has 52 availability zones made up of one or more data centres in 19 regions around the world.

The Digital Media and Entertainment unit was up 6 per cent to ¥6.312bn ($896m) and revenue from the Innovation initiative and others jumped 21 per cent to ¥1.281bn ($182m).

Group operating profit came in at ¥24.375bn ($3.46bn) versus an operating loss of ¥4.863bn ($690m)a year earlier. Net income was ¥21.24bn ($3bn). ®

Alibaba is up? At least someone is benefitting from the trade war.

[GeneChing]

A miserable Year of the Pig for China’s hogs is godsend for American farmers
Outlook for China’s hog farming sector is bleak, as the overall herd size is forecast to fall 20 per cent this year and a further 10 per cent next year
US pork exports to China doubled in the second quarter to 60,898 tonnes from a year earlier
Eric Ng
Published: 2:30am, 17 Aug, 2019


Illustration by SCMP

In China, pigs symbolise wealth. And 2019, being the Year of the Pig, was supposed to be a great year to make money. Instead, the nation’s 26 million hog farmers are battling the deadly African swine fever epidemic that is in its second year now.
The virus, harmless to humans, has spread across 32 of the nation’s 34 administrative regions since the outbreak was first reported in August 2018, affecting a large portion of the nation’s 348 million strong swine inventory, according to Rabobank.
“We estimate China’s current herd loss is 40 per cent year on year, which may expand to over 50 per cent by year-end,” the Dutch bank said in a report last month. “We expect an additional 10 to 15 per cent decline in both herd and pork production in 2020.”
The outbreak, which has wiped out 20 per cent of the planet’s hog herd, is pushing the Chinese government to look for imports from the US, Europe and Brazil, and substitutes such as beef, poultry, fish and even plant-based protein.


Piglets at a farm in Yiyang county, in China’s central Henan province. Photo: AFP

The highly contagious disease that kills all pigs and wild boars it infects was originally restricted to Africa. In 2007, it was first seen in Georgia at the crossroads of Europe and Asia. It has since spread westwards to eastern and central Europe and eastward to Asia, according to the Food and Agriculture Organization of the United Nations.
After infecting hogs in China last year, it has moved this year into farms in Mongolia, Vietnam, Cambodia and Laos. There is no cure.
While vaccine candidates are being evaluated in laboratories in several nations including China, a cure is still several years away, said Dirk Pfeiffer, a professor at City University’s Jockey Club College of Veterinary Medicine and Life Sciences in Hong Kong.
Mainland China had lost 26.7 per cent of its breeding sows by the end of June from a year earlier based on the Ministry of Agriculture and Rural Affairs’ tally.
The effect of a major decline in new pig births began to surface this summer, after hog supply initially rose and suppressed pork prices before sick pigs were culled to contain the epidemic.
Hog prices have risen 80 per cent this month from their lows in February to around 19 yuan a catty (US$2.70 for 600 grams). The prices are up some 46 per cent before the epidemic broke out.
As pork – a staple in China – is the leading driver of food prices, consumer price inflation rose a higher than expected 2.8 per cent last month and could breach 3 per cent in the months ahead, Nomura economists said in a note.


SCMP Graphics

This complicates the task of policymakers in Beijing who are already dealing with slowing economic growth amid an escalating trade war with the US.
China, which produces and consumes roughly half of the world’s pork, has been largely self-sufficient before the epidemic.
But the Chinese hog farming sector’s outlook is bleak, as the overall herd size is forecast to fall 20 per cent this year and a further 10 per cent next year, according to the Foreign Agricultural Service of the US Department of Agriculture.
A 6.2 per cent year on year fall in domestic hog supply in the first half meant the slaughtering and meat processing industry imported 818,702 tonnes of pork – 26.3 per cent higher year on year – to meet demand, according to government statistics.
Even the US, the world’s second largest pork producer and the largest exporter that is in the midst of a trade war with China, has helped to plug the supply gap in the past few months. Exports to China in the second quarter doubled year-on-year to 60,898 tonnes, according to the US Meat Export Federation.


SCMP Graphics

This was made possible by a sharp increase in prices in China and depressed US prices because of excess supply, which helped to offset a 62 per cent import duty slapped by Beijing on US pork exports.
Meanwhile, US production is expected to grow 5.5 per cent year on year in the second half, thanks to a large breeding herd and higher productivity, according to Rabobank’s forecast.
This is bodes well for Hong Kong-listed WH Group, the world’s largest pork producer, which has been caught in the middle of the trade war.
Besides controlling China’s largest hog slaughtering and packaged pork facilities, WH also owns Virginia-based Smithfield Foods – the top US hog producer and pork processor – which it acquired in 2013.

continued next post

[GeneChing]

WH Group chairman Wan Long (centre) said his company would increase pork imports from Europe and South America to hedge the risk of Chinese tariffs on US exports. Photo: Jonathan Wong

WH Group chairman Wan Long said on Tuesday to ensure it has enough supply to meet Chinese demand, the firm would increase imports from Europe and South America to hedge the risk of Chinese tariffs on US pork.
At the same time, Smithfield’s chief financial officer Glenn Nunziata said that while rising Chinese price premium over US prices is favourable for more fresh pork exports to China, the firm will also work on expanding sales to Mexico, Japan and South Korea as a backup.
A de-escalating of tensions would certainly help WH Group and other US pork suppliers.
But the trade appeared to have hit a massive hurdle this month when Beijing retaliated against US President Donald Trump’s move to impose 10 per cent tariff on US$300 billion by suspending purchase of US agricultural products.


Some of Smithfield Foods’ pork products, which is owned by Hong Kong-listed WH Group. Photo: Reuters

David Ortega, an agricultural economist with Michigan State University, said that the US, as the world’s top pork exporter, could nevertheless help satisfy Chinese demand.
“The rise in domestic Chinese pork prices can offset some of the tariff’s impact, but there is a lot of uncertainty as the trade negotiation is fairly fluid … other pork exporters like the EU and Brazil are positioning themselves to meet Chinese demand,” Ortega said.
Canada, another major pork exporter, has sent 217,193 tonnes to China in the first six months, up 50 per cent from last year, according to Canada’s Agriculture and Agri-Food Department.
However, since June 25 China has stopped accepting meat from Canada after a pork shipment was found to contain ractopamine, a banned feed additive.
The Canadian government said the shipment probably came from a third country and the certificate might have been falsified.


Relations between China and Canada have cooled since Huawei Technologies’ CFO Meng Wanzhou was arrested in Vancouver last December. Photo: The Canadian Press via AP

Relations between Canada and China rapidly soured last December after Huawei Technologies’ chief financial officer Meng Wanzhou was detained on US charges relating to alleged violation of sanctions on Iran.
Other nations have also cashed in on opportunities.
Exports from the European Union – led by Germany, Spain and Denmark – in the year’s first five months surged 52 per cent year on year to 432,293 tonnes, while exports from Brazil in the first half gained 28.9 per cent to 92,188 tonnes, according to Darin Friedrichs, a Shanghai-based analyst at commodities brokerage INTL FCStone.
He expected the US to be the biggest potential source of additional pork supply to China as Canada has been banned and Europe only has limited extra supply, adding that negotiations for more supply from Brazil were ongoing.
However, even as China increases pork imports, he said there were bottlenecks that need to be addressed.
“A lot of the infrastructure isn’t built for frozen or chilled pork … it is for live hog that is killed close to the market,” he said.
Besides pork, China has also lifted chicken and beef imports by around 50 per cent in the first half from a year ago.
Friedrichs said that in the long term, small pig farms were expected to be phased out, while larger ones will deepen vertical integration into downstream slaughtering and processing so that hogs can avoid exposure to the virus.
This was likely to speed up industry consolidation, he added, noting Beijing has been offering farmers in northeast China subsidies to build larger facilities integrating breeding and slaughtering.


Darin Friedrichs, a Shanghai-based analyst at commodities brokerage INTL FCStone, says China’s pig farming sector will see consolidation. Photo: Handout

For leading Chinese companies that have capacity to expand, the future looks bright.
Shenzhen-listed Muyuan Foodstuff, China’s second largest pork producer that sold 11 million heads of hogs last year, said in July that it expected to post a net profit of between 376 million yuan and 396 million yuan in the second quarter on the back of higher prices, after a loss of 145 million yuan in the first quarter.
The epidemic has not derailed its aggressive target to boost production to 14 million heads this year, according to a report from brokerage Changjiang Securities.
Still, Pfeiffer of City University, said it will be a long road to recovery for the industry because of the sheer density of farms in China and poor biosecurity behaviour in the entire chain right from farmers to slaughterhouse staff.
“It would be a miracle if African swine fever can be controlled, let alone eradicated, within the next five to 10 years,” he said.

THREADS
Bacon!!!!!!
Year of the Pig 2019
Trade War

[GeneChing]

Unfortunately, all of the major martial arts gear manufacturers are based in China. This goes for all styles, not just Chinese. There really are no affordable alternatives. This has a direct impact on martial arts in America.

08/25/2019 03:53 am ET Updated 45 minutes ago
Wall Street Journal To ‘Chairman’ Trump: ‘This Isn’t The People’s Republic Of America’
The editorial slammed Trump’s imperious order to U.S. businesses, blowing a gasket and tanking stocks in no-win trade war with China.
headshot
By Mary Papenfuss

The Wall Street Journal gave President Donald Trump a stiff word-lashing Friday for ratcheting up his no-win trade war with China.

“The trouble with trade wars, like shooting wars, is that once they start you never know how they’re going to end,” the Journal noted in an editorial scorching Trump. “The enemy gets a vote, and sometimes events escalate in ugly fashion. Take Friday, which saw China retaliate for Donald Trump’s recent tariffs, Mr. Trump blow a gasket, markets tank, and Mr. Trump impose even more tariffs.”

The newspaper said Trump then “began tweeting like a bull in a china shop,” and scoffed at his “order” that American companies no longer have anything to do with the world’s second-largest economy.

“Order? Somebody should tell Chairman Trump this isn’t the People’s Republic of America,” the editorial added. U.S. businesses have been trying to shift production out of China to avoid tariffs, “but supply chains that have been developed over decades can’t be uprooted overnight. And no other country has China’s huge relatively skilled workforce, infrastructure and network of suppliers,” the newspaper noted.

The editorial mocked Trump’s “trade-war general” Peter Navarro, and his laughable advice to the stock market that “we’re cool here.” The editors scoffed: “Got that, markets? Just chill, baby.”

Instead, the newspaper warned, “markets are wondering if we’re heading toward mutual assured economic destruction.”

In a final dig, the editorial asked: “What was that again about trade wars being easy to win?”

You can check out the entire editorial, “Just Another Manic Friday,” on The Wall Street Journal.

CORRECTION: An earlier version of this article said the Wall Street Journal editorial was published Saturday. It went live on the website Friday.

WSJ articles are subscription only so we'll just make do with this huffpost encapsulization.

[GeneChing]

As I've said in our Trade War thread:

I usually steer clear of politics here, but the potential U.S/P.R.C. Trade War has already impacted our industry. The bulk of martial arts equipment distributed in the U.S. - not just Chinese but Korean and Japanese too - even MMA - is manufactured in China. We've already felt some impact and are trying to keep prices down, but this may bode poorly for U.S. martial arts suppliers and consequently, U.S. martial arts. We know where our competitors get their merch. It's not like there are that many martial arts manufacturers in the world.

The rising Hate Towards China may exacerbate boycotts and the trade war. However, this will affect products across the board - not just martial arts gear.

[Jimbo]

As I've said in our Trade War thread:


The rising Hate Towards China may exacerbate boycotts and the trade war. However, this will affect products across the board - not just martial arts gear.

Unfortunately, in regards to manufacturing, companies the world over have ‘put all their eggs in one basket’ in China, and now we will (most likely) see the dire consequences of that. I realize that manufacturing in China is cheaper, but regarding martial arts uniforms alone, I would rather spend more for a quality product that’s going to last, than buy a cheap product that wears out prematurely. Then you haven’t saved any money at all, but are actually spending more in the long run, because you have to keep replacing cheap gear. There is a saying: “Buy quality and cry only once.”

Not that that has any bearing on me anymore. Since I no longer attend classes or teach, my training “uniform” for the past several years has consisted of sweat pants (or loose-fitting cargo pants) and a T-shirt.

The time is long overdue for US and other international companies to move manufacturing, if not all back home, then to other, alternate countries outside of China. I say this, and I am not anti-China (but I’m not getting into politics). I am anti-over-reliance on China, or any other country, on making everything we depend on and giving one country so much power.

[GeneChing]

...it's all still going.

Hong Kong: China vows to retaliate after Trump ends special economic status
4 hours ago

Media caption"Their freedom has been taken away"

China has vowed to retaliate after the US ended Hong Kong's preferential trade status and imposed sanctions on officials who crack down on rights.

President Donald Trump said he was acting because China had taken away Hong Kong's freedom after it imposed a new security law.

Beijing condemned Mr Trump's decision, saying it would impose sanctions on relevant people and entities in the US.

US-China ties have become increasingly strained over a wide range of issues.

Apart from Beijing's actions in Hong Kong, Mr Trump has criticised China over its handling of the coronavirus pandemic as well as its military build-up in the South China Sea, its treatment of Muslim minorities and massive trade surpluses.

Mr Trump's decision means the end of Hong Kong's special trade status with the US, agreed in 1984 when the territory was still a British colony. Hong Kong is expected to be treated the same as mainland China, meaning its goods could be subjected to additional tariffs.

The controversial security law - which effectively outlaws criticism of China's government - is the most sweeping change to the political landscape of Hong Kong since the UK handed back sovereignty to Beijing in 1997.

Mr Trump also said he had signed the Hong Kong Autonomy Act, which passed unanimously in Congress earlier this month and penalises banks doing business with Chinese officials who implement the security law.

In a strongly worded statement, China's foreign ministry described the decision as a "gross interference" in its domestic affairs and said the country would impose retaliatory sanctions to "safeguard China's legitimate interests".

"The US attempt to obstruct the implementation of the national security law for Hong Kong will never succeed," the statement said.

"We urge the US side to correct its mistakes, refrain from implementing the act and stop interfering in China's internal affairs in any way. China will firmly respond if the US goes ahead."

What did President Trump say?

Speaking in the Rose Garden on Tuesday, Mr Trump said the executive order was intended to "hold China accountable for its aggressive actions against the people" of Hong Kong.

"No special privileges [for Hong Kong], no special economic treatment and no export of sensitive technologies," said the president, who first announced in May that his administration would begin paring back the territory's special status.

According to a document released by the White House, any dealings in US property by anyone determined to be responsible for or complicit in "actions or policies that undermine democratic processes or institutions in Hong Kong" would be blocked.

It also directs officials to "revoke license exceptions for exports to Hong Kong," and includes revoking special treatment for Hong Kong passport holders.

Mr Trump said the Hong Kong Autonomy Act gave the administration "powerful new tools to hold responsible the individuals and the entities involved in extinguishing Hong Kong's freedom".

After being questioned by a journalist, the president said he had no plans to speak to Chinese President Xi Jinping.

Mr Trump also said his administration held China "fully responsible for concealing the [coronavirus] and unleashing it upon the world". His own response to the pandemic has been under scrutiny, as the US has 3.4 million recorded cases, the highest in the world, and more than 136,000 deaths.

The president's policy address digressed into a lengthy political attack on his Democratic presidential challenger, Joe Biden, ranging from trade and immigration to policing and climate change.

Perception is reality

It was not a matter of if, but when. Scrapping Hong Kong's special status will mean companies based there will now have to evaluate what this means for them.

Hong Kong is a re-exporting hub, which means that goods that go through Hong Kong to the US but have come from somewhere else - like China for instance - have avoided the tariffs the US has slapped on China.

Now that Hong Kong's special status is gone - mainland Chinese companies may look for another place to send their goods - which would see Hong Kong's port and logistics businesses suffer.

And how much of an impact will this have on American and multinational companies using Hong Kong as a regional hub? Well, as one business consultant told me - the structural reasons for why a company would use Hong Kong as a hub are still there - low tax rates, good geographic location, convertibility of currency.

But perception is reality - and if the perception is that doing business in Hong Kong has become so much more onerous - why not decamp to mainland China or Singapore instead?

What is going on with US-China relations?

With Mr Trump facing an uphill battle for re-election this November, he and Mr Biden have accused each other of being weak on China.

On Monday, the administration condemned China's military build-up in the South China Sea, accusing it of bullying neighbours.

Last Friday, Mr Trump told reporters on Air Force One that a "phase two" trade deal with China was in doubt because of its handling of coronavirus, which he called the "plague".

The US also officially withdrew last week from the World Health Organization, which Mr Trump had accused of being beholden to China.

Last week, too, the Trump administration announced sanctions against Chinese politicians who it says are responsible for human rights violations against Muslim minorities in Xinjiang.

[GeneChing]

Economy / China Economy
US trade deficit with China wider than May 2016, when Donald Trump accused China of ‘greatest theft in history’
The US trade deficit with China was 9.15 per cent wider in July 2020 than May 2016, when President Donald Trump accused China of ‘raping’ the US on trade
After narrowing in the early months of the year due to coronavirus shutdowns, the deficit has recovered in recent months

Finbarr Bermingham
Published: 10:25am, 4 Sep, 2020


US President Donald Trump has vowed on the campaign trail to eradicate a yawning trade deficit with China that he claimed showed the inequities in the global trading system. Photo: Bloomberg

The United States’ trade deficit with China has crept back up close to pre-coronavirus levels after narrowing when the outbreak battered the Chinese economy.
The deficit with China – the gap between the amount the US buys from China and what it sells – was US$31.62 billion in July, just 3.46 per cent lower than US$32.8 billion in July 2019, data released by the US Census Bureau on Thursday showed.
But the rate at which it has grown in recent months will rattle US President Donald Trump, who vowed on the campaign trail in 2016 to eradicate the yawning gap that he claimed showed the inequities in the global trading system.
In quarterly terms, the deficit climbed 36.8 per cent from the first three months of the year to the second, even if it is markedly lower in year-to-date terms than it was last year, due to a shutdown of China’s export engine in the early months of the year, when it was the first to be hit by the coronavirus pandemic.
But perhaps most tellingly, the US trade deficit with China was 4.36 per cent wider last month than it was in July 2016, when Trump was on the campaign trail raging against it. Last month’s deficit was 9.15 per cent wider than May 2016, a month when Trump accused China of “raping” the US on trade.
“Do not forget. We’re like the piggy bank that is being robbed. We have the cards. We have a lot of power with China,” Trump said at the time, during a campaign rally in Fort Wayne, Indiana. “Because we cannot continue to allow China to rape our country. And that is what they’re doing. It’s the greatest theft in the history of the world.”
That rhetoric has not entirely subsided in the intervening four years, with tensions between the US and China now at their highest level for 40 years. Trade is seen as the one sticking plaster holding the relationship together, but even that is stuttering along, rather than powering home.
Reuters agricultural columnist Karen Braun reported that US exports of soybeans to China between January and July 2020 were the lowest since 2004, and while August’s volumes have bounced back with an 18 per cent rise year on year, they are the lowest since 2008 if last year was excluded.
Enormous purchases of American agricultural products in recent weeks have not stopped China from being well short of meeting its obligations under the phase one trade deal, which remains electorally important for Trump, given that key exporting states such as Iowa, Nebraska and Minnesota are considered in play in November’s poll.
The overall US trade deficit jumped to its highest level in 12 years in July, as imports soared and exports grew by a smaller margin.
US imports from Taiwan also jumped to record levels in July, helping to add to the overall trade deficit.
Economists have said that prioritising the reduction in the trade deficit is a fool’s errand, since the economic profile of the consumption-driven US means it will naturally buy more goods from cheaper, lower-end manufacturing hubs.

Everyone recognises that the overall direction of the economy is grim
Christine McDaniel

The fact that it narrowed by 32 per cent from a year earlier in the first quarter was not a cause to celebrate, critics said, because it represented a collapse in consumption in the US and a collapse in manufacturing in China due to the coronavirus.
“Needless to say, everyone recognises that the overall direction of the economy is grim. But this is what reducing the trade deficit looks like: relative to our exports, we import less. Today, we are importing less because Americans are consuming less during an economic shut down,” wrote Christine McDaniel, a senior research fellow with the Mercatus Center at George Mason University, in April.
On Monday, China will release its official trade data for August, which is expected to show continued recovery in the export-led economy.




CONVERSATIONS
Finbarr Bermingham

Finbarr Bermingham has been reporting on Asian trade since 2014. Prior to this, he covered global trade and economics in London. He joined the Post in 2018, before which he was Asia Editor at Global Trade Review and Trade Correspondent for the International Business Times

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[highlypotion]

A little impatience will spoil great plans.