Miscellaneous News

[iewgnem]

I wonder if the intention is some kind of "trap" - where the US will simply demand all countries to put tariffs on China to get relief.
While the tributaries/vassals would certainly comply, it may not extend much further.

Americans spends too much time thinking about how to coerce others themselves, they never stopped to think if the country that controls half of global industry and the largest trading partner of most country on earth can also coerce others.

IMO the retaliatory tariff is mostly just symbolic so simple minded Americans don't get any illusions, the real punishment are all the export controls and investigations into US MNCs.

 

[BlackWindMnt]

Dam i would have expected economic bifurcation to be something happening in the background over the course of a decade plus.
Not in like 2 weeks like Trump is doing..

Is this why Wang Yi went to Moscow to meet Putin and co. Probably said something like "We are going on the offensive on the economic front, take in Ukraine whatever you want Brothers"

 

[plawolf]

I wont be surprised if in the future i see Finbarr in media like politico in the future...

.....

https://twitter.com/i/web/status/1909812789348094419

Same desperate wishful thinking energy, just with 0% of the charm and 1000% more incel rage.

 

[iewgnem]

https://twitter.com/i/web/status/1909812789348094419

There is actually another very interesting strategic dimension to this: tariff are actually fundamentally different from supply cut off, a lot of American companies already planned for or costed for tariffs, e.g. if Chinese input make up 20% of their input, they only need to raise final sales price by 20% to cover the tariffs, which isn't that extreme.

But if that 20% input gets cut off cold however, there is no planning against it and they go out of business. We're already seeing a lot of Chinese suppliers just all-together telling US client they're giving up on the US market and supplies are getting cut off cold, but 400% tariff will do the same thing, i.e. there's no absorbing increasing sale price by 80%

What Mr. Don't-Let-My-Wife-On-A-Boat suggest here is possibly what China's going for: if Trump gets goaded into increasing tariff to 400%, or 1000%, then he turns a cost problem into a supply chain crisis that we already seen the effect of during COVID, China gets to effectively destroy a large chunk of American industry without taking a single iota of blame. And all China has to suffer is an 8% loss in revenue

 

[Sinnavuuty]

China has three options for retaliation:

a) Sell all US government bonds, basically in one or two days

b) Block the export and sale of all types of US agricultural products, including orders already placed.

This would generate a rapid and cruel shock to the US economy

Since:

The rapid rise in interest rates would force the FED to intervene by cutting interest rates or buying bonds, weakening the dollar.

If this were not done, banks would collapse instantly.

The immediate ban on US agricultural products would lead to the largest bank failure since the 1930s and a collapse in the value of farmland, with a build-up of food that would spoil. It would lead to a need for trillion-dollar stimulus from the US government to save all agricultural productivity, also weakening the dollar.

China would suffer from such retaliation too, but it would go down with a bang.

Option c) would be the breaking of American patents. Imagine the impact this would have on the stock market when the Global South was flooded with American products and services renamed by Chinese companies. It would cause even more stress on the American stock markets, impacting millions of Americans who have their savings invested in the stock market.

 

[iewgnem]

China has three options for retaliation:

a) Sell all US government bonds, basically in one or two days

b) Block the export and sale of all types of US agricultural products, including orders already placed.

This would generate a rapid and cruel shock to the US economy

Since:

The rapid rise in interest rates would force the FED to intervene by cutting interest rates or buying bonds, weakening the dollar.

If this were not done, banks would collapse instantly.

The immediate ban on US agricultural products would lead to the largest bank failure since the 1930s and a collapse in the value of farmland, with a build-up of food that would spoil. It would lead to a need for trillion-dollar stimulus from the US government to save all agricultural productivity, also weakening the dollar.

China would suffer from such retaliation too, but it would go down with a bang.

Option c) would be the breaking of American patents. Imagine the impact this would have on the stock market when the Global South was flooded with American products and services renamed by Chinese companies. It would cause even more stress on the American stock markets, impacting millions of Americans who have their savings invested in the stock market.

We don't even know for sure if China is behind the surge in UST yield so far, why play your entire hand when you can achieve the same effect by playing one card at a time. America is already suffering massive damage from Trump going cold turkey, IMO China should let America do most of the work themselves.

As for China, if America disappeared from earth tomorrow, damage to China would be a one off -10% YoY export, but even that would be more than offset by all the increase in revenue from taking over marketshare from destroyed American industries. This is another dimension I haven't see many people talk about.

 

[Sinnavuuty]

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According to this, it started with the hedge funds, they are having sell off treasuries because they can’t get the funds through lending and they have to cover their margin calls because the stock market got nuked. At least that’s from my limited understanding someone more versed please explain.

Explanation:

Imagine you (a hedge fund) buy bonds and sell futures of the same bond to make a small but well-leveraged arbitrage profit, which gives you a good amount of money.

This operation is called a “basis trade”.

But to have money to do this operation, you need to borrow. And to borrow, you use collateral/pledge (bonds) . But your borrowing cost has exploded due to market instability and you are forced to sell your position (the bond) at a loss.

Can you imagine everyone repeating the same thing by selling bonds?

This is called an “unwind of the basis trade”.

Bond prices fall, INTEREST RATES GO UP.

No, it’s not the death of the dollar (yet)…

Here:

https://twitter.com/i/web/status/1909880139388690464

 

[Sinnavuuty]

We don't even know for sure if China is behind the surge in UST yield so far, why play your entire hand when you can achieve the same effect by playing one card at a time. America is already suffering massive damage from Trump going cold turkey, IMO China should let America do most of the work themselves.

From what I've seen, China sold a little over $50 billion, but this has been going on for some time. It remains to be seen whether they sold bonds massively, which doesn't seem to have been the case yet. The broader explanation for interest rates rising is in my comment above that I responded to.

 

[daifo]

Glenn found the amount of services and us mnc trade are in China which the US don't account for in their deficit account. If you take those in, the trade is closer to balance than unbalenced.

https://twitter.com/i/web/status/1909873793973338353

 

[FriedButter]

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U.S. crude oil tumbles more than 6%, trades below $56 as China imposes retaliatory tariffs​

U.S. crude oil futures fell more than 6% on Wednesday, as China slapped retaliatory tariffs on the U.S. after President Donald Trump’s sweeping levies took effect.

The U.S. benchmark dropped $4.01, or 6.7%, to $55.57 per barrel by 7:53 a.m. ET. Global benchmark Brent tumbled $4.04, or 6.4%, to $58.78.

The oil sell-off took a leg lower after Beijing announced tariffs of 84% on U.S. goods in response to Trump’s levies. China’s tariffs take effect on April 10.

Traders are worried the world is descending into a full-blown trade war that will trigger a recession, hitting crude oil demand. OPEC+, meanwhile, has agreed to accelerate output in May, which will bring more oil to a market that was already facing a surplus.

The collision of recession fears and growing oil supply is a “toxic cocktail,” Helima Croft, global head of commodity strategy at RBC Capital Markets, told CNBC on Tuesday.

The U.S. and Iran are scheduled to hold talks in Oman on Saturday to discuss the Islamic Republic’s nuclear program. Successful negotiations could result in more Iranian oil entering the global market.

FYI. Russia break even is estimated around ~$45 per barrel but a lot of US oil is between ~$55 to $60. If OPEC is willing to eat an bullet then they could run US oil into an crisis under Trump lol.