Trade War with China
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Last week we documented several instances of China's most recent monetary easing, from the expanded usage of the Medium-Term Lending Facility to purchase China's equivalent ot junk bonds, to the barely noticed 103bps cut in China's 3-Month Treasury rate, even as the PBOC had cut the RRR three times already, most recently at the end of June.
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- allow all firms to deduct 75% of their R&D expenses from tax, which they estimate can save firms RMB 65bn for the full year;
- speed up the disbursement of tax rebate for some industries by end of September; and
- accelerate the issuance and disbursement of RMB 1.35trn local government bonds, to help ongoing infrastructure projects.
With the message from the State Council on Monday, Deutsche Bank now expects growth of infrastructure investment to rebound in H2 to 10%.
This is the answer for Trump customs / trade barriers. : )
The effect of the trade barrier is the restriction of the Chinese capability to buy treasuries.
That is visible from the next :
As , this week we will see a massive amount of short-term bond issuance, with the amount of 2, 5 and 7Y auctions rising to the highest amount since 2013. And moments ago, we were off when the Treasury sold $35BN in 2Y bonds, $1BN more than last month, at a yield of 2.657%, above last month's 2.538% and the highest going back a decade to July 2008, and a 0.1 basis point tail to the 2.656% When Issued.
Of course everybody ramble about the how bad is Trump decision about the tariff, taking the example of Smoot-Halley
4. Smoot-Hawley Tariff Act 1930
Some economists blame the Smoot-Hawley Tariff Act of 1930 for exacerbating the Great Depression.Implemented with the aim of saving US factories, the act raised tariffs on more than 20,000 kinds of imported goods — despite a petition signed by more than 1,000 economics and threats of retaliation from other countries.
The act did not revive the American economy, as its architects envisioned, however. Instead, it is blamed for spreading protectionist policies around the globe, helping global trade plummet by about 26 percent in the years after its signing.
Smoot-Hawley “was such a disaster that it’s held sway over American trade policy for over 80 years,” said Joshua Meltzer, a senior fellow at the Brookings Institution who teaches international trade law at Johns Hopkins University. “No one wants to repeat it.”
Following World War 2, the World Trade Organization was formed to regulate international trade and prevent a repeat of destructive trade policies.
However they forgot that NOT the Smoot-Hawley was the issue, but the response from the trade partners, and the introduction of tariffs in Europe.
The US was running very high trade surplus at that point of time.
That was the reason why during the foundation of IMF they didn't cared about the trade balances, they considered that as an advantageous for the USA ( to be able to run huge trade surplus)
The European tariffs killed the US economy, and its recovered only during the second world war.
Without retaliatory tariffs the US economy should ended better, but with wider trade surplus.
The treasuries / trade deficit is the other way ( the first is the military) to control countries.
But this is paid by the extinction of the USA middle class.
Imperialism, made in USA.
Equation
Lieutenant General
It is called...I gotta distract the public from my constant Russian probing desperation act.
This bailout shows how deadly China's tariffs are to Trump despite the idea of China being unable to continue the soybean tariffs due to domestic needs ( link and link)
Key GOP senators rip Trump's farm bailout: 'America’s farmers don’t want to be paid to lose'
Published 3 Hours Ago Updated 2 Hours AgoCNBC.com
Tom Williams | CQ-Roll Call Group | Getty Images
Sen. Bob Corker, R-Tenn., talks with reporters in the Capitol's Senate subway before the Senate Policy luncheons on June 19, 2018.
Republican senators Tuesday condemned the Trump administration's $12 billion bailout plan for farmers hit by crippling tariffs on their goods.
Sen. , R-Neb., came out swinging , describing it as a pair of "gold crutches" to support the farmers hobbled by President 's own trade policy.
“This trade war is cutting the legs out from under farmers and the White House’s ‘plan’ is to spend $12 billion on gold crutches," Sasse, a frequent Trump critic, said in a statement.
"America’s farmers don’t want to be paid to lose — they want to win by feeding the world. This administration’s tariffs and bailouts aren’t going to make America great again, they’re just going to make it 1929 again,” he added.
Key GOP senators rip Trump's farm bailout: 'America’s farmers don’t want to be paid to lose'
- Republican senators condemned the Trump administration's recently announced plans to bail out U.S. farmers hit by crippling tariffs on their goods.
- “This trade war is cutting the legs out from under farmers and the White House’s ‘plan’ is to spend $12 billion on gold crutches," said Nebraska Sen. Ben Sasse.
- Tennessee Sen. Bob Corker called on the Trump administration to "reverse course and end this incoherent" tariff and said the administration was "offering welfare to farmers to solve a problem they themselves created."
Published 3 Hours Ago Updated 2 Hours AgoCNBC.com
Tom Williams | CQ-Roll Call Group | Getty Images
Sen. Bob Corker, R-Tenn., talks with reporters in the Capitol's Senate subway before the Senate Policy luncheons on June 19, 2018.
Republican senators Tuesday condemned the Trump administration's $12 billion bailout plan for farmers hit by crippling tariffs on their goods.
Sen. , R-Neb., came out swinging , describing it as a pair of "gold crutches" to support the farmers hobbled by President 's own trade policy.
“This trade war is cutting the legs out from under farmers and the White House’s ‘plan’ is to spend $12 billion on gold crutches," Sasse, a frequent Trump critic, said in a statement.
"America’s farmers don’t want to be paid to lose — they want to win by feeding the world. This administration’s tariffs and bailouts aren’t going to make America great again, they’re just going to make it 1929 again,” he added.
If the changes do occur tomorrow, it looks like US airlines and the US government can't handle China's economic pressure in regards to air travel, and it shows to President Tsai that the idea of independence is out of the question.
US airlines poised to change Taiwan references as China deadline looms
Chen Chi-Chuan | AFP | Getty Images
An airline crew walks past a sign at the Taoyuan international airport.
Major U.S. airlines are expected to change how their websites refer to Chinese-claimed by Wednesday in an effort to avoid Chinese penalties, three sources said, after coordination between the carriers and the U.S. government.
Beijing has demanded that foreign firms, and airlines in particular, not refer to self-ruled Taiwan as non-Chinese territory on their websites, along with Hong Kong and Macau, a move described by the in May as “Orwellian nonsense”.
China set a final deadline of July 25 for the changes, and last month rejected U.S. requests for talks on the matter, adding to tension in relations already frayed by an escalating trade conflict.
Numerous non-U.S. airlines including , and British Airways have already made changes to their websites, according to Reuters checks, after China’s Civil Aviation Administration sent a letter to 36 foreign air carriers earlier in the year.
US airlines poised to change Taiwan references as China deadline looms
- Beijing has demanded that foreign firms, and airlines in particular, not refer to self-ruled Taiwan as non-Chinese territory on their websites, along with Hong Kong and Macau.
- China set a final deadline of July 25 for the changes and rejected U.S. requests for talks on the matter.
- It was unclear how China might punish airlines that do not comply.
Chen Chi-Chuan | AFP | Getty Images
An airline crew walks past a sign at the Taoyuan international airport.
Major U.S. airlines are expected to change how their websites refer to Chinese-claimed by Wednesday in an effort to avoid Chinese penalties, three sources said, after coordination between the carriers and the U.S. government.
Beijing has demanded that foreign firms, and airlines in particular, not refer to self-ruled Taiwan as non-Chinese territory on their websites, along with Hong Kong and Macau, a move described by the in May as “Orwellian nonsense”.
China set a final deadline of July 25 for the changes, and last month rejected U.S. requests for talks on the matter, adding to tension in relations already frayed by an escalating trade conflict.
Numerous non-U.S. airlines including , and British Airways have already made changes to their websites, according to Reuters checks, after China’s Civil Aviation Administration sent a letter to 36 foreign air carriers earlier in the year.
To counter the outside sells of Treasuries, the Fed has to raise the interest rates for the new bonds it sells, otherwise the investors are going to buy the older issued bonds and not the new bonds the Fed has issued. Raising the interest rates raises the costs of the borrowing, which raises the cost of doing business, and generally puts a downward pressure on the stock market as inflation goes up. The US depends on cheap credit. For China, it needs to stop supplying this cheap credit.
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