Posted yesterday p.m.: SCARY FED
White House Plans to Escalate Trade Pressure on China The White House, confident that its hard-line strategy is succeeding, is planning to ratchet up the pressure on China by focusing on new tariffs and threatening to block Chinese technology investment in the U.S.
The additional moves come as President Donald Trump has told his senior aides to investigate the possibility of joining the Trans-Pacific Partnership, a move that would reverse a Trump campaign promise and further challenge China, which isn’t part of the trade pact.
For its part, China is looking to line up other countries against the U.S., Chinese officials said—especially in Europe, whose companies could benefit should China react to the stepped up pressure by retaliating against the U.S. Beijing has already responded to early volleys from Washington in the trade conflict with retaliatory tariffs of its own.
Administration officials familiar with the U.S. strategy say that the U.S. trade representative, as early as next week, will detail which products are on the list of $100 billion in Chinese goods subject to 25% import tariffs. The initial hit list of $50 billion in Chinese imports didn’t include some consumer staples such as clothing, mobile phones or shoes, to minimize consumer impact and limit domestic criticism. But trade experts say the sheer size of the expansion of the hit list makes the inclusion of consumer goods inevitable.
At the same time, the Treasury Department is crafting sharp prohibitions on Chinese investment in advanced U.S. technology, whether by acquisition, joint ventures, licensing or any other arrangement, according to a senior administration official. The agency is targeting China’s subsidization of domestic industries to turn them into so-called technology national champions, the official said.
The administration is debating whether to make the investment restrictions permanent, even if China changes its industrial policies, the official said. (…)
“China basically surrendered [with the Xi speech] and he [Trump] is probably going to put even more pressure on them before he accepts whatever their bottom line becomes,” said a person familiar with White House views. (…)
To try to limit domestic opposition to its tough line, the administration now is working on a program, which could cost billions of dollars, to compensate farmers suffering from Chinese retaliatory tariffs on U.S. crops. (…)
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Pettis: China Has Most to Lose in Trade War
TPP Nations Welcome Trump’s Interest, Don’t Want Renegotiation
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Get Ready for the Unintended Consequences of Trump’s Trade War
Here’s one via the WSJ:
The brewing U.S.-China trade war is compounding problems for companies that peddleused paper, milk jugs and metal. China is the top customer for the vast quantities of recyclable waste generated by the U.S., but the WSJ’s Bob Tita reports a 25% tariff on U.S. scrap aluminum and other recent Chinese restrictions on imported waste are sending the recycling industry into a tailspin. U.S exports of scrap plastic to China dropped 80% from October to January, and prices for mixed aluminum scrap dropped by about 15% over the past month, crumbling profit margins for processors and brokers that sell the material to China. Analysts say Chinese companies may end up buying more scrap aluminum from cheaper sources in Europe. In the U.S., some worry that trash collectors may simply toss recyclables in landfills if they can’t find other buyers.
U.S. Import Prices Are Unchanged
Nonpetroleum import prices ticked 0.1% higher (2.1% y/y) after two months of firm increase. Last 3 months: +4.4% annualized.
TECHNICALS WATCH
Lowry’s Research warns of the low volume during the recent highly volatile sessions. “The market will likely need to show signs of significantly stronger Demand if a breakout from the recent trading range is to be sustained.”
