Trade War with China

The U.S. administration's tariffs on Chinese products, which expanded to an additional 200 billion U.S. dollars' worth of goods in September, are forcing businesses to rethink their supply chains.

But given China's comparative advantages as well as cost and market rules, it would not be easy to shift the supply chains away from China, U.S. trade experts have told Xinhua.

CHINA: ONLY SOURCE OF IMPORTS FOR MANY PRODUCTS

"Tariffs are taxes that raise costs for businesses and consumers. Families will see higher prices for countless products. For retailers, tariffs are very disruptive to complex global supply chains," U.S. National Retail Federation (NRF) spokeswoman Bethany Aronhalt told Xinhua.

"Right now, retailers are assessing their supply chains to determine possible alternative sources, but for certain products, China is the only source that exists," she said.

The NRF is the world's largest retail trade association representing discount and department stores, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries and regions.

The group, the spokeswoman said, holds that "tariffs and the retaliatory actions that follow are a threat to just about every sector of the U.S. economy, including manufacturing, agriculture, technology, retail, energy and more."

Adjusting supply chains is "not that simple in a global economy. Businesses make production or sourcing decisions months and years in advance, and they rely on very complex supply chains," she said.

"Retailers and other importers could not easily or quickly switch to domestic sources because they do not exist on the scale that would be needed," she said.

"Even if there were to be an eventual switch to U.S. sourcing, it would take years to build up a base to support it. And for many products subject to tariffs, China is the sole source of U.S. imports. No alternative sources exist," she said.

WHAT ARE CHINA'S ADVANTAGES?

As the new wave of tariffs which came on top of the 50 billion dollars' worth already taxed earlier this year begins to make China look more expensive, few other places around the world could match China's advantages -- its highly skilled labor and the reliability of the supply chains.

Before the tariffs, some labor-intensive manufacturers have already started leaving China as the country's wages have risen for the past 10 to 15 years in a row, Mary Lovely, an American professor of economics and an expert on trade with China, told Xinhua in an interview.

They have already seen apparel, footwear, toys, sporting goods and some electronics moving elsewhere in Asia.

"These are things that we would expect because as China develops, the rest of East Asia or the poorer countries of East Asia also expect to be pulled along with that train," said Lovely, who is a professor of economics at Syracuse University and a nonresident senior fellow at the Peterson Institute for International Economics.

"China is an engine of growth for the region, so none of that is surprising," she said.

"The tariffs will likely accelerate that," she said, adding that firms that are thinking about moving will probably go ahead because these additional 25 percent tariffs will make it very tough for them to compete with subcontractors in other countries that won't face these tariffs.

"And that puts competitive pressure on China so it will accelerate changes in global value chains," she said.

But not all firms can do that, she said.

For one thing, companies produce or purchase higher value items from China, which are made by more highly skilled labor and are reflecting relationships that have developed, she said.

"Many of those supply chains are certified by the FDA (Food and Drug Administration) in the United States or other regulatory bodies and moving them is difficult," she said.

"So there's a great deal of uncertainty and firms are really in doubt as to what they should do because moving the supply chain is costly. Before you want to do that, you want to make sure that it's something that you really need to do," she said.

She warned that "the uncertainty causes a kind of paralysis on investment and we are already seeing some slowdown in investment flows."

According to data from the U.S. Bureau of Economic Analysis released in July, net foreign direct investment dropped to 51.3 billion dollars in the first quarter, a 37 percent fall from the same quarter in 2017 and a 65 percent decline from the first quarter of 2016.

UNINTENDED CONSEQUENCES FOR U.S.

The Texas-based arts and crafts retail chain, Michaels, has warned in early September that retail prices could be hit by the U.S. administration's new round of tariffs on Chinese imports.

An estimated 400 million dollars of its product costs would be subject to the new round of tariffs, Chief Executive Officer Chuck Rubin told a Goldman Sachs Group Inc. retail conference in New York on Sept. 5.

But the cost of goods to fill its shelves is not what annoys the largest American arts and crafts retail chain most as Michaels has "a lot of levers" it can pull to mitigate the impact, Rubin said.

While the company with a large bulk of its goods coming from China is looking into shifting manufacturing to other countries, he said, "There is virtually no possibility of moving manufacturing into the U.S."

Companies that are forced to rethink their sourcing may find their hands tied as "supply chains are built by companies with great care and substantial analysis," said Professor Robert Sicina, executive in residence of Kogod School of Business at the Washington-based American University.

"To disrupt them is to negatively impact the confidence firms have in the U.S. having a consistent policy," Sicina told Xinhua in an interview.

"Without consistency, firms will move their supply chains away from the U.S., not towards it. This is just one example of the unintended consequences of President (Donald) Trump's actions," said Sicina, who has 30 years of experience in senior executive positions at big banks and various entrepreneurial endeavors.

"The supply chain is always going to move to where the economics are best," he said, adding that "the economics are overwhelmingly in favor of China."

Another major, long-term unintended consequence, Sicina said, is that "foreign investment in the U.S. will also be disrupted because of the tariffs."

When investment flows into the United States, foreign investors have to consider its trade policies, as extra tariffs will impact investors' ability to import raw materials and export their products, Sicina said.

"Trump's trade war is to curb foreign investment in the future, because they're going to lack confidence that the U.S. will play by the rules, because it's now breaking the rules of fair trade in expectation of cutting a better deal with China," he said.

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Anlsvrthng said:

There are more options on the spectrum.

And we don't know.
Maybe the US/China willing to go very far with war without going to MAD.

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Viktor Jav said:

That is Bloomberg's issue, not mine to address.

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Security researcher cited in Bloomberg's China spy chip investigation casts doubt on story's veracity

Security researcher Joe Fitzpatrick, one of the few sources named in Bloomberg Businessweek's bombshell Chinese hack investigation, in a podcast this week said he felt uneasy after reading the article in part because its claims almost perfectly echoed theories on hardware implants he shared with journalist Jordan Robertson.
...
I have the knowledge to look at the technical details and see that they're jumbled. They're not outright wrong, but they are theoretical," he said. "I don't have the knowledge to know the other conversations — the other 17 sources and what they said, but I can infer based on the technical side of things that the non-technical side of things may be jumbled the same way."

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Apple tells Congress it found no signs of a hacking attack
CNBC

Apple's top security officer told Congress it had found no sign of suspicious transmissions or other evidence that it had been penetrated in a sophisticated attack on its supply chain.

Apple Vice President for Information Security George Stathakopoulos wrote in a letter to the Senate and House commerce committees that the company had repeatedly investigated and found no evidence for the main points in a Bloomberg Businessweek article published on Thursday.

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AndrewS said:

I think Bloomberg must really be sweating now.

There are supposedly 30 companies involved, so they were probably expecting a deluge of confirmation reports.

But all we've heard is silence from those unnamed companies and categorical denials from the companies that have been named

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B.I.B. said:

Can Bloomberg be sued?

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US Vice President Mike Pence’s latest speech talked a lot about historical events between China and the US from the perspective of God, but unfortunately, his words are mostly selective memories, many of which are not in line with historical facts.

In the speech, Pence also talked about China’s current development from God’s perspective and the superiority of the “Savior” behind his words is undoubted.

Pence mentioned that the US gave Beijing open access to its economy, and brought China into the World Trade Organization (WTO). The implication is that China should thank their “acceptance”. However, he did not mention China’s hard work in joining the WTO, nor did he mention that China’s access to the WTO was the result of several rounds of multilateral negotiations, not the unilateral “gift” from the US.

As Pence said, “over the past 17 years, China’s GDP has grown nine-fold; it’s become the second-largest economy in the world,” but behind all this, it’s China’s 287 million migrant workers, 20 million private entrepreneurs and millions of families trying to change their own destiny that made this happen. There are also countless Chinese people who would leave their homes in the process of urbanization and are willing to seize the meager profit in the process of globalization.

No one knows more about the meaning of self-reliance than the Chinese. China’s development, without exporting revolutions and refugees, is based on its own hard work one step at a time. If such diligence is also a mistake, then which is the so-called correct path?

Pence believes that there was a “great trade deficit” between China and the US, so it can be said that the US “rebuilt China” over the last 25 years”, but he deliberately avoided the essence of free trade, which is that two parties buy and sell at their own will. In June, the research report released by Deutsche Bank said the US actually obtained more commercial net benefits than China in China-US bilateral trade.

In those years, China had to sell hundreds of millions of shirts to import a large passenger plane. Profits obtained by China and the US were 5% and 84%, respectively, when China exports suits worth $450. Not to mention Apple mobile phones used by young Chinese: an Apple 7 mobile phone sells for a minimum of $649, but its production cost Apple paid for China’s factories accounts for less than 1%. We wonder how Pence’s theory can have a leg to stand on when he faces such facts.

We know that China’s reform and opening up is a great process of development and progress of China and the world. We believe that people in many parts of the world have felt the goodwill of the Chinese people and Chinese government. This is also why China’s Belt and Road Initiative can attract many countries to participate and why China’s idea of “a community with a shared future for humanity” is included in UN documents.

We regret to see that the US still holds a double standard in today’s economic globalization.

Pence accused Chinese warships of driving away the US warships, but did not mention that the US warships sailed 12 nautical miles within the Nansha Islands of China. He said China “militarizes the South China Sea”, but did not mention the US is always engaged in military exercises in this region, sending large amounts of advanced weapons to the South China Sea and constantly constructing new military bases.

Pence complained that China’s military spending is higher than all countries in the Asia-Pacific region combined, but didn’t mention that the US military spending in fiscal year 2019 reached more than 700 billion dollars, not only the highest in its history, but also more than the rest of other big countries combined.

On one hand, Pence said that “the Chinese Communist Party is rewarding or coercing American businesses, movie studios, universities, think tanks, scholars, journalists, and local, state, and federal officials”; on the other hand, the US interfered in China’s internal affairs and diplomacy, intervening in China’s opening-up policy, “Made in China 2025” policy and the Belt and Road Initiative.

In his speech, Pence could not even bear China’s “Social Credit Score” construction, criticizing it for “controlling virtually every facet of human life”. However, he forgot that the US has built a credit system for more than a century, reluctant to admit that every American is required to apply to the federal government for a lifetime social security number (SSN) when they are born, and unwilling to recognize that one can go nowhere in the US without credit.

As for Pence’s accusation that “China has initiated an unprecedented effort to influence American public opinion, the 2018 midterm elections, and the environment leading into the 2020 presidential elections”, not only does China feel wronged, but US Secretary of Homeland Security Kirstjen Nielsen said on October 3 that there’s no indication that China intends to interfere in the midterm elections. It’s the US that should reflect on how it has used its social networking sites to make turbulence in the Middle East and trigger a chain of revolutions.

China has shown great patience, dignity and sobriety to face the increasingly provocative and aggressive anti-China words of the US, British scholar Martin Jacques said. He said that if China follows the same approach to confront the US, China-US relations will sharply decline, bringing serious consequences to the entire world.

There is a line in the movie Spiderman which goes, “With great power comes great responsibility.” As the world’s biggest superpower, the US should match its words with action. Regrettably, people have become more and more disappointed over the years.

The US withdrew from the Paris Agreement, UNESCO and the UN Human Rights Council...In October, the country withdrew from the treaty of friendship signed with Iran and also the optional protocol and dispute resolution to the Vienna Convention on Diplomatic Relations.

The previous “free trade standard bearer” has now become the base of protectionism and has frequently set limits on various trade activities, claiming national security. US products such as the iPhone can be found everywhere in China, which we don’t regard as a threat. However, if someone buys a Huawei phone in the US, it seems to some people that it threatens US national security. Is the US, the world’s number one superpower, so vulnerable?

We are glad to see the US become “great again,” but such greatness should not be based on superpower dominance or suppression over other countries.

Over the past 40 years, the leaders of China and the US made a historic breakthrough in China-US relations and realized “a handshake across the Pacific” with the political courage and wisdom of strategists. Chinese President Xi Jinping held night talks at Yingtai with former US President Barack Obama and had a tea break at the Forbidden City with US President Donald Trump. At that time, the whole world could see that “there was enough space on both sides of the Pacific Ocean to accommodate the two great powers.”

This year marks the 40th anniversary of the establishment of diplomatic relations between China and the US. As members of the young generation, we believe that if the US develops the right way, China will benefit from it, and vice versa.

After all, China and the US are the two largest countries in the world today. If the two countries get along with each other, huge positive energy could be generated not only for the two but also for the world.

The renowned US writer Mark Twain once said that if all you have is a hammer, everything looks like a nail. Just as a Western saying put it, a bit of fragrance clings to the hand that gives flowers. We hope that fewer people hold hammers and more carry roses. The world, after all, belongs to those who open their arms rather than clench their fists.

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