Trade Wars – No winners

March 2 is getting way too close for comfort.  The stock market crashed yesterday as hopes dimmed on any negotiated settlement.  The two hard core hawks in Trump’s administration (Lighthizer and Navarro) are likely in control, working on the premise that once we exert enough economic pressure, China will cave in.

Trade wars are unlike real wars.  In this case, we know exactly how China will react on March 2 when tariffs go to 25%.  They will try to match us dollar for dollar. It will simultaneously  hurt both countries.   The slowing Chinese economy coupled with a general slowdown in Europe, will make for less demand for US goods abroad.

China can withstand a lot more pain than we can.  They know this and we know this.   Trump talks about doing what is right for our country, while Chinese leaders talk about global cooperation.   Wow, it used to be the other way around.   It is a mess, because we need China’s help in convincing North Korea to end their nuclear plans.

Republicans used to be for free trade, but by embracing Trump’s policies, they are really for isolation and protectionism.

Stay tuned.

Dave

Wanzhou Meng’s Arrest

Wanzhou Meng is the Chief Financial Officer of Huawei Technologies, Inc, a rapidly growing technology company in China.  (See links)  She has been arrested in Canada and is awaiting deportation to the US.  I believe the Canadian court will rule in favor of deportation.

How big an impact can the arrest of one person have a major impact on trade relations and the world economy?   It can be huge.  I believe there is an analogous situation.  The small country of Tunisia likely understands why her arrest is such a big deal.

Almost exactly eight years ago, one simple street peddler named Mohamed Bouazizi  provided the spark to ignite Arab Spring.  After being shaken down for a bribe by local police, and having his cart confiscated, he returned to the plaza and lit himself on fire.   In 2012, the leaders of Tunisia, Egypt, Libya and Yemen were all forced out through civil war.  Civil uprisings occurred in Bahrain and Syria.   Other protests occurred through the Arab world, including Algeria, Iraq, Jordan, Kuwait, Morocco, Oman, and Sudan.  The rebellion in Tunisia lit the way, showing that repressive regimes could be overthrown.  What happened in Tunisia was aired throughout the Arab world in real time.

Wanzhou Meng is the new Mohamed Bouazizi.  She is a symbol to both Xi  government and his vision of China’s role in technology.  She is a symbol also to the  people of China and the idea that Donald Trump (and the US) are bullies, getting their way through threats.  This creates a new unity within China against any trade agreement.   It isn’t something our Trade Representative, Robert Lighthizer is prepared to deal.  That said, I don’t really know how one deals with the psychological impact of Meng’s arrest.

From his biographical statement, it seems the last time he was a trade representative of the US was in 1983-1985.   He knows the legal aspects of trade and commerce, and that China frequently violates international agreements.  Wikipedia stated his background as follows:

In 1983, during the administration of President Ronald Reagan, Lighthizer was nominated and confirmed to serve as Deputy U.S. Trade Representative under William Brock.  During his tenure, Lighthizer negotiated over two dozen bilateral international agreements, including agreements on steel, automobiles, and agricultural products.  As Deputy USTR, Lighthizer also served as Vice Chairman of the Board of the Overseas Private Investment Corporation.  In 1985, Lighthizer joined the law firm Skadden, Arps, Slate, Meagher & Flom LLP (Skadden) as a partner.[6] He practiced international trade law at Skadden for over 30 years, representing American workers and businesses ranging from manufacturing to financial services, agriculture, and technology. While at Skadden, Lighthizer worked to expand markets to U.S. exports and defended U.S. industries from unfair trading practices.

He has correctly stated that the extradition and prosecution of Wanzou Meng are a matter for the Department of Justice, separate from the US Trade Administration.

When tensions run high, as they are now,  the best thing to do is to lay low.  Lighthizer  seemed to go on the attack.  His public statement that Meng’s arrest and trade negotiations are two completely separated, while true, will never be accepted by the Chinese.   He also stated that the deadline of March 1, 2019 is a hard deadline for tariffs to go to 25%.  It’s obvious that China will retaliate in kind.

It just seemed he was more ready to prepare for battle than the bargaining table.  I suspect it’s the way Trump likes it.   The hawks on trade policy are Peter Navarro and John Bolton.  For every Make American Great Again hawk, there is an equal Make China Great Again hawk on the other side fighting against US aggressive tactics.   Tariffs wars are like military arms race,  Only the sides can retaliate extremely rapidly.

Details of the charges against Meng have recently been revealed.  The US claims that a spinoff company, Skycom, was used to sell electronic products to Iran in violation of the Iran trade embargo, as established by the Obama administration and their allies, including Russia and China.   Huawei misrepresented the relationship between Skycom and Huawei as two separate companies.   International law apparently allows the Department of Justice to issue warrants of arrest against Corporate officers if they have proof of their involvement in fraud resulting in harm to US companies.   In Meng’s case,  DOJ’s  proof is likely her signature on financial documents.

This story is just beginning.

Stay tuned,

Dave

Links:

Note:   Meng Wanzhou also goes by Sabrina Meng or Cathy Meng.   Her last name is Meng.  Her father  Ren Zhengfei is the founder and president of Huawei.  It is a real rags to riches story.  Meng is the surname of  Wanzhou mother.

US Trade rep warns 90 day pause in US-China trade war is a ‘hard deadline’

South China Post:  Huawei and trade negotiations are completely separate

Office of Trade Representative and Robert Lighthizer

Wikipedia Arab Spring

Bloomberg:  Wanzou Meng arrest

Huawei (Wikipedia)

Ren Zhengfei

2018 myth of the year

Politifact selects a lie of the year.    They don’t have a similar award for myths.  They should.

A political myth is perpetrated usually with great concoction of bits of truths mixed in with a lot of lies or exaggerations.  John Kennedy got it right in 1962 when he said:

“The greatest enemy of truth is very often not the lie – deliberate, contrived and dishonest, but the myth – persistent, persuasive and unrealistic.  Too often we hold fast to the cliches of our forebears.  We subject all facts to a prefabricated set of interpretations.  We enjoy the comfort of opinion without the discomfort of thought.”

I am concerned with the mix of news and opinions presented primarily on cable news.  Fox News is a clear example of this.

“You’re entitled to your own opinions. You’re not entitled to your own facts.”

Let’s consider a few examples:   Trump sent the military to halt the impending invasion of a caravan of immigrants, filled with would be criminals.

Basically,  this was just a mid-term election stunt.   Unfortunately, a very unnecessary one.  But it was done to because immigration was a hot button issue, and Trump wanted to stand out, as the toughest guy on halting illegal immigration.

But the myth of the year, I believe is Trump’s  simple statement:

“Trade wars are good, and easy to win”

Trade wars makes every economist who understands the mechanisms of capitalism cringe.   Tariffs imposed on China result almost immediately in China imposing tariffs on the US.   No one is ahead in negotiations.  The government gains because they receive the tariff income, but industries which import from China must pay higher costs.   Higher steel prices strongly impacts the oil industry and their capital investments.  I believe Trump has  killed any chance of the  Keystone XL pipeline, Phase 4 of every being constructed given the sharp drop in oil prices and the increase in steel prices.   Trump bragged at his ability to talk down oil prices, by getting Saudi Arabia to increase production.   The Saudi’s increase production as Trump pushed through new sanctions against Iran, and importers of Iranian oil.   Of course, Trump then reversed course and granted waivers to many countries, so Iranian oil could keep flowing to the world market, creating a temporary oil glut.

The Department of Energy will let oil companies drill almost anywhere they want, but the economics of many projects are gone.  This includes the decades of controversy of drilling in northern Alaska and extensive oil shale developments.

Mr. Tariff man, you’ve made a mess of things!

Stay tuned

Dave

 

 

 

 

 

The Helsinki Disaster

Trump’s responses to questions at Monday’s joint press conference may seem miles away by now.  But, I’ll repeat a few critical parts and add my comments given in italics. It was a disaster, on many fronts.  Unfortunately,  I don’t think Trump was “off his game”  on this one.  I think we’re going to see more excusing the actions of countries with not respect for human rights (Turkey, the Philippines and Egypt, come to mind)  and attacks on our friends.

I have included in the links that the transcript of the entire press conference as provided by National Public Radio.

Thank you. Mr. President, you tweeted this morning that it’s U.S. foolishness, stupidity, and the Mueller probe that is responsible for the decline in U.S. relations with Russia. Do you hold Russia at all accountable or anything in particular? And if so, what would you what would you consider them that they are responsible for?

TRUMP:  Yes I do. I hold both countries responsible. I think that the United States has been foolish. I think we’ve all been foolish. We should have had this dialogue a long time ago, a long time frankly before I got to office. And I think we’re all to blame.  I think that the United States now has stepped forward, along with Russia, and we’re getting together and we have a chance to do some great things, whether it’s nuclear proliferation in terms of stopping, have to do it, ultimately that’s probably the most important thing that we can be working on.  But I do feel that we have both made some mistakes.

I think that the probe is a disaster for our country. I think it’s kept us apart, it’s kept us separated.

There was no collusion at all. Everybody knows it. People are being brought out to the fore. So far that I know virtually none of it related to the campaign. And they’re gonna have to try really hard to find somebody that did relate to the campaign. That was a clean campaign. I beat Hillary Clinton easily and frankly we beat her. And I’m not even saying from the standpoint…we won that race. And it’s a shame that there can even be a little bit of a cloud over it. People know that. People understand it. But the main thing and we discussed this also is zero collusion and it has had a negative impact upon the relationship of the two largest nuclear powers in the world. We have 90 percent of nuclear power between the two countries.

It’s ridiculous. It’s ridiculous what’s going on with the [Mueller]  probe.

Trump’s answer is pretty clear.   He standing there side by side with Putin, and is saying is he wishes that the Russian interference in our elections in 2016 would be just swept under the rug.  When he holds US partially responsible,  this is pointing the finger to Obama administration policies.  It is as if, the Obama administration just didn’t know how to conduct diplomacy.   Trump is not going into any details on the US foolishness, but were the sanctions imposed by Obama really so foolish?  Russia was propping up the regime in Syria with military support, even after they used chemical weapons on their own people.  Russia has been involved in the assassination of dissidents outside their borders.  Residents of England were likely horrified at Trump’s statement were, as they witnessed the Salisbury poisoning (Sergei and Yulia Skripal).   Trump was obviously, avoided past conflicts, including the takeover of Crimea, support of separatists in Ukraine, and human rights abuses, such as the likely Kremlin ordered murder of Sergei Magnitsky in 2005, when he discovered tax fraud corruption among Russia’s richest citizens on a wide scale.  Dissidents and whistle blowers seem to turn up dead. The hand of the Kremlin at going after enemies of the state is worldwide. (see link)

REPORTER: For President Putin, if I could follow up as well. Why should Americans and why should President Trump believe your statement that Russia did not intervene in the 2016 election, given the evidence that U.S. intelligence agencies have provided? And will you consider extraditing the 12 Russian officials that were indicted last week by a U.S. grand jury?

TRUMP: Well, I’m going to let the president answer the second part of that question. But, as you know, the whole concept of that came up perhaps a little bit before but it came out as a reason why the Democrats lost an election, which frankly, they should have been able to win because the electoral college is much more advantageous for Democrats, as you know, than it is to Republicans. We won the Electoral College by a lot. 306 to 223, I believe. And that was a well fought, that was a well fought battle. We did a great job. And frankly, I’m going to let the president speak to the second part of your question. But just to say it one time again and I say it all the time, there was no collusion. I didn’t know the president. There was nobody to collude with. There was no collusion with the campaign and every time you hear all of these you know 12 and 14 – stuff that has nothing to do and frankly they admit – these are not people involved in the campaign. But to the average reader out there, they’re saying well maybe that does. It doesn’t. And even the people involved, some perhaps told mis-stories or in one case the FBI said there was no lie. There was no lie. Somebody else said there was. We ran a brilliant campaign and that’s why I’m president. Thank you.

The question is actual about “election intervention.”   Trump steered the question to  collusion, and since he claims he had never personally met Putin before the election, he feels vindicated.  In Putin’s response, he says:  “We should be guided by facts. Could you name a single fact that would definitively prove the collusion? This is utter nonsense.”   So Trump and Putin see eye-to-eye on this.   Intervention  =  collusion = nonsense.   In Putin’s reply to extradition, he brings up the idea of swapping Mr. Browder for 12 indicted Russians.  Putin states: “They  [Browder business associates]  sent a huge amount of money – 400 million – as a contribution to the campaign of Hillary Clinton.”   The actual figure is $400,000.   I will cover the actions of Mr. Browder in a separate blog.  Putin is not saying no to extradition, but simply saying that it has to go through proper channels.

The following is the question that has help cause an enormous backlash:

REPORTER, AP: President Trump, you first. Just now, President Putin denied having anything to do with the election interference in 2016. Every U.S. intelligence agency has concluded that Russia did. My first question for you sir is, who do you believe? My second question is would you now, with the whole world watching, tell President Putin, would you denounce what happened in 2016 and would you warn him to never do it again?

TRUMP: So let me just say that we have two thoughts. You have groups that are wondering why the FBI never took the server. Why haven’t they taken the server? Why was the FBI told to leave the office of the Democratic National Committee? I’ve been wondering that. I’ve been asking that for months and months and I’ve been tweeting it out and calling it out on social media. Where is the server? I want to know where is the server and what is the server saying?

With that being said, all I can do is ask the question. My people came to me, Dan Coates, came to me and some others they said they think it’s Russia. I have President Putin. He just said it’s not Russia. I will say this: I don’t see any reason why it would be. But I really do want to see the server but I have, I have confidence in both parties.

I really believe that this will probably go on for a while but I don’t think it can go on without finding out what happened to the server. What happened to the servers of the Pakistani gentleman that worked on the DNC? Where are those servers? They’re missing. Where are they? What happened to Hillary Clinton’s emails? 33,000 emails gone, just gone. I think in Russia they wouldn’t be gone so easily.  I think it’s a disgrace that we can’t get Hillary Clinton’s thirty three thousand e-mails.

I have great confidence in my intelligence people but I will tell you that President Putin was extremely strong and powerful in his denial today and what he did is an incredible offer. He offered to have the people working on the case come and work with their investigators, with respect to the 12 people. I think that’s an incredible offer. Ok? Thank you.

Trump could have answered this in two short sentences: (1) The conclusion of  election interference  by Russia in 2016 by US intelligence is right, and (2) Putin should not try this again.  He didn’t do either.   Even in the wake of the indictments of 12 Russian military officials, he wasn’t about to walk back on his hundreds of tweets stating that Mueller’s investigation was a witch hunt and the FBI under Comey was incompetent.   Mind you, Trump wasn’t asked if  there was  collusion or even involvement of the Trump’s campaign officials in this interference.   He was defending Putin more than the US government.   This “incredible offer”  was considered by the State Department as absurd.  

In one key phase,  Trump later said he misspoke, and meant to say wouldn’t instead of would.   Lawrence O’Donnell (MSNBC commentator) got it right, when he said the statement was beyond fixing.  To do so, was an insult to the intelligence of Americans.

I count a total of 23 sentences.  I count 19 of these sentences would fall under the category of FBI misconduct  in the areas of deliberately incomplete or improper investigation.  So, he is back on the witch hunt theme.      There’s only one statement (“My people came to me, Dan Coats, came to me and some others they said they think it’s Russia.”)   Yikes!    Dan Coats is the Director of National Intelligence, and it is his job to provide the president of all national security threats from multiple US agencies.   Of course, Dan Coats immediately issued a statement after the press conference, stating that it was absolutely true that Russia interfered with our election.  

Trump  is demeaning the FBI because in 2015 and 2016, it was under Director Comey’s command.   The missing emails  is a mess It confuses  a subpoena from the Benghazi Committee in 2015, with the FBI’s investigation of the Russian hacked  DNC server in 2016.   The first statement about the server of the Pakistani gentleman is false, and the second one refers to accidental deletions of email that were not at Clinton’s direction.   The Benghazi Committee was just trolling for dirt on Hillary Clinton prior to the election.  All Trump was trying to do, is to attack the integrity of the FBI in years before he was president.

Russia is taking the lead, where the US is shrinking back globally.  It supports the Iran nuclear deal and is party to the Paris Climate Agreement.  It even came to the rescue of the World Health Organization, as US pressured countries not to introduce the breastfeeding resolution.   It is looking for strengthening economic ties with China, as we look to punish them with tariffs.   There is nothing more desirable in Putin’s priorities than restoring their hold on the Eastern European countries.   That’s why Putin brings up the Minsk agreements.

The word change only shows how Trump believes he can easily fool the American people.  Helsinki was a disaster for the US and a victory for Vladimir Putin.  Dialogue with Russia is important, but standing firm with Eastern Europe and NATO is vital.

Stay tuned,

Dave

Links:

Transcripts of Press Conference

Trump sides with Putin over US intelligence

Donald Trump’s ‘missing’ server comments get all of the details wrong

Clinton’s 33000 emails – Politifact

(The conclusion was that the deletion was not done at the direction of Clinton.  These were old emails, and to the technician in charge of the server, was a routine cleanup effort and unaware of the subpoena.  When he learned of the subpoena, he describes this as the “Oh shit” moment.

Wikipedia:  Bill Browder 

Wikipedia: Magnisky Act

Trade Wars – What doesn’t work

“Trade wars are good, and easy to win”  Donald Trump March 2, 2018 tweet

Trump would like to pressure China into respecting intellectual property.  A lot of folks who understand free trade say this is fair and right.   Trade wars using tariffs don’t work.  In fact, the outcomes are so absolutely predictable, the other country will retaliate.  We have a 34 billion dollar tariff against China, so they impose equal tariffs against us.   Their and our exporters get hurt.  Does any country gain leverage on trade disputes by first imposing tariffs?   What tariffs have done is to end trade discussions between countries.   Policy changes can’t proceed while trade wars are in progress.   So, the idea of waging war and peace doesn’t work.  And leverage would work if one country is feeling real pain and the other is not.  But, this isn’t the case, and our pain is very apparent to voters.  China doesn’t have voters, so their tolerance is as high as the leaders want to go.

Really dumb.

Stay tuned,

Dave

PS.  I’m working on another blog called Presidential lies and myths.    Trump’s tweet on trade wars is a myth and it’s a whopper.   Lies usually have some false statistic associated with them, most notably with immigration and the economy.

 

 

 

 

Freshly brewed morning news on trade

Front page of today’s  New York Times.   “As US Steps back on Trade, Allies Move on,” Peter Goodman, correspondent from London, writes:

In the master plan advanced by President Trump, an unabashedly aggressive United States is supposed to retain its rightful perch as the center of the commercial universe, wielding its economic dominance to dictate the rules to the rest of global trade.

As it turns out, the rest of the planet has its own ideas.

Gee, what a wonderful way to say we don’t all think the same.  And what sounds good, sometimes isn’t!  Two  beautifully written sentences in the morning goes well with coffee and toast.

The rest of the article adds more details on the collaboration between the European Union and Japan on trade. It certainly adds to other stories of the day, such as the Qatar crisis,  where unintended consequences can be completely contrary to the original intent of a strategy.

Madeleine Albright got it right when she said international relationships should be considered more like a game of billiards rather than a game of chess.    The balls in billiards are all clustered together, but when hit, they go in different directions.

Stay tuned,

Dave

 

 

Don’t you worry ’bout a thing

Stevie Wonder,  released 1973.

I talked to someone about Trump, and he tells me we are in good hands.  He listens to Fox News and plays golf 3 times a week.   Not a bad life.

There are some real tough questioning coming up on Trump’s cabinet positions.   I guess the most troublesome is our future relations with China.  We can not have a trade war with China, and expect their help in stopping North Korea’s nuclear plans.

I would think there is nothing more urgent than a united front against North Korea.  Trump would be wise to remember that a majority of Americans voted for Hillary Clinton, whose campaign slogan was “stronger together.”

There was a great discussion on Fareed Zakaria show (GPS)  with James Baker, saying that what previous republican presidents (Reagan & HW Bush) have favored was free trade agreements, and Trump’s new cabinet tends more towards protectionism.   Baker said Trump as candidate, or now president-elect is not the same as when he actually moves into the White House with the staff making recommendations.

Baker may be right.  He’s not yet our president.  However, the more Trump goes after Mexico stealing our jobs  and their citizens pouring over the border, the more I worry that it’s the same old Trump,  always playing politics with an incoherent foreign policy strategy.