Lees
het volgende uitstekende artikel van Mike ‘Mish’ Shedlock, eerder
geplaatst op Mish Talk, de site van Shedlock, een artikel over de
handelsoorlog die Trump heeft ontketend met China, volgens Shedlock
niet alleen een dom ‘beleid’, maar ook uiterst hypocriet en
contraproductief.
US
Trade Policy: Not Only are We Stupid, We are Hypocrites
by
Mike
Mish Shedlock 1
day–edited
(August 2, 2018)
The
news agencies reported Trump would extend tariffs on Wednesday.
Instead, we have an outline of possible actions.
The Wall Street Journal
reports U.S.
Turns Up the Heat on China.
The U.S. turned up the
heat Wednesday on China, with the Trump administration threatening to
more than double proposed tariffs on imports while Congress passed a
defense bill designed to restrict Beijing’s economic and military
activity.
The moves come as Beijing
and Washington have failed to ease an escalating trade dispute,
prompting the administration to seek additional leverage. The
administration, which has already affixed tariffs on billions of
dollars in Chinese imports, said it would consider more than doubling
proposed tariffs on a further $200 billion worth of Chinese goods to
25%, up from an original 10%.
Meantime, the Senate
approved a defense-policy bill that both tightens U.S.
national-security reviews of Chinese corporate deals and revamps
export controls over which U.S. technologies can be sent abroad. The
bill, which also restricts Beijing in areas ranging from cultural
activity to military exercises, passed the House a week earlier and
President Trump is expected to sign it into law.
Administration officials
are confident they have the upper hand in the trade fight because the
U.S. economy is strengthening while the Chinese economy shows signs
of growing slack. Moreover, China is more dependent on trade than the
U.S.
But that confidence so
far hasn’t translated into action.
President Trump has
threatened to apply tariffs to all $505 billion in Chinese goods
entering the U.S. if the two are unable to reach a settlement.
Washington has already applied tariffs to $34 billion worth of
Chinese imports, with another set of duties on $16 billion in goods
scheduled in the days ahead.
The U.S. threatened
Wednesday to make the next round of tariffs more punitive. In a
Monday White House meeting, Mr. Trump dismissed the original
administration plan for a 10% tariff on $200 billion in imports—the
next step in Mr. Trump’s escalation—and had his team bump up the
levy to 25%.
Another Tariff
Backfiring Moment
The administration didn’t
spell out a particular rationale for increasing the tariff. People
familiar with White House discussions say the reasons include anger
over the Chinese government’s failure to approve the merger of
U.S.-based Qualcomm Inc. and Dutch chip maker NXP Semiconductors ,
which forced the companies to scrap a deal aimed at boosting
Qualcomm’s reach into new markets.
Both sides lose. That’s
exactly what happens in trade wars.
More Losses
Coming
The proposed tariff
increase poses big risks for both the U.S. and global economy. A 25%
tariff would boost the cost of a range of U.S. imports at a time when
inflation has begun to pick up. It would become another factor for
the Federal Reserve to consider as it decides how quickly to raise
interest rates.
“This gets you
nothing,” said Fred Bergsten, founder of the Peterson Institute for
International Economics, a Washington, D.C., free-trade think tank.
“It adds to inflation pressure and interest rates and [would]
strengthen the dollar, which makes trade situation even worse” for
the U.S., he said.
It gets less than
nothing. Inflation will be temporary, and it will be followed by a
deflationary collapse in trade.
Three Ways China
Can Retaliate
-
Let the Yuan slide 25%
negating the tariffs.
-
Further limit US firms
ability to do deals in China
-
Halt
Rare Earth Exports. Rare earths are 17 minerals used to make cell
phones, hybrid cars, weapons, flat-screen TVs, magnets,
mercury-vapor lights, and camera lenses.
Option one has capital
flight risks for China of course. But US tariffs pose numerous risks
to the US and global economy as well.
Option two is a given.
Option three is rarely
discussed, but China has at least 80% of the global market.
China’s Rate
Earth Monopoly
In August of 2017, The
Diplomat commented on The
Ongoing Efforts to Challenge China’s Monopoly.
Back in 2010, “rare
earth elements” became a hot topic in the national security and
foreign policy fields, mainly because of the political, economic, and
security turmoil that followed China’s defacto embargo of those
elements. In September of that year, China (the major supplier of
rare earth elements) suddenly reduced its export quotas by 40 percent
— not long after the collision of a Chinese fishing ship and a
Japanese Coast Guard vessel in the East China Sea. Due to the export
restriction, Japan found it difficult to fill its domestic rare earth
demands, and as a result the world market price of the elements
skyrocketed.
Eventually, when the WTO
ruled against China’s export restriction in 2014, and the market
price went back to the original (or even lower) level, media coverage
on rare earths declined dramatically. Are the risks in the rare earth
supply chain really gone? Probably not.
Called “the
vitamins of modern society,”
rare earth elements play a critical role in our daily life — in
both the economic and security domains. These elements are key
components of a vast array of products, including smart phones,
computers, light bulbs, electric cars, wind turbines, satellites,
cruise missiles, and stealth aircrafts. Some elements, like neodymium
and dysprosium, are highly demanded for the production of permanent
magnets, which are used for sensors and motors of these products. The
most noteworthy fact is that the more we go green and
technology-oriented, the more important these elements become to our
society.
Today, China enjoys a
monopoly in the rare earths market. It is estimated that in
2016, more
than 80 percent of
rare earth elements produced in the world were excavated in China.
The country is also believed to hold more than 30 percent of the
planet’s remaining rare earth element reserves. While many stopped
paying attention to rare earths after the dispute settlement at the
WTO, the market has been preparing for more potential turmoil.
It is costly to find
alternatives to low-priced Chinese rare earths, whether those
alternatives are opening and reopening mines, inventing new recycling
process, or developing substitutes. Nonetheless, in the current
situation, where China not only has major control over global supply
but has also begun stockpiling in preparation for future market
demand, continuing efforts to diversify the supply chain portfolio
are critical for the United States and its allies — from both
economic and security perspectives. It is not sustainable to rely on
Chinese rare earths, although they look very cost-effective in a very
short term. Now is the time to revisit the powerful dynamics of rare
earth elements and to establish a strategy to win the
soon-to-be-more-competitive battle of the market.
Not That Rare? So
What?
In April of 2018, The
Verge reported China
can’t control the market in rare earth elements because they aren’t
all that rare.
The Verge contradicts its
own headline in the body.
The whole process is
“expensive, difficult, and dangerous,” says former rare earth
trader and freelance journalist Tim Worstall. He tells The Verge
that, because of this, the West has been more or less happy to cede
production of rare earths to China. From the 1960s to the ‘80s, the
US did actually supply the world with these elements; all extracted
from a single mine in California named Mountain Pass. But in the
‘90s, China entered the market and drove down prices, making
Mountain Pass unprofitable and leading to its closure in 2002.
Worstall says there are
many reasons production moved overseas. Some of these are familiar:
cheap labor costs and a willingness to overlook environmental damage,
for example. But there’s also the fact that rare earth production
in China is often a byproduct of other mining operations. “The
biggest plant there is actually an iron ore mine which extracts rare
earths on the side,” says Worstall. This means that, unlike the
Mountain Pass mine, producers aren’t reliant on a single product.
“If you are trying to only produce rare earths, then you’re
subject to the swings and roundabouts of the market.”
In a paper describing
the Minamitori find published in Nature
Scientific Reports,
the Japanese suggest a hydrocycle could use centrifugal forces to
quickly separate out a lot of the unnecessary materials in the sea
mud. But this method is unproven.
“Nobody has ever done
it before, and no-one has proved it can work at an industrial scale,”
says Professor Frances Wall of the Exeter University’s Camborne
School of Mines. Wall tells The
Verge that
the Japanese team are doing “some nice work,” but says a huge
amount of research has yet to be done before the seabed becomes a
reliable source of these important elements. “There have been
literally hundreds of exploration projects [that have found rare
earth metals] and they’ve not been able to go forward through
production because they can’t prove they’ll make any money,”
says Wall.
Where’s the Mine?
Rare earths may not be
that rare but how long does it takes to start a mine and produce what
you need?
It was a WTO ruling that
eventually led to the price collapse, some four years later! And if
Trump has no use for the WTO, maybe China will decide the same thing.
Alleged Steel
Glut
Let’s step back for a
moment and look at what started this trade war: An alleged steel
glut. China supposedly was dumping steel below cost.
Complaining about
“dumping” is idiotic. If someone is providing goods cheaper
than you or they can make them, you are getting one hell of a good
deal! Period. End of story. If it hurts steel manufacturers, then it
benefits thousands of other companies that use steel.
And tariffs pick winners
and losers, mostly losers, all but the steel industry in fact. To
argue about this is absurd.
When someone Tweeted
about a steel glut today, I responded:
Mike
Mish Shedlock on Twitter
“Is
there a “steel glut”? Are people paying to get rid of
steel? If not, where is evidence of a glut? China produces more steel
than…
twitter.com
Oceans
of Gluts
If
there is a “steel glut” then there is a “soybean
glut”. There are tens of thousands of gluts. Literally every
export can be deemed a glut.
And
again, if China is indeed subsidizing steel, then we should be
eternally grateful. Instead, Trump spits in their face.
Amazing.
By
the way, the US subsidizes Boeing and the entire defense industry by
fighting needless, counterproductive wars. And what about the sugar
lobby? Ethanol?
So
not only are we stupid, we are hypocrites.
Mike
“Mish” Shedlock
=============================
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