Illustration: Lazaro Gamio/Axios
President Trump last night reiterated his stance on the trade war against China, telling Fox News host Sean Hannity:
"Well, it is time to take a stand on China. We have no choice. You know it has been a long time. They have been hurting us."
Background: The White House announcement Monday of the next round of tariffs on $200 billion in Chinese imports promised:
If China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.
The other side: China immediately responded by saying there'd be a new round of tariffs from them as well, but so far there's been no announcement of the threatened retaliation details. That may change in the next few days.
My thought bubble: The U.S. announcement of the new tariffs and threats of even more unless China surrenders unconditionally, was on the 87th anniversary of the September 18, 1931, Mukden Incident that was used as the pretext for Japan to invade Manchuria.
This supports the point to just about everyone in China paying attention that America’s real goal is to keep China down, and that China has become too reliant on American markets, technology and imports.Even in the very unlikely event there's a short-term deal between the U.S. and China, the message seems crystal clear now to the PRC — that America has a broad strategy to contain China’s rise.
It further bolsters Chinese President Xi Jinping's position, as described in an April piece I wrote about the U.S. smackdown on ZTE:
While the company may end up crippled, the episode has strategic and propaganda value for Beijing. The timing of the announcement — right before the 2nd anniversary of an important speech on cybersecurity and technology made by Chinese President Xi Jinping — only serves to strengthen the point he's been making about the need to reduce reliance on foreign, and especially American, technologies.
Why it matters: Some say the U.S. may be underestimating China's resolve to lessen its dependence on America. Reuters offers a good inside look at China's strategy in the soybean trade war:
“Many foreign business people and politicians have underestimated the determination of Chinese people to support the government in a trade war,” said Mu [Yan Kui], vice chairman of Yihai Kerry, owned by Singapore-based Wilmar International…
Just one prong of the strategy Mu detailed — to slash soymeal content in pig feed — could obliterate Chinese demand for U.S. soybeans if broadly adopted, according to Reuters calculations.
Cutting the soy ration for hogs from the typical 20 percent to 12 percent would equate to a demand reduction of up to 27 million tonnes of soybeans per year — an amount equal to 82 percent of Chinese soy imports from the United States last year. Chinese farmers could cut soymeal rations by nearly half without harming hogs’ growth, experts and academics said.
Quick take: Once they have cut their reliance on American soybeans, why would they ever go back?
Walmart is where the trade war comes home (CNN)The forever trade war (Axios)A new era of U.S.-China competition calls for new rules (Axios Expert Voices)Alibaba bails on pledge to create one million U.S. jobs(Axios)