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- On Aug. 23, the Dow dropped over 600 points (2.4%) after U.S. President Donald Trump took to Twitter demanding U.S. companies find alternatives to China. Just a few days later, the market rallied more than 250 points after Trump said that China “very badly” wants to make a trade deal and that he was “not sure they have a choice” during a joint press conference with French President Emanuel Macron. [Reuters]
….better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing..
— Donald J. Trump (@realDonaldTrump) August 23, 2019
- Experts have pointed out that the U.S. President does not have the power to order U.S. companies to leave a country. In a tweet, Trump said that the International Emergency Economic Powers Act provides legal justification for his edict. However, historical uses of the law suggest Trump’s interpretation may extend beyond its intended purpose. [Vox]
- U.S. tariffs have been part of a larger strategy to curb China’s alleged intellectual property theft, curtail forced technology transfers, and reduce unfair industrial subsidies. [Reuters]
- On Sept. 1, the United States imposed tariffs of 15% on goods valued at $111 billion including tools, clothing, and electronics. This recent round of tariffs is expected to have a direct impact on consumers. Previously, the United States had levied 25% tariffs against $250 billion worth of Chinese goods, largely used by businesses, with rates slated to increase to 30% in a month. [WSJ]
- China responded with retaliatory duties of 10% on $75 billion of U.S. goods, also effective Sept. 1. China also stated it would resume tariffs on U.S. automobile imports—25% on vehicles and 5% on parts—by Dec. 15. [CNN]
- The Trump Administration recently delayed 15% tariffs on $156 billion worth of smartphones, laptops, and other consumer electronics from September until December to avoid dampening holiday sales. Apple shares jumped 4% on the news. In June, Apple had warned investors that products produced in China would be impacted by tariffs and adversely affect the company’s competitiveness. Trump responded by tweeting “Apple will not be given Tariff wavers, or relief, for Mac Pro parts that are made in China. Make them in the USA, no Tariffs!” [CNBC]
- In early August, China’s currency rose above 7 yuan per dollar for the first time in more than a decade, an arbitrary but psychologically important level. The currency isn’t freely traded; exchange rates are set by China’s central bank. Foreign exchange traders have come to consider the 7-to-1 rate a threshold for the currency. Trump responded by again accusing the country of currency manipulation. The president isn’t alone in these accusations—there is a long history of U.S. officials accusing China of manipulating its currency to make its exports cheaper and thus gain a competitive trade advantage. [WSJ]
- Earlier this year, Chinese company Huawei was added to the U.S. Entity List, barring American companies from doing business with the world’s largest telecommunications equipment supplier. The Department of Justice cited multiple violations of U.S. law, including illicit business dealings with Iran. In a press release, Huawei accused the U.S. government of harassing its employees and using “every tool at its disposal” to disrupt its business. [WSJ]
Trump’s trade war has long-term implications for U.S. competitiveness and will sow division in the global economy. Meanwhile, China has made few concessions, and the conflict is devolving into a protracted series of reprisals with no end in sight.