Category Archives: China

(EP) Portugal, primer país de la zona euro que emite deuda en moneda china

(EP) El objetivo es entrar en un mercado con gran liquidez

El primer ministro luso, Carlos Costa, con el presidente chino, Xi Jinping.
El primer ministro luso, Carlos Costa, con el presidente chino, Xi Jinping. LUSA

Portugal será el primer país de la Zona euro en emitir deuda en moneda china tras recibir la autorización de aquel país, según ha confirmado el secretario de Estado de Finanzas, Ricardo Mourinho.

Portugal -que ya emite deuda en euros y dólares- realizará una emisión a tres años de 2.000 millones de renminbi, equivalente a 260 millones de euros. La emisión comenzará la próxima semana y a un coste aún sin cerrar, aunque se prevé que sea algo superior a lo que se paga en las emisiones en euros (en torno a -0,222%).

Aunque el importe es bajo, la autorización permite realizar en el futuro otras de mayor alcance. “El objetivo es estar en un mercado de gran dimensión y de mucha liquidez y así ampliar la base de inversores”, ha declarado Mourinho al diario Eco.

China es el primer inversor extra comunitario en Portugal, con participaciones clave en sectores como la electricidad, el agua, los bancos, los seguros o la sanidad. Recientemente, vio frustrada la opa para hacerse con el 100% de EDP, la principal eléctrica portuguesa, en donde posee una participación del 25%.

En la última visita del presidente chino a Portugal, en diciembre del pasado año, firmó con António Costa, primer ministro portugués un acuerdo para participar en la nueva ‘ruta de la seda’, la red de transporte desde China a Europa, con la participación del puerto marítimo de Sines.

(DML) Now EE and Vodafone drop Huawei phones from their 5G network launch lineup as chip designer ARM distances itself from the company over US ban

(DML)

  • Firms EE and Vodafone have pulled Huawei’s phones from their 5G networks 
  • UK-based chip designer ARM has told staff not to do business with the company
  • The reports follow Google’s decision to pull the company’s android license
  • An order from President Trump last week effectively banned technology firms from ‘foreign adversaries’ trading with US companies without approval

Leading mobile carriers and technology firms have started to sever ties with Huawei to comply with the recent US trade clampdown. 

UK-based chip designer ARM have told their staff to ‘halt’ business with the Chinese telecoms firm while mobile operators EE and Vodafone have pulled Huawei’s phones from their 5G networks.

Japan’s KDDI and Y! Mobile are also said to be delaying the launch of upcoming Huawei smartphones  to protect their operations amid security concerns.

An order from President Trump last week effectively banned technology firms from ‘foreign adversaries’ trading with US companies without approval. 

Huawei is accused of being a gateway for the Chinese government to spy on Western nations using equipment used to facilitate the upcoming 5G service.  

A number of leading mobile carriers and technology firms have started to sever ties with Huawei to comply with the recent US trade clampdown. Chip designer ARM and mobile operators EE and Vodafone have pulled the Chinese firm’s phones from their 5G networks

Since then, the firm has received a series of blows including Google’s announcement that they would be pulling the company’s Android license.

This means that new and yet-to-be-released Huawei models would not be able to access Google apps as part of Android, like Google Maps or Youtube. 

Another major drawback to the business came today as British tech company ARM has also suspended dealing with the company.

Documents obtained by the BBC have instructed ARM employees to halt ‘all active contracts, support entitlements, and any pending engagements’ with the company.

If ARM does sever ties in the long-term it would greatly affect Huawei as it relies on ARM’s technology to build its own chips.    

One analyst told the BBC that  the move, if it became long-term would be an ‘insurmountable’ blow to Huawei’s business.

An order from President Trump last week banned technology firms from ‘foreign adversaries’ trading with US companies without approval. Huawei is accused of being a gateway for the Chinese government to spy on Western nations

Telecom firms EE and Vodafone has left Huawei out of their line-up of 5G smartphones, which EE is launching next week.

EE said it had chosen to ‘pause’ the sale of Huawei 5G phones amid ongoing tensions between the US and the company.

They also confirmed the Huawei equipment it currently uses in its network infrastructure is in the process of being phased out.

Vodafone also said it would suspend Huawei’s Mate X phone from its 5G line-up because ‘Huawei’s 5G handset is yet to receive the necessary certifications’. 

EE chief executive Mark Allera said it will not restart Huawei sales until they are satisfied that the security of its customers is being protected. 

The BT-owned telecoms giant said it will be the first operator in the UK to launch the high-speed mobile network, which is expected to offer internet speeds several times that of current generation 4G. 

An order from President Trump last week banned technology firms from 'foreign adversaries' trading with US companies. Huawei knocked Apple off the second place to Samsung in smartphone sales, however experts say not having Google Play will put off potential buyers

An order from President Trump last week banned technology firms from ‘foreign adversaries’ trading with US companies. Huawei knocked Apple off the second place to Samsung in smartphone sales, however experts say not having Google Play will put off potential buyers

The company confirmed a number of 5G-ready smartphones would be available on its new network, including devices from Samsung, OnePlus, LG, HTC and Oppo.

Fellow mobile operator Vodafone has confirmed it will launch 5G across seven cities in the UK on July 3, with another 12 cities to follow by the end of the year.

Mr Allera said the company has ‘worked for decades with government’ and ‘at the moment we have no instructions to change our plans’, amid security fears around the use of Huawei in 5G networks. 

A Huawei spokesperson told the Telegraph: ‘We value our close relationships with our partners, but recognise the pressure some of them are under, as a result of politically motivated decisions. 

‘We are confident this regrettable situation can be resolved and our priority remains to continue to deliver world-class technology and products to our customers around the world.’

MailOnline have contacted Huawei for comment.

In 2017, Huawei shipped over 153 million phones globally in the first three months of 2019 alone and delivered more than 59 million smartphones, around half of which went to European consumers. 

The Government is yet to announce its decision on whether the Chinese firm should be allowed as part of telecoms infrastructure following an official review.

‘Extremely unfortunate timing’: Huawei-owned Honor launches new devices just two days after Google pulls its Android license

Huawei-owned smartphone firm Honor has unveiled its next line-up of smartphones, amid uncertainty over the future of its devices.

An order from President Trump last week effectively banned technology firms from ‘foreign adversaries’ trading with US companies without approval.

Google then confirmed it would stop supporting Android on Huawei and Honor devices, the software which powers both firms’ phones.

Huawei-owned smartphone firm Honor has unveiled its next line-up of smartphones, despite uncertainty over the future of its devices. Here, a picture from Honor’s smartphones launch yesterday

The block means that new and yet-to-be-released Huawei and Honor phones are unlikely to be able to access Google apps as part of Android.

Although Honor says that their new line  should have access to the Google Play Store as well as Google’s other services, future updates are less certain.

A temporary license and grace period sanctioned by the US government will initially allow support for existing devices until August.

Speaking to MailOnline, Ben Wood, from the CCS Insight consultancy, said that it was ‘extremely unfortunate timing for such an exciting product’.

The uncertainty of the current situation is damaging for Huawei’s business and the fact that they don’t have clarity further muddies the water for customers.

‘People rely on core Google services like Google maps and not being able to have these applications on devices would present a huge challenge,’ he said. 

At the launch, Honor boss George Zhao said regarding the ongoing trade row, ‘no matter what happens’ he believed that the firm can ‘overcome it’. 

The company has chosen bright colours for the holographic designs, paired with a powerful 48MP AI Quad Camera

Both models also boast a 6.26′ all-view display with a 91.7 per cent screen-to-body ratio. Honor said availability for the 20 Pro, which will cost €599 (£525) in Europe, would only be ‘released in the near future’

Existing Huawei smartphone users will be able to update apps and push through security fixes, as well as update Google Play services.

But when Google launches the next version of Android later this year, it may not be available on Huawei devices.

Effectively what this means is that future Huawei devices may no longer have apps such as YouTube and Maps.

The latest offering continues the winning trend of flagship hardware at more reasonable prices aimed at millennial smartphone users.

A third device, the Honor 20 Lite, is already on sale for £249.99

Google is assuring users of Huawei smartphones the American company’s services will still will work on them but the impact to Huawei may be crippling (file photo)

The company has chosen bright colours for the holographic designs, paired with  a powerful  48MP AI Quad Camera. 

The Pro supports up to 5x hybrid zoom, which uses the other cameras to fill in details beyond the optical zoom, and up to 30x digital zoom. 

The Honor 20 can be pre-ordered now for £399.99 at Carphone Warehouse, O2, Three, Amazon and Argos with a free Honor Watch Magic.

(NYT) In China, Some Fear the End of ‘Chimerica’

(NYT) A factory in central China’s Jiangxi Province. “I hope China and the U.S. can find a better way to coexist,” one Chinese entrepreneur said.

A factory in central China’s Jiangxi Province. “I hope China and the U.S. can find a better way to coexist,” one Chinese entrepreneur said.CreditCreditCHINATOPIX, via Associated Press

Wu Shichun is one of countless Chinese entrepreneurs who over the past four decades have prospered from access to American customers and money.

Today, as the American government threatens to take that away, the serial entrepreneur and venture capital investor is fundamentally rethinking how he does business.

One of his portfolio companies designs and makes fashion products in China, then sells to American consumers on Amazon.com. Another, a vape device maker, sells most of its products in the United States. The third, which makes metal materials for electronic manufacturers, exports 40 percent of its production there. All three would be hit by new American tariffs.

“From now on I’ll have to invest in companies that focus on the Chinese market,” said Mr. Wu, 42.

“I hope China and the U.S. can find a better way to coexist,” he said. “It doesn’t have to be mutually destructive.”

The Chinese government has struck a defiant tone since President Trump ratcheted up the trade war on Friday by raising tariffs on Chinese exports worth $200 billion a year. “If the U.S. wants to talk, our door is open,” said a commentary on state-controlled China Central Television on Monday night that quickly went viral. “If the U.S. wants to fight, we’ll be with them till the end.”

Many entrepreneurs and intellectuals, by contrast, are hoping for a deal. China’s rise out of the stark terror of the Cultural Revolution was fueled in part from connections to the United States, an early diplomatic partner that offered investment, markets and opportunity. There’s even a word going around the Chinese internet for the tight economic bonds that have formed between the world’s two largest economies: “Chimerica.”

The trade war is taking direct aim at Chimerica. New tariffs, if they stick, threaten to cut off a big market for many Chinese companies.

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Catch up and prep for the week ahead with this newsletter of the most important business insights, delivered Sundays.SIGN UPPresident Trump and President Xi Jinping of China in Beijing in November 2017.CreditDoug Mills/The New York Times

President Trump and President Xi Jinping of China in Beijing in November 2017.CreditDoug Mills/The New York Times

[Trump’s love for tariffs began in Japan’s ’80s boom.]

Beyond tariffs, trade hawks within the Trump administration are pursuing what they call decoupling, or breaking up a relationship that they now feel poses a long-term strategic threat to the United States. The trade hawks hope to get American companies to shift their factories to friendlier countries. They are pushing to restrict Chinese investment in the United States and cut academic and other bonds.

Now many people in China are wondering what will happen if the countries decouple. They question whether the country can continue its miraculous rise as borders and barriers go up.

“From the day we were born, my generation has always seen the country’s economy heading for the better,” Feng Dahui, an early Alibaba employee and an internet entrepreneur in the city of Hangzhou, wrote on his timeline on WeChat, the Chinese social media service, on Monday evening.

“We’ve experienced the internet revolution and enjoyed the benefits of globalization,” he continued. “Now this type of optimism seems to be deserting us. Everything seems to be ending abruptly.”

Their concerns are unlikely to sway the Chinese government. Most political analysts believe that the only effective pressure will have to come from within the Chinese Communist Party’s leadership, and official voices have been uniformly strident. Negative commentaries have been stricken from China’s heavily censored internet.

Still, some entrepreneurs are expressing their worries.

Xiao Yu said the e-commerce business he founded, OFashion, which sells luxury goods from Europe and the United States to Chinese consumers, saw growth slow in the second half of last year partly because of the trade war. While only about 10 percent of its merchandise comes from American brands like Michael Kors or Coach, the trade war has hit China’s stock market and hurt consumer confidence.

The trade war could jeopardize his dreams of raising money from American investors and perhaps even taking his start-up public on an American stock exchange, he said.

“As an entrepreneur, our fate is tightly bound to the country,” Mr. Xiao said. He hopes and is confident that the two countries can reach a deal.

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“China and the U.S. don’t have to have strained relations,” he said.

Many also appear worried that the trade war and the government’s tightening control over the private sector could halt or even reverse its progress. In a country only a couple of generations removed from starvation, the possibility doesn’t seem far-fetched to many. One 2017 post online, called “A Guide to Eating Tree Bark,” described how people in the Chinese region of Inner Mongolia survived during the starvation of the Great Leap Forward. It has recently gone viral again, with more than 100,000 page views.

The two sides have plenty of reasons to distrust each other. The United States blames China for heavy job losses, theft of corporate secrets and cheating at the rules of global trade. China credits the hard work and sacrifices of its people for its success and sees the trade war as driven by American fears of a prosperous Chinese nation.

But the doves in China say both sides benefit from the relationship more than they admit. Foreign investors were early backers and inspirations for Chinese internet giants like Alibaba and Tencent, for example. And many American companies and investors have profited handsomely from China’s rise.

Those hoping for a deal worry that the Chinese government has fundamentally misjudged the Trump administration. At three top-level economic and monetary meetings in April, an economist at a Chinese investment bank said, government officials sent the signals that the leadership was optimistic about a trade deal.

Some people are resurrecting old articles online about the Chinese-American relationship that are now going viral. One of them was a January speech by Li Ruogu, a former chairman of the Export-Import Bank of China and former deputy governor of China’s central bank. Mr. Li argued that many Chinese, including some senior officials, didn’t realize that the relations had shifted fundamentally. The conflict wasn’t about the United States being threatened by China’s growth, he said, but by its vision of state-led capitalism.

“This is the conflict of systems,” he wrote. “It won’t end easily.”

Another popular, and subsequently censored, article had the headline “The Reasons Behind the Chimerica Breakup,” recalling the portmanteau coined by Niall Ferguson and Moritz Schularick. The popularity of the article, whose author is anonymous, reflects a growing realization that the two countries’ conflicts go beyond trade and may not have an easy solution.

The article argues that China’s system of low human rights-based mercantilistic state capitalism negatively affected the pricing and wage structures in the United States and other developed economies. Now the United States wants China to change its economic growth model, the author argued, while China only wants to buy more American products to solve short-term trade imbalances.

“Chimerica parted ways on May 10,” the author wrote. “Now it’s time to decide whether to adopt the U.S. rules or the Chinese rules.”

(ZH) Xi Sends Trump A Message: Rare-Earth Export Ban Is Coming

(ZH)

Back in April of 2018, when the trade war with China was still in its early stages, we explained that among the five “nuclear” options Beijing has to retaliate against the US, one was the block of rare-earth exports to the US, potentially crippling countless US supply chains that rely on these rare commodities, and forcing painful and costly delays in US production as alternative supply pathways had to be implemented.

As a result, for many months China watchers expected Beijing to respond to Trump’s tariff hikes by blocking the exports of one or more rare-earths, although fast forwarding one year later this still hasn’t happened. But that doesn’t mean it won’t happen, and overnight President Xi Jinping’s visit to a rare earths facility fueled speculation that the strategic materials will soon be weaponized in China’s tit-for-tat war the US.

As Bloomberg reported overnight, shares in JL MAG Rare-Earth surged by the daily limit on Monday after Xinhua said the Chinese president had stopped by the company in Jiangxi, a scripted move designed to telegraph what China could do next.

The reason for the dramatic market response is that the presidential visit flags policy priorities, and “rare earths have featured in the escalating trade spat between the U.S. and China.” Specifically, as Bloomberg notes, China raised tariffs to 25% from 10% on American imports, while the U.S. excluded rare earths from its own list of prospective tariffs on roughly $300 billion worth of Chinese goods to be targeted in the next wave of measures. And just in case the White House missed the message, Xi was accompanied on the trip to JL MAG by Liu He, the vice premier who has led the Chinese side in the trade negotiations.

Why does China have a clear advantage in this area? Simple: the U.S. relies on China, the dominant global supplier, for about 80% of its rare earths imports.

The visit “sends a warning signal to the U.S. that China may use rare earths as a retaliation measure as the trade war heats up,” said Pacific Securities analyst Yang Kunhe. That could include curbs on rare earth exports to the U.S., he said.

Xi’s visit came just hours after the Trump administration on  Friday blacklisted Huawei and threatened to cut it off from the U.S. software and semiconductors it needs to make its products. A spokesman for China’s foreign ministry told reporters Monday to “please wait and see” how the government and companies respond.

Of course, a Chinese export curb, or ban, would also cripple domestic producers, as domestic rare earth miners would be hurt, and likely need state subsidies, similar to US soybean farmers. But curbs could potentially help companies like JL MAG, which makes magnets containing rare earths that are used in products including electric vehicles and wind turbines.

Finally, to those looking to trade a potential rare-earth export ban, one place would be to go long the REMX rare earth ETF, which after hitting an all time high of $114 in 2011 during the first rare-earth “scare” during the China-Japan trade war, is trading some 90% lower as the market has all but discounted any possibility of a price spike.

Needless to say, should China lock out the US, the price of rare earths could soar orders of magnitude higher.

(BI) Chinese tech giant Huawei has developed its own operating system as a ‘plan B’ in case it’s barred by the US government from using Google and Microsoft products

(BI)

Huawei
Huawei Rotating Chairman Guo Ping, center, speaks in front of other executives during a press conference in Shenzhen, China’s Guangdong province.
  • The Chinese tech-giant Huawei confirmed it has developed its own operating system that could replace Google’s Android and Microsoft’s Windows should it be barred from using American-made products, according to a recent report by the German newspaper Die Welt.
  • The prospect of being banned from such products has intensified for Huawei in the wake of its recent lawsuit against the US government.
  • “We have prepared our own operating system. Should it ever happen that we can no longer use these systems, we would be prepared,” Huawei executive Richard Yu said, according to a translation of the original German text.
  • Huawei currently uses Android’s operating system for its smartphone devices and Windows for its laptop and tablets.

UPDATE: Since this article was originally published in March 2019, Google severed ties with Huawei following an executive order from US President Donald Trump. Here’s what that means if you own a Huawei phone.

The Chinese tech giant Huawei confirmed it has developed its own operating system that could replace Google’s Android and Microsoft’s Windows should it be barred from using American-made products, according to a recent report by the German newspaper Die Welt.

The prospect of being banned from such products has intensified for Huawei in the wake of its recent lawsuit against the US government.

“We have prepared our own operating system. Should it ever happen that we can no longer use these systems, we would be prepared,” Huawei executive Richard Yu said, according to a translation of the original German text.

A Huawei spokesperson did not immediately respond to Business Insider’s request for comment on the report.

Huawei is suing the US government for not allowing its federal officials to use the Chinese firm’s telecom equipment over security concerns. The company has said that the US government has failed to provide evidence to substantiate the security claims and that the US is acting unconstitutionally.

Read more: The Trump administration is warning allies to stay away from a powerful Chinese company — but not everyone’s listening

Huawei has been working on building its own operating system since as early as 2012, according to the South China Morning Post. The completion of those efforts had previously been unknown until Die Welt’s recent report.

Huawei currently uses Android’s operating system for its smartphone devices and Windows for its laptop and tablets.

Yu said that moving onto Huawei’s in-house platform was the company’s “plan B” and that “of course we prefer to work with the ecosystems of Google and Microsoft.”

(Verge) Intel, Qualcomm, and other chipmakers reportedly join Google in Huawei ban

(Verge)

Huawei has been stockpiling chips to prepare for this eventuality

Huawei’s bad weekend is turning worse as the company’s American suppliers are all falling in line with a US government edict banning them from doing business with the company. Bloomberg now reports that Intel, Qualcomm, and Broadcom, three of the world’s leading chip designers and suppliers, are cutting off their dealings with Huawei, effective immediately. Nikkei reports that German chipmaker Infineon Technologies has also suspended shipments to Huawei, as have US memory chip makers Micron Technology and Western Digital.

The chip suspensions follow the earlier news of Google abruptly rescinding Huawei’s Android license and halting its access to Google Play Services and the Play Store, effectively dumping it out of the Android smartphone market and forcing the Chinese company to develop its own version atop the barebone open-source edition of Android.

According to Bloomberg’s sources, employees across the major US chipmakers have been informed that their companies will freeze their supply deals with Huawei until further notice. Intel provides Huawei with server chips and the processors for its laptop line, while Qualcomm figures less prominently in providing modems and other processors. Huawei’s actually quite well insulated from the Qualcomm impact, as it builds its own mobile processors and modems. Another Bloomberg report suggests Huawei has also been preparing for this eventuality by stockpiling chips from US suppliers to last it at least three months, which should be enough time to tell if the current measure is a scare tactic or a permanent imposition from the US government.

Nikkei’s sources suggest that Europe might be falling into line as well. “Infineon decided to adopt a more cautious measure and stopped the shipment. But it will hold meetings this week to discuss [the situation] and make assessments,” said one source speaking to Nikkei. European chipmaker ST Microelectronics is reportedly discussing its continued shipments to Huawei this week as well.

Huawei has been developing in-house alternatives to Android and Windows, specifically to try and address a situation such as the present one. Microsoft hasn’t yet commented on whether it will continue to provide the Windows operating system for Huawei laptops, but odds are that it too will respect the US government’s orders.

The effort by the US government to sideline Huawei has been going for a long time, and the company was last year unceremoniously rebuffed in its effort to enter the US phone market. The current escalation is part of an increasingly hostile trade dispute between the Trump administration and the Chinese government, with the former trying to force a renegotiation of the trading relationship between the two.

(ZH) China’s Huawei, 70 Affiliates Blacklisted By US Commerce Department

(ZH)

Update (1815ET): That did not take long…

Reuters reports that the U.S. Commerce Department is adding Huawei Technologies Co Ltd and 70 affiliates to its so-called “Entity List” – a move that will make it much more difficult for the telecom giant to buy parts and components from U.S. companies. U.S. officials said the decision would also make it difficult for Huawei to sell some products because of its reliance on U.S. suppliers.

Department of Commerce Announces the Addition of Huawei Technologies Co. Ltd. to the Entity List

WASHINGTON – Today, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced that it will be adding Huawei Technologies Co. Ltd. and its affiliates to the Bureau’s Entity List. This action stems from information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest. This information includes the activities alleged in the Department of Justice’s public superseding indictment of Huawei, including alleged violations of the International Emergency Economic Powers Act (IEEPA), conspiracy to violate IEEPA by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of those alleged violations of U.S. sanctions.

The sale or transfer of American technology to a company or person on the Entity List requires a license issued by BIS, and a license may be denied if the sale or transfer would harm U.S. national security or foreign policy interests. The listing will be effective when published in the Federal Register.

“This action by the Commerce Department’s Bureau of Industry and Security, with the support of the President of the United States, places Huawei, a Chinese owned company that is the largest telecommunications equipment producer in the world, on the Entity List. This will prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” said Secretary of Commerce Wilbur Ross. “President Trump has directed the Commerce Department to be vigilant in its protection of national security activities. Since the beginning of the Administration, the Department has added 190 persons or organizations to the Entity List, as well as instituted five investigations of the effect of imports on national security under Section 232 of the Trade Act of 1962.” Additions to the Entity List are decided by the End-User Review Committee which is comprised of officials from the Department of Commerce, Department of Defense, State Department, and Department of Energy. Under § 744.11(b) of the Export Administration Regulations, persons or organizations for whom there is reasonable cause to believe that they are involved, were involved, or pose a significant risk of becoming involved in activities that are contrary to the national security or foreign policy interests of the United States, and those acting on behalf of such persons, may be added to the Entity List.

The Bureau of Industry and Security’s mission is to advance U.S. national security and foreign policy objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership. BIS is committed to preventing U.S.-origin items from supporting Weapons of Mass Destruction (WMD) projects, terrorism, or destabilizing military modernization programs.

Commerce Secretary Wilbur Ross said in a statement President Donald Trump backed the decision that will “prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests.”

Sec. Wilbur Ross@SecretaryRoss

Under President Trump’s leadership, Americans will be able to trust that our data and infrastructure are secure. #ICTSupplyChain46910:21 PM – May 15, 2019Twitter Ads info and privacy174 people are talking about this

*  *  *

Update (1645ET): Confirming what we previewed earlier, in a move that is seen as aimed at keeping the Chinese company Huawei out of the US market, President Trump has declared a “national emergency” to protect U.S. communications networks giving the federal government broad powers to bar American companies from doing business with certain foreign suppliers.

“The president has made it clear that this administration will do what it takes to keep America safe and prosperous, and to protect America from foreign adversaries who are actively and increasingly creating and exploiting vulnerabilities in information and communications technology infrastructure and services in the United States,” the statement said.

The order authorizes the commerce secretary to block transactions involving communications technologies built by firms controlled by a foreign adversary that puts U.S. security at “unacceptable” risk — or poses a threat of espionage or sabotage to networks that underpin the day-to-day running of vital public services… which would include the Chinese firm Huawei.

As WaPo details, Trump’s executive order instructs the commerce secretary to develop an enforcement regime and permits the secretary to name companies or technologies that could be barred, according to officials.

The order acknowledges that, although an open investment climate is generally positive, the United States needs to do more to protect the security of its networks.

The national emergency declaration comes a day after a congressional hearing in which senators from both parties joined administration officials in calling out the risks of doing business with a company like Huawei. They emphasized that the problem was less about the company than the authoritarian country whose system of laws, which lacks due process and transparency, it must obey.

“It’s not about overseeing Huawei. It’s about overseeing China,” said Sen. Lindsey O. Graham (R-S.C.), chairman of the Senate Judiciary Committee during the hearing on 5G security.

But, of course, “The executive order is company and country agnostic,” replies a senior White House official when asked if the executive order targets Huawei and China (h/t @W7VOA)

*  *  *

As we detailed earlier, in what appears to be the US government’s latest salvo in its war against Huawei, President Trump is reportedly preparing to sign an executive order that would prohibit American firms from using equipment made by foreign telecom companies that pose a ‘security threat’, according to Bloomberg, which sourced its report to administration insiders.

The official who spoke with Bloomberg insisted the order wasn’t intended to single out any country or company, but anybody who has been following the ongoing spat with Huawei should instantly recognize that this simply isn’t true (though, with the trade negotiations at a very delicate impasse, we understand why the administration needs to maintain this pretense). Though Huawei and its fellow Chinese telecoms giant ZTE already face serious restrictions on selling their products in the US, Huawei still maintains a US subsidiary in Texas.

Huawei

The order, which could be signed as soon as Wednesday, wouldn’t outright ban sales to US entities, but it would grant the Commerce Department more authority to review products and purchases made by firms with connections to adversarial countries (we doubt that’s directed at Ericsson and Sweden).

China’s foreign ministry has already lashed out at the US over reports of the executive order.

“This is neither graceful nor fair,” ministry spokesman Geng Shuang said at a news briefing in Beijing. “We urge the U.S. to stop citing security concerns as an excuse to unreasonably suppress Chinese companies and provide a fair and equitable and non-discriminatory environment for Chinese companies to operate in the U.S.”

Washington has been campaigning for months to stop its allies around the globe from allowing Huawei products to be used in their 5G networks, but to little avail. Yesterday, Huawei promised to sign a “no spy” pledge to governments like the UK that are still deciding how much reliance on Huawei they are willing to stomach.

As Huawei pushes to assume a global leadership position in 5G, the US’s efforts to try and discredit the company have included successfully pushing for the arrest of its CFO, Meng Wanzhou, in Canada, on charges she helped the company violate US sanctions on Iran.

American lawmakers suspect Huawei’s equipment could be used for spying – and not without reason.

Just last month, Ars Technica found a backdoor like vulnerability in Huawei’s Matebook laptop series which could have allowed remote hackers to gain access to the system. Chinese law also could technically compel companies like Huawei to cooperate with authorities.

But even if the order is signed on Wednesday, it might not take effect for six months, as it would take time for the Commerce Department to “fashion an approach” to the order.

In the meantime, Verizon and other US telecoms firms are still way behind in the war to dominate the global market for 5G networking equipment.

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(BBG) Trump’s Huawei Threat Is the Nuclear Option to Halt China’s Rise

(BBG)

  •  The White House’s campaign could disrupt 5G rollouts globally
  •  The struggle to contain Beijing may also hurt America

PauseUnmuteCurrent Time1:36/Duration Time4:18Loaded: 0%Progress: 0% CaptionsFullscreenHuawei Says it’s Ready, Willing to Engage With U.S. on Product SecurityUnmuteHuawei Says it’s Ready, Willing to Engage With U.S. on Product Security

The Trump administration is pulling out the big guns in its push to slow China’s rise, with potentially devastating consequences for the rest of the world.

The White House on Wednesday initiated a two-pronged assault on China: barring companies deemed a national security threat from selling to the U.S., and threatening to blacklist Huawei Technologies Co. from buying essential components. If it follows through, the move could cripple China’s largest technology company, depress the business of American chip giants from Qualcomm Inc. to Micron Technology Inc., and potentially disrupt the rollout of critical 5G wireless networks around the world.

“The Trump administration action is a grave escalation with China,” Eurasia Group analysts Paul Triolo, Michael Hirson and Jeffrey Wright wrote in a note. If fully implemented, the blacklist would “put at risk both the company itself and the networks of Huawei customers around the world, as the firm would be unable to upgrade software and conduct routine maintenance and hardware replacement.”

President Trump Speaks At 38th Annual National Peace Officers Memorial Service
Donald Trump on May 15.Photographer: Kevin Dietsch/Pool via Bloomberg

The threat is likely to elevate fears in Beijing that President Donald Trump’s broader goal is to contain China, leading to a protracted cold war between the world’s biggest economies. In addition to a trade fight that has rattled global markets for months, the U.S. has pressured both allies and foes to avoid using Huawei for 5G networks that will form the backbone of the modern economy.

“@Huawei 5G, RIP. Thanks for playing,” U.S. Senator Tom Cotton, a Republican from Arkansas, wrote on Twitter.

Read More: China Promises Response If U.S. Tariffs all Remaining Imports

U.S. suppliers to Huawei including Lumentum Holdings Inc. and Qualcomm Inc. are indicated to open lower in pre-market trading, after shares in Asian suppliers including Sunny Optical Technology Group and AAC Technologies Holdings Inc. dropped as much as 5% on Thursday.

In Europe, STMicroelectronics NV fell, while Huawei competitor Nokia Oyj gained 2%. Huawei has said it devotes about a third of its budget — some $11 billion annually — to the acquisition of American components. It counts 33 U.S. companies among its top 92 suppliers.

“The negative impact on the global 5G market will be significant,” said Charlie Dai, a Beijing-based analyst at Forrester Research, nothing that Huawei is one of the market leaders globally. “Nokia and Cisco could address the gap to some extent, but the overall adoption will be slowed down, which eventually will be harmful to telco carriers and consumers around the world.”

Read More: Macron’s Answer to Trump’s Threat: Europe Won’t Block Huawei

The Commerce Department said Wednesday it will soon put Huawei on an “Entity List” — meaning any U.S. company will need a special license to sell products to the world’s largest networking gear maker. Since American companies dominate semiconductors, that could smother Huawei’s production of everything from 5G base stations to mobile phones. It may not even be able to use Google’s Android, the most popular operating system globally for smartphones. A similar move last year against ZTE Corp. — China’s second-biggest telecom equipment company — nearly forced the company out of business.

“This could potentially lead to Huawei’s destruction,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies. “You can’t underestimate the significance. It’s their most important company and threatening it in this way will generate a massive public response as well as from the Chinese government. The bilateral trade talks were on thin ice and this could derail them entirely.”

Read more: Trump Moves to Curb Huawei as Trade War With China Escalates

At the heart of Trump’s concerted campaign is suspicion that Huawei aids Beijing in espionage while spearheading China’s ambitions of becoming a technology superpower. The Justice Department also accuses it of willfully violating sanctions on Iran, and last year engineered the arrest of the eldest daughter of Huawei’s billionaire founder.

Huawei, which has denied those allegations, said Thursday it was “ready and willing” to engage with the U.S. to ensure product security. Restricting it from doing business “will only serve to limit the U.S. to inferior yet more expensive alternatives,” it said in a statement.

China’s government said it will take “all necessary measures” to defend its companies.

“We resolutely object to any country, based on their own laws, unilaterally sanctioning Chinese entities,” Ministry of Commerce spokesman Gao Feng said at a regularly scheduled briefing in Beijing Thursday. “We also object to the generalization of the national security concept and abuse of export control methods.”

The lack of alternatives is one reason that it’s far from certain the U.S. will make good on its threat to cut off Huawei. Observers for months had been dismissing the possibility, in part because it would hurt some of America’s largest tech corporations. The Trump administration has also been pressuring allies to bar Huawei equipment from their communications networks for security reasons. But the U.S. effort had largely failed, as even the U.K. declined to join the American call for a boycott.

If the U.S. handicaps Huawei by cutting off suppliers, countries and telecoms carriers around the world that are already spending billions to build 5G networks may have to resort to pricier equipment from Nokia Oyj and Ericsson AB. Tying up a chunk of the world’s 5G gear supply would slow the build-out of a technology that underpins future services from self-driving cars to smart homes and advanced medicine.

Huawei appears to have anticipated this possibility. It’s been developing and designing its own chips for years, which it now uses in many of its own smartphones. It’s reportedly even developing its own operating software to run phones and servers.

For now, though, it remains heavily reliant on American technology.

Huawei’s base station, smartphone, server and maritime cable businesses simply cannot run without Qualcomm baseband and processor chips. There are alternatives — but from American peers such as Intel Corp., Micron and Broadcom Corp.

It also depends on smaller American suppliers in key areas: Lumentum Holdings Inc. for optical cable; Amphenol for fiber-optic connectors; Inphi Corp. for analog chips; Qorvo Inc. and Analog Devices Inc. for radio-frequency semiconductors in both 4G and 5G; and Western Digital Corp. for storage. Texas Instruments Inc. supplies it with digital signal processing chips. Huawei even uses Oracle Corp. software in products sold to state-owned companies.

Why 5G Mobile Arrives With a Subplot of Espionage: QuickTake

ZTE provides a roadmap for what may happen next. Huawei’s much smaller rival in 2017 ran afoul of the Commerce Department for violating the same Iranian sanctions, and then lying about it. The subsequent ban on American exports pushed the company to the brink of extinction, before Trump intervened as part of trade negotiations with Beijing.

A blanket ban would hurt not just U.S. companies, but also alienate American allies around the world. Many have resisted Washington’s attempts to steer them away from Huawei, for reasons ranging from economics to just the simple fact that the Shenzhen-based company’s 5G technology is for now considered superior.

Read more: Trump Is Losing the Fight to Ban Huawei From Global Networks

That’s why some observers, including the Eurasia Group, argue that the White House is unlikely to bring the full force of a blacklist to bear. Instead, it argued, the Trump administration is likely to issue export licenses to all of its American companies while retaining the option in future to pull them if needed.

Roger Sheng at market research firm Gartner Inc. draws parallels with the Chinese fable of the Monkey King, whose powers are constrained by a magic circlet that his handler constricts — painfully — when the deity misbehaves.

“The U.S. is putting a circlet around the head of Huawei,” said Sheng, who is based in Shanghai. “The impact goes well beyond its 5G ambitions because without American suppliers like Qualcomm and Marvell, it can’t even maintain normal operations.”

(BBG) China Loses More From This Trade War

(BBG) It is vulnerable because it is a much poorer country with more fragile political institutions.By Tyler Cowen13 de maio de 2019, 11:30 WEST

Soybeans in China, but not from America.
Soybeans in China, but not from America. Photographer: STR/AFP

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “The Complacent Class: The Self-Defeating Quest for the American Dream.”Read more opinionFollow @tylercowen on Twitter

With the U.S.-China trade talks now at a halt, odds are that the recent U.S. tariffs on China will continue — and perhaps even rise and multiply. So it’s worth considering what effects those tariffs will have. One prominent argument, which can also serve as a criticism of President Donald Trump, is that the U.S. consumer is the loser. Yet in reality, China is probably in the more vulnerable position.

To be clear, there are well-done studies showing that the recent tariffs have translated into higher prices for U.S. consumers. I am not contesting that research. The question is whether those studies give sufficient weight to all relevant variables for the longer run.

To see why the full picture is more complicated, let’s say the U.S. slaps tariffs on the industrial inputs (whether materials or labor) it is buying from China. It is easy to see the immediate chain of higher costs for the U.S. businesses translating into higher prices for U.S. consumers, and that is what the afore-mentioned studies are picking up. But keep in mind China won’t be supplying those inputs forever, especially if the tariffs remain. Within a few years, a country such as Vietnam will provide the same products, perhaps at cheaper prices, because Vietnam has lower wages. So the costs to U.S. consumers are temporary, but the lost business in China will be permanent. Furthermore, the medium-term adjustment will have the effect of making China’s main competitors better exporters.

Obviously, no final long-run estimates are possible right now. But it is quite plausible that China will bear the larger costs here, not the U.S.

Another risk for China is this: As its access to U.S. markets becomes more difficult, China may be tempted to look to Europe. It remains to be seen whether the European Union will adopt additional protectionist measures, but China must consider that the possibility is more than zero.

To understand another feature of the longer-term perspective, consider that the impact of tariffs can be felt in at least two ways. In highly competitive markets, prices have to match costs, and so a cost-boosting tariff really does translate into higher consumer prices. (This is the case with many of the recent U.S. tariffs on China.) But for profitable branded goods, the economics aren’t the same. If the U.S. puts higher tariffs on Mercedes-Benz, for example, the prices of those cars will still exceed their costs of production. Mercedes, wishing to keep some of its strong market position, will probably decide to suffer some of the cost of the tariffs in the form of lower profits, rather than passing them along to its customers.

China has prominent brands as well, be it Huawei in electronics or other firms in exotic food products, and over time it aspires to climb the value chain and sell more branded goods to Americans. In fact China has an industrial policy whose goal is to be competitive in these and other areas. Tariffs will limit profits for these companies and prevent Chinese products from achieving full economies of scale. So this preemptive tariff strike will hurt the Chinese economy in the future, even if it doesn’t yet show up in the numbers.

There is also a broader reason why a trade war with the U.S. hurts China, and this gets to an important point with trade agreements more generally. A U.S. trade agreement with China would (if enforceable) certify China as a place where foreigners can invest and be protected against espionage, intellectual property theft and unfair legal treatment. That prospect of certification is now suspended. That makes investing in China less desirable for many multinationals, not just U.S. ones. That, in turn, limits Chinese domestic wages as well as long-term learning and technology transfer. A U.S. certification of China might even boost Chinese domestic investment, but again that is now off the table.

In my numerous visits to China, I’ve found that the Chinese think of themselves as much more vulnerable than Americans to a trade war. I think they are basically correct, mostly because China is a much poorer country with more fragile political institutions.

And finally: My argument isn’t about whether Trump’s policy toward China is correct. I am only trying to get the basic economics straight. Next time you hear that the costs of the trade war are simply being borne by Americans, be suspicious. In their zeal to make Trump look completelywrong, on tariffs or other issues, too many commentators pick and choose their arguments. A more fair and complete economic analysis indicates that China is also a big loser from a trade war. Trump’s threats are exerting some very real pressure on the country.

(Reuters) Exclusive: Trump expected to sign order paving way for U.S. telecoms ban on Huawei

(Reuters)

The order, which will not name specific countries or companies, has been under consideration for more than a year but has repeatedly been delayed, the sources said, asking not to be named because the preparations remain confidential. It could be delayed again, they said.

The executive order would invoke the International Emergency Economic Powers Act, which gives the president the authority to regulate commerce in response to a national emergency that threatens the United States. The order will direct the Commerce Department, working with other government agencies, to draw up a plan for enforcement, the sources said.

If signed, the executive order would come at a delicate time in relations between China and the United States as the world’s two largest economies ratchet up tariffs in a battle over what U.S. officials call China’s unfair trade practices.

Washington believes equipment made by Huawei Technologies Co Ltd, the world’s third largest smartphone maker, could be used by the Chinese state to spy. Huawei, which has repeatedly denied the allegations, did not immediately comment.

The White House and Commerce Department declined to comment.

The United States has been actively pushing other countries not to use Huawei’s equipment in next-generation 5G networks that it calls “untrustworthy.” In August, Trump signed a bill that barred the U.S. government itself from using equipment from Huawei and another Chinese provider, ZTE Corp.

In January, U.S. prosecutors charged two Huawei units in Washington state saying they conspired to steal T-Mobile US Inc trade secrets, and also charged Huawei and its chief financial officer with bank and wire fraud on allegations that the company violated sanctions against Iran.

The Federal Communications Commission in April 2018 voted to advance a proposal to bar the use of funds from a $9 billion government fund to purchase equipment or services from companies that pose a security threat to U.S. communications networks.

Federal Communications Commission chairman Ajit Pai said last week he is waiting for the Commerce Department to express views on how to “define the list of companies” that would be prohibited under the FCC proposal.

The FCC voted unanimously to deny China Mobile Ltd’s bid to provide U.S. telecommunications services last week and said it was reviewing similar prior approvals held by China Unicom and China Telecom Corp.

The issue has taken on new urgency as U.S. wireless carriers look for partners as they rollout 5G networks.

While the big wireless companies have already cut ties with Huawei, small rural carriers continue to rely on both Huawei and ZTE switches and other equipment because they tend to be cheaper.FILE PHOTO: A Huawei logo is pictured during the media day for the Shanghai auto show in Shanghai, China April 16, 2019. REUTERS/Aly Song/File Photo

The Rural Wireless Association, which represents carriers with fewer than 100,000 subscribers, estimated that 25 percent of its members had Huawei or ZTE equipment in their networks, it said in an FCC filing in December.

At a hearing Tuesday, U.S. senators raised the alarm about allies using Chinese equipment in 5G networks.

The Wall Street Journal first reported in May 2018 that the executive order was under review. Reuters reported in December that Trump was still considering issuing the order and other media reported in February that the order was imminent.

(Reuters) China’s retail sales growth slumps to 16-year low as trade war risks rise

(Reuters)

BEIJING (Reuters) – China reported surprisingly weaker growth in retail sales and industrial output for April on Wednesday, adding pressure on Beijing to roll out more stimulus as the trade war with the United States escalates.FILE PHOTO: Employees work on the production line at a factory of automotive engine manufacturer Power Xinchen in Mianyang, Sichuan province, China March 28, 2019. REUTERS/Stringer/File Photo

Clothing sales fell for the first time since 2009, suggesting Chinese consumers were growing more worried about the economy even before a U.S. tariff hike on Friday heightened stress on the country’s struggling exporters.

Overall retail sales in April rose 7.2% from a year earlier, the slowest pace since May 2003, data from the National Bureau of Statistics (NBS) showed. That undershot March’s 8.7% and forecasts of 8.6%.

The data suggested consumers were now beginning to cut back spending on everyday products such as personal care and cosmetics, while continuing to shun more expensive items such as cars.

“Weak retail sales partially stemmed from a deterioration in employment and declining income of the middle-and-low income groups,” said Nie Wen, an economist at Hwabao Trust.

“In terms of future policies to keep consumption as the stabilizer of the economy, China might roll out targeted tax cuts or subsidies to the middle-and-low income groups.”

As a whole, Chinese data for April largely pointed to a loss of momentum, after surprisingly upbeat March readings had raised hopes the economy was slowly getting back onto firmer footing and would require less policy support.

RELATED COVERAGE

Growth in industrial output slowed more than expected to 5.4% in April on-year, pulling back from a 4-1/2-year high of 8.5% in March, which some analysts had suspected was boosted by seasonal and temporary factors.

Analysts polled by Reuters had forecast output would grow 6.5%.

Motor vehicle production dropped nearly 16% as demand weakened, with sedan output slumping 18.8%, the steepest decline since September 2015. Industry data this week showed auto sales fell 14.6% in April, the 10th consecutive month of decline.

China’s exports also unexpectedly shrank in April in the face of U.S. tariffs and weaker global demand, while new factory orders from at home and abroad remained sluggish.

“There are still uncertainties haunting the performance of the economy. Tensions between China and the U.S. have returned while concerns about insufficient demand worldwide are on the rise,” Nie said.

Nie said China may need a more comprehensive cut in banks’ reserve requirements in June before a G20 summit where Presidents Donald Trump and Xi Jinping are expected to discuss trade.

“The funding gap in the market is relatively large,” Nie said, adding that smaller, more targeted reductions in bank reserves may no longer be enough to spur stronger growth.

There is relatively big room for policies to support growth, Liu Aihua, a spokeswoman at the statistics bureau, told reporters at a briefing, adding that employment is expected to remain steady.

The April nationwide survey-based jobless rate improved to 5.0% from 5.2% in March, though analysts are generally skeptical of Chinese employment data and see a rise in layoffs if export conditions deteriorate.

INVESTMENT

Adding to worries about domestic demand, Wednesday’s data also showed an unexpected stumble in investment.

Fixed-asset investment growth slowed to 6.1% in the first four months of this year, dashing expectations for a slight rise to 6.4%.

Growth in infrastructure spending held steady at 4.4%, with a sharp slowdown in cement production possibly reflecting a slower-than-expected payoff from Beijing’s efforts to fast-track road and rail projects.

China is trying to engineer a construction boom even as it steps up efforts to ease strains on smaller companies, ranging from tax cuts to financial incentives for firms which do not shed staff.

But private sector fixed-asset investment slowed sharply to 5.5% growth from 6.4%, suggesting the sector continues to face difficulties. The private sector accounts for the majority of jobs in China and about 60% of overall investment.

One of the few bright spots in the data was property investment, a key growth driver.

Real estate investment in April rose 12% from a year earlier, unchanged from March, according to Reuters calculations. But demand for new homes remained weak, weighing on sales of appliances and furniture.

TRADE TENSIONS

Washington dramatically escalated its 10-month tariff war with Beijing on Friday by raising levies on $200 billion of Chinese goods in the midst of trade talks, and Trump has threatened new levies on all remaining U.S. imports from China, sending global financial markets into a tailspin.

China retaliated on Monday, though on a smaller scale.

The two sides appear deadlocked in negotiations. But Trump softened his tone on Tuesday, insisting that talks between the world’s two largest economies had not collapsed.

Economists at Citi estimate the U.S. tariff increase could lop 50 basis points off China’s GDP growth, reduce exports by 2.7% and cost the country another 2.1 million jobs, though they are optimistic a trade deal will be reached eventually.

Analysts at BofA Merrill Lynch believe a prolonged period of brinkmanship would drag China’s growth to 6.1% this year, from a near 30-year low of 6.6% in 2018.

They expect more policy easing in the short term, further cuts in banks’ reserve requirements and another surge in bank lending, as well as consumer subsidies to boost sales of products such as cars, appliances and smartphones.

Some companies such as BMW have already lowered their prices after China cut the value-added tax (VAT) from April 1.

“We have full confidence in China’s economic prospects,” Geng Shuang, spokesman at the Chinese foreign ministry, said at a daily news briefing.

“U.S. protectionist and bullying actions will have some influences on the Chinese economy, but they can be completely overcome. If some people are not willing to do business with China, others will naturally fill this gap.”

(Aljazeera) China to increase tariffs on $60bn worth of US goods

(Aljazeera) Beijing will increase tariffs on a total of 5,140 American products from June 1 as the trade war with the US escalates.18 hours ago.

Retaliatory measures announced after President Donald Trump tweeted directly to Chinese President Xi Jinping [File: Jonathan Ernst/Reuters]
Retaliatory measures announced after President Donald Trump tweeted directly to Chinese President Xi Jinping [File: Jonathan Ernst/Reuters]

Deepening a trade battle and sending financial markets into a tailspin, Chinaannounced Monday it was raising tariffs on $60bn of US goods after the latest increase in American tariffs on its exports.

The move comes after the United Statesescalated the bitter trade war with a tariff hike on $200bn of Chinese products on Friday.

China will impose tariffs on a total of 5,140 US products from June 1, the finance ministry said in a statement.

“China’s adjustment on additional tariffs is a response to US unilateralism and protectionism,” the ministry said. “China hopes the US will get back to the right track of bilateral trade and economic consultations and meet with China halfway.”

The retaliatory measures were announced about an hour after US President Donald Trump tweeted directly to Chinese President Xi Jinping.

I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China. You had a great deal, almost completed, & you backed out!— Donald J. Trump (@realDonaldTrump) May 13, 2019

“China will never surrender to external pressure,” foreign ministry spokesman Geng Shuang said at a regular briefing shortly after.

Markets immediately slumped with the Dow Jones Industrial and the S&P 500 down more than 2 percent. The tech-heavy Nasdaq dropped more than 3 percent.

Technology, industrial and consumer-focused companies beared the brunt of the losses, including Apple down 5.3 percent. 

Other US companies with large China operations suffered big declines: Caterpillar down 4.3 percent, Deere & Company down 5.2 percent, General Motors down 3.2 percent, and Starbucks down 2.2 percent.

“With the ultimate trade outcome inherently uncertain and difficult to model or predict, investors are selling first and asking questions later,” said Alec Young, managing director of global markets research at FTSE Russell in New York.

New tariffs kick in as US-China trade talks head into second day

Thousands affected

China’s finance ministry said the new penalty duties of 5 percent to 25 percent will affect thousands of US products – including batteries, spinach and coffee.

That followed Trump’s increase on Friday of duties on $200bn of Chinese imports from 10 percent to 25 percent after alleging that China backtracked on commitments it made in earlier negotiations in a dispute over Beijing’s technology ambitions and perennial trade surplus.

Trump started raising tariffs last July over complaints China steals or pressures companies to hand over technology.

Washington wants Beijing to roll back government support for Chinese companies striving to become global leaders in robotics and other technology. The US and other trading partners say such efforts violate Beijing’s free-trade commitments.

Trump has also threatened to slap tariffs on $325bn worth of other Chinese products.

“Investors are increasingly worried an anticipated second-half profit rebound may now evaporate as President Trump’s threat to tariff the remaining $325bn in Chinese imports would disproportionately target consumer products like iPhones, thereby posing a greater threat to the consumption-driven US economy,” said Young.

China vows not to compromise on principles as US trade talks end (1:53)

Global shockwaves

The editor of the Communist Party-owned Chinese newspaper Global Times said on Twitter that Beijing was considering additional actions, including dumping US treasuries, ending US agricultural purchases, and reducing orders for Boeing planes.

Boeing shares fell 3.4 percent. A spokesman for the company said it was “confident the US and China will continue trade discussions and come to an agreement that benefits both US and Chinese manufacturers and consumers”.

But some analysts weren’t as confident. 

“The reality is that while trade talks are expected to resume in Beijing, no date has been set and that should tell us a lot about how strained relations are,” said Kristina Hooper, chief global market strategist at Invesco in New York.

The new tariffs are likely to hurt exporters on both sides, as well as European and Asian companies that trade between the US and China or supply components and raw materials to their manufacturers.

The increases already in place have disrupted trade in goods from soybeans to medical equipment and sent shockwaves through other Asian economies that supply Chinese factories.

Recovery path?

Forecasters have warned the US tariff hikes could disrupt a Chinese recovery that had appeared to be gaining traction. Growth in the world’s second-largest economy held steady at 6.4 percent over a year earlier in January-March, supported by higher government spending and bank lending.

WATCH24:20

Could US-China trade talks collapse?

The tensions “raise fresh doubts about this recovery path”, Morgan Stanley economists Robin Xing, Jenny Zheng and Zhipeng Cai said in a report.

The latest US charges could knock 0.5 percentage points off annual Chinese economic growth and that loss could widen to one percentage point if both sides extend penalties to all of each other’s exports, economists say. That would pull annual growth below six percent, raising the risk of politically dangerous job losses.

The latest China-US talks ended with no word of progress on Friday.

Trump might meet Xi during next month’s meeting of the Group of 20 major economies in Osaka, Japan, his economic adviser Larry Kudlow said on Sunday.

He also admitted for the first time that American consumers and businesses pay for the tariffs, something Trump has repeatedly denied. “Both sides will pay,” Kudlow told Fox News.

(MacauHub) Relations between Macau and Portugal are excellent, political leaders say

(MacauHub)

Relations between Macau and Portugal are excellent and our cooperation is also being strengthened in several areas, said the Chief Executive of Macau and the President of the Portuguese Republic at a meeting in Lisbon on Monday.

Portugal’s President, Marcelo Rebelo de Sousa was pleased to be reunited with Chui Sai On in Lisbon, adding that Portugal is currently in an excellent phase of its relationship with China and Macau.

The Portuguese President expressed his satisfaction at the prominence given by the President of China, Xi Jinping, to the role and functions of Macau in the connection between China and Portugal, as well as with the Portuguese-speaking countries.

Rebelo de Sousa added that the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries, a Macau-based organisation, is very important to maintain the union between Portuguese-speaking countries.

He also said he considered the preservation, strengthening and development of the Portuguese culture and language in Macau to be very important, noting that China actively supports exchanges and cooperation with Portugal and with Portuguese-speaking countries.

The Chief Executive thanked the president for the invitation and the reception given to the Macau Special Administrative Region (MSAR) delegation, highlighting two objectives: to observe the new development of Portugal and to take part in the sixth meeting of the Macau-Portugal Joint Commission, where the two parties will give a retrospective overview of work carried out, as well as a forecast of how cooperation will be bolstered in several areas.

Chui Sai On agreed with the views of the President of the Portuguese Republic on Portuguese-Chinese relations, the connection between Macau and Portugal and Macau’s role in the relationship between China and Portugal, as well as promoting the development of the Portuguese language in order to achieve this effect, the Macau SAR Government continues to support the dissemination of the language in Macau.

Chui Sai On also said that bilateral cooperation has been strengthened and added that the two territories will have even more opportunities to develop new cooperation based on opportunities for the construction of the Belt and Road initiative and the Guangdong-Hong Kong-Macau Greater Bay.

Macau’s Chief Executive, Chui Sai On, on Saturday started an official visit to Portugal, scheduled to end on 19 May, heading up a local government delegation, with activities in Lisbon and Porto.

In addition to a meeting with Portugal’s Prime Minister António Costa, with whom he will “exchange ideas on consolidating friendly relations between Macau and Portugal and strengthening bilateral cooperation,” Chui Sai On will co-chair the 6th meeting of the Macau-Portugal Joint Commission with the Minister of Foreign Affairs, Augusto Santos Silva.

The city of Lisbon will host a photographic exhibition commemorating the 20th anniversary of the establishment of the Macau Special Administrative Region (Macau SAR), this year, and once the Lisbon part of the programme is completed, the Chief Executive will travel to the city of Porto, where he will sign a cooperation agreement with the City Hall. (Macauhub)

(CNN) The US just raised tariffs on Chinese goods. China says it will hit back

(CNN)

US raises tariffs on Chinese imports

Hong Kong (CNN Business)The United States has escalated its trade war with China, hiking tariffs on $200 billion worth of Chinese exports hours after trade talks held in Washington failed to produce a breakthrough.Tariffs on the targeted exports increased from 10% to 25% at 12:01 a.m. ET on Friday, prompting a swift rebuke from Beijing.The Chinese government expressed “deep regret over the development” and pledged to take “necessary countermeasures.””We hope the United States will meet us halfway, and work with us to resolve existing issues through cooperation and consultation,” China’s Ministry of Commerce said in a statement. The ministry did not give specifics on how it would respond.The Trump administration’s decision to impose new taxes on Chinese exports comes after the United States accused China of backtracking on commitments made during recent negotiations on trade.Trump has repeatedly slammed China for indulging in what he says are unfair trade practices, particularly with regards to access to its giant market, intellectual property and technology transfers.The talks are aimed at settling the dispute, which has hurt Chinese exporters, damaged some US companies and slowed global growth since it began last July.

China overplayed its hand with Trump on trade, and it could cost them dearly

China overplayed its hand with Trump on trade, and it could cost them dearlyA Chinese delegation led by the country’s top trade negotiator, Vice Premier Liu He, arrived in Washington on Thursday for the latest round of discussions.Under the current circumstances, Liu said he “hopes to engage in rational and candid exchanges with the US side,” according to China’s state news agency. Liu added that raising tariffs is not a solution to the problems.Trump said hours before talks began on Thursday that he had just received an upbeat letter from his Chinese counterpart, Xi Jinping, suggesting a deal was still attainable.”It’s possible to do it,” Trump said when asked about the prospect of an agreement that would prevent a tariff hike on Chinese goods. “I have no idea what’s going to happen.”Yet the outward optimism did not appear to translate into a last-minute agreement. Negotiators are expected to meet for a second day of talks on Friday.Trump has already suggested that he’s ready to bring in more trade penalties if his demands are not met. He threatened in a tweet on Sunday to raise taxes on virtually all of China’s exports to the United States.”While we believe that a trade deal will eventually be reached between the US and China, the risk of a complete breakdown in trade talks has certainly increased,” said Michael Taylor of Moody’s Investors Service.

Tariff reaction

Global stock markets have endured a week of extreme volatility prompted by uncertainty over trade. Reactions were mixed on Friday.Having started the day in positive territory, Japan’s Nikkei Index dipped 0.3%. The Shanghai Composite Index rose 3.1% and Hong Kong’s Hang Seng Index closed up 0.8%.Benchmark indexes in Europe posted gains of less than 1% in early trade. But US stock futureswere lower.Analysts say the tariff hikes could hit growth in both economies and drag down global growth. Many experts believe that Beijing will be forced to step in with new stimulus measures if the conflict escalates further.

Trump's new tariff threat could make iPhones, toys and shoes more expensive

Trump’s new tariff threat could make iPhones, toys and shoes more expensiveTrump’s move to increase tariffs has startled US businesses. Importers received just five days’ notice about the sudden rise in penalties.”The tariff increase inflicts significant harm on US industry, farmers and consumers,” said Jacob Parker, vice president of the US-China Business Council, a trade group that represents American companies’ interests in China.”It will decrease the competitiveness of American companies, reduce the efficiency of their global supply chains, and reverberate through the US economy. Pure and simple, this is a tax on the American consumer,” he added.Consumers are also feeling some pain: The American Apparel and Footwear Association estimates that a 25% tariff on apparel imports will increase costs for a family of four by $500 a year.The higher tariffs will be applied to relevant US-bound goods exported from China on or after Friday, according to a notice from the US Federal Register.

(ZH) Trump Deletes, Then Retweets Tweet Saying “No Need To Rush” China Trade Talks

(ZH)

Update 2: In what appears to be the third round of revisions to his increasingly disjointed thread of trade-deal related tweets, Trump has now retweeted the deleted tweet saying talks were proceeding in a “congenial” manner and that there was no need to rush.

Donald J. Trump@realDonaldTrump

Talks with China continue in a very congenial manner – there is absolutely no need to rush – as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S….17K12:43 PM – May 10, 2019Twitter Ads info and privacy6,240 people are talking about this

He also added a tweet taking a shot at Obama and “Sleepy Joe” Biden, while warning China not to try and renegotiate a nearly finalized deal at the last minute.

Donald J. Trump@realDonaldTrump

Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch! In the meantime, China should not renegotiate deals with the U.S. at the last minute. This is not the Obama Administration, or the Administration of Sleepy Joe, who let China get away with “murder!”14.3K12:48 PM – May 10, 2019Twitter Ads info and privacy6,557 people are talking about this

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Update: Trump has retweeted his original rant, apparently with the aim of correcting an error where he said the amount of goods subjected to tariff hikes last night was $250 billion, not $200 billion. We have updated some of these tweets below.

He has also deleted the first tweet in his initial thread, where he said talks continued in “a very congenial manner” and that there was “no need to rush.”

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Clearly anxious about the impact the trade war is having on America’s farmers, President Trump in a flurry of tweets Friday morning assured investors that although trade talks continue “in a very congenial manner,” there is “absolutely no need to rush” because the new tariffs will bring in “$100 billion” to the Treasury, which can in turn be spent buying agricultural goods from US farmers.

Trump

Trump added that “the process has already begun to place additional Tariffs at 25% on the remaining 325 Billion Dollars” – in keeping with the tariff threats from Sunday that set this whole thing in motion (notably, Trump tweeted that tariffs had been raised on $250 billion of goods, when the accurate figure is $200 billion) [Note: This tweet has since been deleted].

These goods, in turn, would be shipped to struggling countries in the form of humanitarian assistance, throwing a lifeline to American farmers while leaving $85 billion in tariff revenues for infrastructure.

….The process has begun to place additional Tariffs at 25% on the remaining 325 Billion Dollars. The U.S. only sells China approximately 100 Billion Dollars of goods & products, a very big imbalance. With the over 100 Billion Dollars in Tariffs that we take in, we will buy…..— Donald J. Trump (@realDonaldTrump) May 10, 2019

….agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance. In the meantime we will continue to negotiate with China in the hopes that they do not again try to redo deal!— Donald J. Trump (@realDonaldTrump) May 10, 2019

Tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do. Our Farmers will do better, faster, and starving nations can now be helped. Waivers on some products will be granted, or go to new source!— Donald J. Trump (@realDonaldTrump) May 10, 2019

….If we bought 15 Billion Dollars of Agriculture from our Farmers, far more than China buys now, we would have more than 85 Billion Dollars left over for new Infrastructure, Healthcare, or anything else. China would greatly slow down, and we would automatically speed up!— Donald J. Trump (@realDonaldTrump) May 10, 2019

Donald J. Trump@realDonaldTrump

We have lost 500 Billion Dollars a year, for many years, on Crazy Trade with China. NO MORE!23.8K12:24 PM – May 10, 2019Twitter Ads info and privacy9,581 people are talking about this

“Our farmers will do better, faster, and starving nations can now be helped.” The US will buy more products “than China ever did,” Trump insisted.

“Tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind.”

We know that sounds complicated, and the plan sketched out in the five-tweet thread is probably unrealistic. But the biggest takeaway is this: Trump is already preparing his political cover for a no-deal scenario. Furthermore, Trump’s comments about the next round of tariff escalation risks spooking the market, though he hedged by saying talks remain congenial.

Stock futures ticked lower in the aftermath of the tweets, demonstrating just how fragile sentiment has become, even though – as Goldman pointed out – the US has a two-week window before the first batches of Chinese goods subject to the new tariff rates reach American shores.

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