Category Archives: United States

(NYT) Julian Assange Indicted Under Espionage Act, Raising First Amendment Issues

(NYT)

Though Julian Assange is not a conventional journalist, much of what he does at WikiLeaks is difficult to distinguish in a legally meaningful way from what traditional news organizations do.CreditJack Taylor/Getty Images

Though Julian Assange is not a conventional journalist, much of what he does at WikiLeaks is difficult to distinguish in a legally meaningful way from what traditional news organizations do.CreditCreditJack Taylor/Getty Images

WASHINGTON — Julian Assange, the WikiLeaks leader, has been indicted on 17 new counts of violating the Espionage Act for his role in obtaining and publishing classified military and diplomatic documents in 2010, the Justice Department announced on Thursday — a novel case that raises profound First Amendment issues.

The new charges were part of an expanded indictment obtained by the Trump administration that significantly raised the stakes of the legal case against Mr. Assange, who is already fighting extradition proceedings in London based on an earlier hacking-related count brought by federal prosecutors in Northern Virginia.

The secret documents that Mr. Assange published were provided by the former Army intelligence analyst Chelsea Manning, who was convicted at a court-martial trial in 2013 of leaking the records. The indictment accuses Mr. Assange of complicity in Ms. Manning’s leaks, saying he solicited unauthorized disclosures of classified information and encouraged her over several months.

[Press freedoms and the case against Julian Assange, explained.]

“Assange, WikiLeaks affiliates and Manning shared the common objective to subvert lawful restrictions on classified information and to publicly disseminate it,” the indictment said.

Justice Department officials sought to minimize the constitutional implications of the new indictment. They noted in a briefing with reporters that most of the new charges against Mr. Assange were related to his obtaining of the archives of documents, as opposed to their publication.

The three charges that squarely addressed Mr. Assange’s publication of government secrets were focused on a handful of files that contained the names of people who had provided information to the United States in dangerous places like the Afghanistan and Iraq war zones, and authoritarian states like China, Iran, and Syria.

But the officials would not engage with questions about how the actions they said were felonies by Mr. Assange differed from ordinary investigative journalism. Notably, The New York Times, among many other news organizations, obtained precisely the same archives of documents from WikiLeaks, without authorization from the government.

Barry J. Pollack, a lawyer for Mr. Assange, said his client was being charged with a crime “for encouraging sources to provide him truthful information and for publishing that information.” That dramatic step, he said, removed the “fig leaf” that the case about his client was only about hacking.

“These unprecedented charges demonstrate the gravity of the threat the criminal prosecution of Julian Assange poses to all journalists in their endeavor to inform the public about actions that have taken by the U.S. government,” he said.Video2:54Julian Assange: Friend and Foe to Left and RightOver the years, the WikiLeaks founder has been embraced by everyone from Lady Gaga to Sean Hannity. But he’s also made enemies along the way. Our video shows how his anti-secrecy agenda has attracted, and repelled, people across the political spectrum.CreditCreditAndrew Testa for The New York Times

For most of American history, it was rare to treat the leaking of government secrets to the news media as a crime. But starting under the Bush administration, the Justice Department began making much more routine use of the Espionage Act to go after officials who provided information to the public through reporters, as opposed to actual spies. The World War I-era law criminalizes the disclosure of potentially damaging national security secrets to someone not authorized to receive them.

On its face, the Espionage Act could also be used to prosecute reporters who publish government secrets. But many legal scholars believe that prosecuting people for acts related to receiving and publishing information would violate the First Amendment. That notion has never been tested in court, however, because until now the government has never brought such charges.

Though he is not a conventional journalist, much of what Mr. Assange does at WikiLeaks is difficult to distinguish in a legally meaningful way from what traditional news organizations like The New York Times do: seek and publish information that officials want to be secret, including classified national security matters, and take steps to protect the confidentiality of sources.

The Obama administration had also weighed charging Mr. Assange, but rejected that step out of fears that it would chill investigative journalism and could be struck down as unconstitutional. A Justice Department official declined to address whether there was any new evidence that had come to light recently or whether the Trump administration had simply decided to take a step the Obama administration had shied away from.

The evidence laid out in the indictment against Mr. Assange mapped onto information presented by military prosecutors in the 2013 court-martial trial of Ms. Manning. Prosecutors in her case also alleged that her actions endangered the people whose names were revealed in the documents when Mr. Assange published them, though they presented no evidence that anyone was killed as a result.

A Justice Department official declined to say whether any such evidence now exists, but stressed that prosecutors would only need to prove in court what they say in the indictment: that publication put people in danger.

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Ms. Manning was sentenced to 35 years in prison — by far the longest punishment for a leak case in American history. But in one of his last acts in office, former President Barack Obama commuted most of the remainder of her sentence in January 2017.

She is now back in jail again, after a judge held her in contempt for refusing to testify about her interactions with Mr. Assange before the grand jury in the Eastern District of Virginia that indicted him.

Mr. Assange was previously indicted in March 2018 in federal court in Alexandria, Va., on a charge of conspiring to commit unlawful computer intrusion. Prosecutors accused Mr. Assange of agreeing to help Ms. Manning crack an encoded portion of a passcode that would have enabled her to log on to a classified military network.

That charge was unveiled in April, when Mr. Assange was arrested in London after being dragged out of the Ecuadorean Embassy, where he had resided for years to avoid capture. The United States has asked Britain to extradite Mr. Assange, who is fighting it, and the filing of the new charges clears the way for British courts to weigh whether it would be lawful to transfer custody of him to a place where he will face Espionage Act charges.

(BBC) Boeing 737 Max: FAA says no fixed timetable for grounding to be lifted

(BBC)

Boeing's 737 Max aircraft
Image captionBoeing’s 737 Max aircraft was grounded in March

The US aviation regulator has indicated that the Boeing 737 Max might return to service later than airlines had hoped.

US Federal Aviation Authority (FAA) acting director general Dan Elwell said if it took a year for the grounding order to be lifted “so be it”.

International aviation regulators are meeting on Thursday to discuss the 737 Max’s return to service.

The plane was grounded in March after two crashes in five months in which 346 people died.

Ryanair chief executive Michael O’Leary said earlier this week that he expected the 737 Max to receive approval by late June or early July.

Mr Elwell was asked by reporters whether it was realistic that the 737 MAX could be flying again by the summer.

“If you said October I wouldn’t even say that, only because we haven’t finished determining exactly what the training requirements will be.

“If it takes a year to find everything we need to give us the confidence to lift the [grounding] order so be it.”

He said discussions with Boeing over approving the safety update were “a constant give and take until it is exactly right. It’s taking as long as it takes to be right. I’m not tied to a timetable”.

One decision the FAA has yet to make is whether or not to require pilots to undergo simulator training for the safety update.

Safety analysis

Aviation regulators from 33 countries, including the UK, Europe and China, are meeting in Texas.

The meeting, led by the FAA, could set out a timetable for when the aircraft can return to service.

The regulator said it would provide its “safety analysis that will form the basis for our return to service decision process”.

The FAA also said it “will provide safety experts to answer any questions participants have related to their respective decisions to return the fleet to service”.

Boeing has developed a software update for the Manoeuvring Characteristics Augmentation System (Mcas) on the 737 Max – a new feature on the jet designed to improve the handling of the plane and to stop it pitching up at too high an angle.

Mcas has been linked to both the Ethiopian Airlines crash in March, which killed 157 passengers and crew, and the Lion Air disaster in Indonesia at the end of October, in which 189 people perished.

However, Boeing has not formally submitted the software fix to the FAA.

Southwest Airlines is the biggest operator of Boeing's 737 Max
Image captionSouthwest Airlines is the biggest operator of Boeing’s 737 Max

The FAA is expected to conduct a certification flight in the coming weeks.

The executive chairman of the International Pilot Training Association, Captain Tilmann Gabriel, told the BBC: “The FAA current acting director general has made it very clear that he is not committing to October, which was the real date [for the reintroduction], but there is so much to do.

“The credibility of the FAA and Boeing is at stake here. I’m convinced that there is a fix found, but this has to be now properly introduced.

It is also not clear when regulators outside the US in other countries will allow the plane back in the air.

China was the first country to ban the 737 Max from its skies following the Ethiopian Airlines crash. Other nations including the UK, Australia, New Zealand and the European Union soon followed suit.

The US was one of the last countries to ground the 737 Max in March following the Ethiopian Airlines crash. Southwest Airlines and American Airlines are the biggest operators of the 737 Max globally.

Woman mourns at funeral for victims of the Ethiopian Airlines crash
Image captionThe Ethiopian Airlines crash claimed 157 lives

The FAA has said that the issue of whether to make pilot training on 737 Max simulators a requirement before the plane can return to service is “still under review”.

The New York Times recently reported that the simulators – which Boeing provides the software for – were not able to accurately replicate conditions similar to those which played a part in both the Ethiopians Airline and Lion Air disasters.

Boeing said it “has made corrections to the 737 Max simulator software and has provided additional information to device operators to ensure that the simulator experience is representative across different flight conditions”.

It added that it was working with both the manufacturers of the simulators and regulators “on these changes and improvements and to ensure that customer training is not disrupted”.

Mr Gabriel told the BBC: “The big thing is that the simulators had not anticipated the Mcas. Pilots didn’t know about it and if the authorities decide that all pilots have to be trained in a simulator that [could] cause a very big delay.”

Meanwhile, the International Air Transport Association (IATA) will also hold a meeting on Thursday with airlines that have grounded the 737 Max.

Alexandre de Juniac, the IATA’s director general and chief executive, said the gathering was designed to assess what the airlines “expect from the manufacturer and from the regulatory authorities”.

(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.”

(Reuters) Venezuela opposition’s envoy to U.S. meets Pentagon, State Department officials

(Reuters)

WASHINGTON (Reuters) – The Venezuelan opposition’s envoy to the United States said he met Pentagon and State Department officials in Washington on Monday to discuss “all aspects of the Venezuelan crisis.”

Carlos Vecchio, opposition leader Juan Guaido’s ambassador to Washington, said in a message on Twitter that the talks held at the State Department had been “very positive” but offered no further details. “We continue to advance,” he said.

The talks were arranged at the request of Guaido, leader of the opposition-controlled National Assembly who invoked the constitution to assume an interim presidency in January, arguing that socialist President Nicolas Maduro’s 2018 re-election was illegitimate.

The United States and many European and Latin American countries have recognized Guaido as Venezuela’s rightful leader. But Maduro retains control of state functions and the support of the military’s top brass, as well as allies such as Russia, Cuba and China.

The purpose of Monday’s meeting was to discuss the U.S. Defense Department’s “past and future role related to humanitarian assistance and regional support,” a State Department official said ahead of the talks.

President Donald Trump and senior aides have not ruled out military action in the crisis-stricken South American country, repeatedly saying that “all options are on the table.”

But Washington has made clear it prefers to exert continued economic and diplomatic pressure to push Maduro out, and many experts have said the U.S. use of military force is unlikely.

(NYT) How Trump Is Outspending Every 2020 Democrat on Facebook

(NYT)

President Trump’s re-election campaign has spent far more than any single Democratic presidential candidate on Facebook advertising, reprising a strategy that was central to his 2016 victory.

Total Spending on Facebook Ads So Far This Year

Bill de BlasioNotes: The spending figures are for Dec. 30 to May 18. The data comes from Facebook and includes ads on both Facebook and Instagram.

Mr. Trump spent particularly heavily on Facebook ads at the beginning of the year, when the number of Democratic candidates was smaller. But the playing field has shifted.

[Check out our tracker of the 2020 Democratic candidates.]

Since entering the race late last month, former Vice President Joseph R. Biden Jr. has pumped more than $1 million into Facebook ads, outspending Mr. Trump’s campaign for three of the past four weeks.

So far this year, Mr. Trump has spent about $5 million on Facebook advertising. Early in the year, Mr. Trump’s Facebook spending exceeded that of all of the Democratic candidates put together, though Democrats’ collective spending eventually surpassed Mr. Trump’s total.

Facebook Spending: Mr. Trump vs. the 2020 Democratic Field

“For a long time, Trump was running an intensive campaign that no one was paying attention to,” said Mike Schneider, a partner at Bully Pulpit Interactive, a Democratic political and brand communications firm that is tracking Facebook spending by the presidential candidates.

“And while Democrats have picked up their efforts, they’re fighting over the same group of supporters while he’s broadly expanding his base,” Mr. Schneider said.

Much of Mr. Trump’s spending on Facebook advertising in recent weeks has gone toward ads that have been seen by older Americans, particularly women 55 and older, according to an analysis by Bully Pulpit.

Estimated Facebook Ad Spending by the Trump Campaign

Older voters are an important constituency for Mr. Trump, having favored him over Hillary Clinton in the 2016 election, according to exit polls. Mr. Trump also has reason to want to shore up his standing with women, as white women shifted leftward in the midterm elections.

Mr. Trump can pour millions into Facebook advertising because he has a big fund-raising head start over even the best-funded Democratic candidates. He ended the first quarter of the year with about $41 million in cash on hand, far more than the leading Democratic fund-raiser, Senator Bernie Sanders of Vermont.

The Trump campaign received widespread attention for its aggressive use of Facebook in the 2016 election.

In interviews after the 2016 victory, Brad Parscale, who was the campaign’s digital director, described how the Trump campaign sought to make the most of Facebook to reach prospective supporters. Facebook ads make it possible to reach places “that you would never go with TV ads,” Mr. Parscale said in a 2017 interview on “60 Minutes.”

To maximize the effectiveness of its advertising, the Trump campaign used tens of thousands of different ad variations on any given day, said Mr. Parscale, who is now managing Mr. Trump’s re-election bid.

“Changing language, words, colors, changing things because certain people like a green button better than a blue button,” he said. “Some people like the word ‘donate’ over ‘contribute.’”

Campaign officials say that their strategy will expand upon what they did in 2016, not only with Facebook but with other online platforms where voters are consuming news as well. The campaign has found that voters it wants to target are also spending a significant amount of time getting information on YouTube, according to an official.

The campaign anticipates spending hundreds of millions of dollars on its online strategy for the 2020 election, officials said.

Many of the Trump campaign’s ads on Facebook are designed to get users to provide their contact information and expand the size of the campaign’s already enormous list of supporters. Others solicit donations or peddle Trump merchandise.

“Facebook ads are a really valuable source for building your email list, and the more emails you have on your list, the more money you’re going to raise online,” said Eric Wilson, a Republican digital strategist. “There’s a direct through line to resources for the campaign.”

Recently, the Trump campaign has spent heavily on one subject in particular: the president’s birthday.

Mr. Trump turns 73 next month, and his campaign has run an assortment of ads asking people to sign a birthday card for him. The ads vary in their words and visuals. Some show a young man in a party hat being embraced by friends bearing gifts and balloons; others show a woman holding a birthday cake, candles ablaze. Still more just show Mr. Trump.

Curiously, many of the ads say, incorrectly, that he will be turning 72.

Videos in Mr. Trump’s ads on his birthday, “fake news” and immigration

Other Trump ads have asked people to sign a birthday card for the first lady, Melania Trump, whose birthday was last month.

Over five weeks, Mr. Trump spent an estimated $450,000 on birthday ads on Facebook, accounting for slightly more than half of his Facebook spending during that time, according to Bully Pulpit’s analysis.

The birthday ads serve a key purpose for the Trump campaign: collecting contact information for possible new supporters as well as existing ones. Asking people to sign a birthday card is a tried-and-true tactic, digital experts said.

“Digital list-building efforts like birthday cards are a great way to re-engage supporters, to refresh your email list and to grow a more personal relationship with your existing donor base,” said Michael Duncan, a Republican digital strategist who is a founding partner at Cavalry, a public affairs firm.

The birthday ads are just one attempt to gather contact information. Other Trump ads ask people to take an “Official Presidential Job Performance Survey” or a “Mainstream Media Accountability Survey” — and to provide their name, email address and ZIP code in the process.

“We try to harvest and bring people in to become direct contacts,” Mr. Parscale said on Fox News in January. “Cellphone numbers, email addresses, things that we can have direct contact.”

Mr. Parscale said he hoped to accumulate contact information for as many as 40, 50 or 60 million people by the 2020 election. “We might possibly have everybody that could vote for the president in a direct contact method by Election Day,” he said.

Some Trump ads on Facebook have invoked themes like immigration, socialism and the supposed “witch hunt” against Mr. Trump — all topics that the president has been fond of talking about and is likely to continue discussing as he seeks a second term. He has also run ads highlighting last year’s criminal justice overhaul, as well as Spanish-language ads about Venezuela.

“You can really see the start of their general election campaign strategy and platform when you look through these ads over the past number of months,” said Tara McGowan, a Democratic digital strategist who is the founder and chief executive of Acronym, a progressive digital organization that has also been tracking Facebook spending by the candidates.

The issue of immigration is at the core of Mr. Trump’s political identity, having been a central focus of his 2016 bid, and it has been a significant theme in his re-election campaign’s advertising as well.

Some ads ask people to vote on whether Mr. Trump should close the border. Others ask people to take an “Official Secure The Border Survey,” whose questions include, “Do you think Democrats care about your safety?” Still more ask people to sign a petition to end what Mr. Trump calls “chain migration,” or family-based immigration.

A video from an immigration-focused ad

Over a two-week stretch in late March and early April, roughly three-quarters of Mr. Trump’s spending on Facebook advertising was for immigration-related ads, according to the analysis from Bully Pulpit. The firm classified Mr. Trump’s ads based on keywords included in their text; the immigration ads included words like “wall” or “border.”

“A lot of this,” Mr. Schneider said, “is Trump supporter red meat.”

(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.”

(DML) Rapid DNA testing reveals a THIRD of migrants faked family relationship with children to claim asylum during ICE pilot of the procedure in Texas

(DML)

  • ICE ran the pilot for a few days this month in El Paso and McAllen, Texas
  • About 30% of migrants tested with rapid DNA were lying about familial relations
  • Migrants with children can claim asylum and avoid detention in most cases 

An Immigration and Customs Enforcement pilot of new rapid DNA testing at the border has found that nearly a third of those tested were not biologically related to the children in their custody.

ICE conducted the pilot for a few days earlier this month in El Paso and McAllen, Texas, finding about 30 per cent of those tested were not related to the children they claimed were their own, an official told the Washington Examiner

The official said that these were not cases of step-fathers or adoptive parents.

‘Those were not the case. In these cases, they are misrepresented as family members,’ the official said.

Border Patrol agents are seen processing a family unit in Texas earlier this month. A pilot program of DNA testing found that 30 per cent of those tested had lied about family ties

Central Americans who cross the border illegally with children can claim asylum and avoid any lengthy detention in most cases. Migrants are seen in March after illegally entering Texas

It is unclear whether every family unit was tested during the pilot, or only those who raised some sort of red flag. An ICE spokesman did not immediately respond to request for comment.

The official said that some migrants did refuse the test and admit that they were not related to the children they were with, when they learned their claim would be subjected to DNA proof.

ICE said the Department of Homeland Security would look at the results of the pilot to determine whether to roll out rapid DNA tests more broadly. 

After President Donald Trump’s administration backpedaled on ‘family separation’ in the face of enormous backlash last summer, the number of family units arriving at the southern border has skyrocketed.

Current U.S. law and policy means that Central Americans who cross the border illegally with children can claim asylum and avoid any lengthy detention in most cases. 

Migrants are seen outside the U.S. Border Patrol McAllen Station in a makeshift encampment in McAllen, Texas earlier this month

U.S. Border Patrol McAllen Station has been inundated with migrant family units 

US Border Patrol says it has apprehended 535,000 for crossing the border illegally so far this year, with ‘no sign of it getting better.’ 

Due to massive strain on the processing system, 40,000 of those have been released into communities, the agency said. 

On Saturday, the Trump administration told lawmakers that it probably will cost more to care for migrants crossing into the United States from Mexico than the $2.9 billion in emergency money requested just two weeks ago.

In a White House letter, acting budget chief Russell Vought said ‘the situation has continued to deteriorate and is exceeding previous high end estimates.’

Health and Human Services Secretary Alex Azar said in a separate letter that needs for the unaccompanied children account ‘could grow further and be closer to the worst-case scenario HHS had proposed be the basis for the supplemental request, which was $1.4 billion higher.’

(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.

(CNBC) Trump warns Iran not to fight the US: ‘That will be the official end of Iran’

(CNBC)

  • Trump’s threat, posted on Twitter, comes amid rising international tensions in the Middle East as the U.S. has dispatched a carrier strike group and bomber task force to the region in recent weeks.
  • The New York Times has reported that Trump told acting Defense Secretary Patrick Shanahan that he does not want war with Iran.
  • But his national security advisor John Bolton has reportedly pushed within the administration for an aggressive military posture against Iran.
GP: President Trump Departs White House For Louisiana South lawn

U.S. President Donald Trump speaks to members of the media before boarding Marine One on the South Lawn of the White House in Washington, D.C., U.S., on Tuesday, May 14, 2019.Al Drago | Bloomberg | Getty Images

President Donald Trump on Sunday told Iran to never threaten the United States, warning the Islamic Republic that if it wants a fight, it would be “the official end of Iran.“

Trump’s threat, posted on Twitter, comes amid rising international tensions in the Middle East as the U.S. has dispatched a carrier strike group and bomber task force to the region in recent weeks. The Pentagon says the military moves are in response to “heightened Iranian readiness to conduct offensive operations.”

When asked on Thursday if the United States is going to war with Iran, Trump said “hope not.” The New York Times has reported that Trump told acting Defense Secretary Patrick Shanahan that he does not want war with Iran.

But his national security advisor John Bolton has reportedly pushed within the administration for an aggressive military posture against Iran. According to The New York Times, Shanahan presented an updated military plan that included sending as many as 120,000 ground troops to the Middle East if Iran attacks U.S. forces or accelerates nuclear work.

The revisions to the military plan were ordered by hard-liners led by Bolton, accordingto the Times.

Secretary of State Mike Pompeo has said there are growing threats from Iran in the region, but he has had trouble convincing America’s European allies. British Maj. General Chris Ghika, the deputy commander of the U.S.-led coalition fighting the so-called Islamic State, publicly disagreed with the U.S. assessment.

“There has been no increased threat from Iranian backed forces in Iraq and Syria,” Ghika told Pentagon reporters last week.

The Pentagon later issued a statement saying Ghika’s comments “run counter to the identified credible threats available to intelligence from U.S. and allies regarding Iranian backed forces in the region.”

Pompeo told CNBC that the White House does not want war and would welcome the opportunity to negotiate with Iran.

“We’re not going to miscalculate: Our aim is not war, our aim is a change in the behavior of the Iranian leadership,” Pompeo said. “The forces that we’re putting in place, the forces that we’ve had in the region before — you know, we often have carriers in the Persian Gulf — but the president wanted to make sure that, in the event something took place, we were prepared to respond to it in an appropriate way.”

(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.

)

(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.

(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.