As Trade War Persists, Mnuchin Says China Talks Have ‘Broken Down’

The trade war between the United States and China showed no signs of yielding on Thursday, as Steven Mnuchin, the Treasury secretary, told lawmakers there was no clear path to resolution and Beijing blasted the administration over its approach.

Mr. Mnuchin, who has tried to avoid calling the trade tensions with China a “war,” said talks with Beijing had “broken down” and suggested it was now up to China to come to the table with concessions. President Trump, speaking in Brussels on Thursday, described the trade talks with China as a “nasty” battle.

.. “The administration needs to explain to Congress where this is all headed,” Senator Bob Corker, Republican of Tennessee and the committee’s chairman, told Manisha Singh, an assistant secretary at the State Department, as she prepared to testify.

“To my knowledge, not a single person is able to articulate where this is headed, nor what the plans are, nor what the strategy is,” Mr. Corker said.

.. China has also had difficulty figuring out whom to negotiate with, after tentative agreements reached with Mr. Mnuchin and Wilbur Ross, the commerce secretary, fell through.

“I think they’re coming to the conclusion that it doesn’t matter whether Mnuchin or Ross or anybody is in the front of the line, that it’s really going to be figuring out what Trump wants,”

.. “For the purpose of meeting domestic political needs and suppressing China’s development, the U.S. has fabricated a set of policy arguments that distort the truth about Sino-U.S. economic and trade relations.”

 

Trump’s Retreat From the West

Mr. Trump seems to have followed a blueprint for a resolution to the Korean conflict that China and Russia proposed a year before.

“The idea is to ensure a double freeze,” Russia’s foreign minister, Sergey Lavrov, said in an interview with NBC in Moscow on July 21, 2017. “North Korea suspends all their launches and tests, and in response, the U.S. and South Korea reduce the scale of their war maneuvers in the region.”

But all the meeting really accomplished was to open the prospect of new and probably lengthy negotiations for a final peace on the peninsula. Achieving that will depend on how the interests of five countries — North Korea, South Korea, China, Russia and the United States — can all be served.

North Korea and South Korea were created when World War II ended with Soviet troops occupying the northern part of the Korean Peninsula and American troops the south. After North Korea invaded the South in 1950, only to be driven back to China’s border by American-led forces, the fighting didn’t stop until after Chinese troops poured in and restored Communist control in the North.

.. A person of Mr. Putin’s age and experience cannot help seeing in Korea a likeness to a divided Germany. Having served in East Germany as a K.G.B. officer, Mr. Putin was deeply dismayed at the Soviet Union’s decision nearly three decades ago to give up control of what had been the Communists’ East Bloc. Today, his most powerful narrative of grievance is of the West expanding its institutions — especially NATO — to Russia’s western border. He would surely be loath to see the West achieve a matching situation at its eastern door.

..  Mr. Putin, speaking to Chinese reporters in Qingdao, called Mr. Trump’s decision to meet Mr. Kim “very brave and mature.”
.. It is likely that without Mr. Xi’s nod, Mr. Kim would not have met with Mr. Trump. And China may have kept its distance and let the American president steal the spotlight, hoping that a peaceful North Korea colonized by Chinese, Russian and American businesses might emerge and make an American military presence on the peninsula irrelevant
.. Mr. Trump’s foreign policy vision ignores concerns about other countries’ political structures as long as a deal can be reached. He clearly prefers bilateral deals to multilateral accords. He enjoys politics that are personal rather than institutional.

The American president is stirring up trouble in a volatile oil market

If he cannot arm-twist OPEC, he may unleash America’s Special Petroleum Reserve

.. markets are being buffeted by three countervailing forces unleashed by President Donald Trump:
  1. his geopolitical agenda, particularly sanctions on Iran;
  2. his domestic political agenda, to lower American petrol prices before the mid-term elections; and
  3. his looming trade war with China.

If he does not get his way, he may have a dangerous weapon up his sleeve—America’s Strategic Petroleum Reserve (SPR). His meddling risks making OPEC, the oil cartel that is a focus of his wrath, look like a paragon of predictability.

.. adding fuel to the price rally is the Trump administration’s pressure on America’s allies to cut oil imports from Iran to zero by November 4th, or face punishment for violating American sanctions. This is more draconian than expected.

.. on July 2nd that more than 50 international firms, including energy ones, had agreed to pull out of Iran. Though America may allow some countries—possibly Turkey, France and others—to reduce imports rather than cut them completely, it will not grant any waivers.

.. a “zero-barrel” response could see between 800,000 and 1.05m b/d of Iranian crude come off the market, with the squeeze starting in September, 60 days of shipping time before the sanctions kick in.

.. In an interview on Fox TV aired on July 1st, he ordered OPEC to stop manipulating the market, threatening some of its members with the loss of American protection if they do not.

.. the highest level of production Saudi Aramco, the state-owned oil giant, has tried out for any length of time is 11m b/d (it is about 10.3m b/d at the moment). But keeping production at that level for several months would damage its reservoirs. Pumping 12m b/d would also take spare capacity in the global oil market to uncharted lows, exposing it dangerously to supply shocks.

.. Complicating things is the imminent risk of an America-China trade war. China has threatened tariffs on American oil imports if retaliation meets more retaliation.

.. China may pay no heed to American sanctions on Iran, which would further stoke tension between the two.

.. These factors, some bullish for oil prices, some bearish, may offset each other. But they have already had the unfortunate consequence of putting Mr Trump alongside the rulers of Saudi Arabia and Russia in the driving seat of global oil policy. Shale producers, who cannot respond to price signals anything like quickly enough to please Mr Trump, are sidelined

.. Analysts predict that if petrol prices continue to rise ahead of the mid-terms, Mr Trump will use a release of up to 30m barrels from the SPR to flood the market. That would be tantamount to launching an oil war against OPEC and Russia, in addition to the trade war. But it cannot be ruled out.

Why Made in China 2025 Will Succeed, Despite Trump

China will succeed in building a powerful technology industry that will rival the United States, even if President Trump starts a trade war to stop it. The reason can be found on the fourth floor of a nondescript factory in a city once famous for cheap manufacturing and prostitution.

.. Rising labor costs and a new generation with little interest in toiling in factories forced a new tack. Now the sea of people is being replaced by a whirring array of boxy machines, each performing work it used to take 15 people 26 steps to finish.

The factory suggests that Beijing’s vision of Made in China 2025 — the ambitious state-driven plan to retool China’s industries to compete in areas like automation, microchips and self-driving cars — is not being pushed just by the Communist Party’s top leaders. Instead, the drive is also coming from the bottom up: from the businesses and cities across China that know they must modernize or perish.

.. The modernization may not happen in 2025. In fact, it may be long after that. But China will get there, mostly because it has to.

.. China’s very prosperity threatened Dongguan’s future. The average worker’s income rose fourfold over the past decade. Fewer young people wanted to work on dull and stressful assembly lines, preferring service jobs — like waiting tables and delivering e-commerce packages — that let them interact with people or move around. Some factories moved to lower-cost countries or shut down for good.

.. Today, a factory floor that once needed over 300 workers now needs 100.

.. The workers clustered around the machines will probably be replaced by machines themselves in a year or two.

.. The factory requires 16 workers on a shift, instead of 103 before it was automated. The robotic arms are made in China.

.. Made in China 2025’s other goals, such as building up world-class microchip industries or self-driving cars, remain out of sight for now.

.. Yet when it comes to manufacturing, Dongguan suggests Made in China 2025 will succeed partly because the effort is bigger than Beijing. Chinese companies and local government officials are determined to climb the value chain so they will not fall into obsolescence.