How Climate Change Affects Corn & Soybean Prices (w/ Shawn Hackett)

Shawn Hackett, president of Hackett Financial Advisors, breaks down how this year’s harvest for corn and soybeans is at risk of major frost damage. In this interview with Jake Merl, Hackett walks through how weather patterns and solar cycles historically influence crop yields, discusses the severity of the current situation, and reviews how traders can take advantage of the rare setup with a particular grains ETN. Filmed on August 30, 2019.

China Finds It Can Live Without the U.S.

Hawks in Washington speak of ‘decoupling.’ Xi Jinping is already busy doing that—his way.

A China hand and former Treasury Department colleague told me before the 2016 election that officials in Beijing preferred Donald Trump to Hillary Clinton because they thought Mr. Trump would be an easier negotiator.

Yet Mr. Trump has proved to be anything but—and in ways that ill serve U.S. interests. Through a series of vacillating threats and entreaties that often seem to be decided on a whim, he has shown President Xi Jinping that he is an unreliable negotiator. Mr. Trump’s public bullying makes it hard for Mr. Xi to accept any deal while saving face, which is very important to the Chinese. Thus Mr. Xi is no longer earnestly negotiating, merely going through the motions.

The Costs of China’s Crackdown on Hong Kong

The new buzzword in Washington discussions of Sino-U.S. negotiations is “decoupling.” From the Trump administration’s perspective, they are threatening Beijing with the prospect of disentangling the U.S. and China entirely and creating two distinct economic systems, similar to the bipolar world of the Cold War. Many in Mr. Trump’s orbit believe that blocking China’s access to U.S. technology would thwart China’s attempts to surpass the U.S. on the world stage.

This approach is naive and probably counterproductive. It is accelerating rather than slowing the Made in 2025 program. Mr. Xi has jettisoned Deng Xiaoping ’s established strategy: “Hide your strength, bide your time, never take the lead.” From his perspective, decoupling is not only an American threat—it’s the new Chinese strategy.

Nowhere is this more evident than Huawei’s case. The Trump administration has temporarily cut off most transactions between U.S. companies and Huawei, and China hawks are pushing the president to make this decoupling permanent. Meanwhile, Mr. Trump dangles access to American-made components as leverage to get Mr. Xi to buy American soybeans. But Mr. Xi does not appear interested in tactical détente as he was last year, when he asked Mr. Trump to save ZTE, the other prominent Chinese telecommunications firm. Instead of giving in to Mr. Trump’s demands, Huawei recently introduced its own operating system, Harmony, an alternative to Android that will reduce Huawei’s reliance on U.S. technology.

I do not contend that China is benign or even that Mr. Trump has misdiagnosed the problem. Rather, my concern is that the president’s erratic approach has aggravated the situation by encouraging Mr. Xi to embrace decoupling on his own terms. After more than two decades of globalization, severing the integrated supply lines of the world’s two largest economies will necessarily be messy. For the U.S., Mr. Trump’s approach makes it even messier.

Business Groups Warn of Peril as Trump’s Trade War Spirals

The latest whipsawing escalations in the United States’ trade war with China prompted a wide array of business organizations to warn over the weekend that American consumers and workers would soon be caught in the crossfire.

It is now looking increasingly likely that few large American companies will be able to sidestep the toll exacted by the new tit-for-tat tariffs that China and President Trump rolled out on Friday.

Many business leaders have kept a low profile as the trade war intensified, for fear of attracting President Trump’s ire, and in the hope that the threats of tariffs could be negotiating tactics that will lead to some sort of trade agreement.

But with several tariffs already in place, and President Trump staking out an even more aggressive stance on Friday, many industries are reckoning with just how serious the situation has become.

Joshua Bolten, the president and chief executive of the Business Roundtable, an organization representing the leaders of the largest American companies, said on Sunday that many C.E.O.s were already “poised right on top of the brake.”

“The risk is that everybody’s going to slam on the brake, and that would be a disaster,” Mr. Bolten said on “Face the Nation” on CBS.

President Trump’s latest moves, Mr. Bolten said, could “disrupt trade and commerce in a way that would cause huge damage — not just to the Chinese economy, but to the global economy and the U.S. economy.”

The American manufacturing sector shrank in August for the first time since 2009.
CreditRoss Mantle for The New York Times

The American economy has so far been relatively resilient as the two sides battle. But several recent signs suggest that the tit-for-tat is beginning to broadly hit American businesses.

The American manufacturing sector, for instance, shrank in August for the first time since 2009, according to data released last week from the research group IHS Markit.

“America’s manufacturing workers will bear the brunt of these retaliatory tariffs, which will make it even harder to sell the products they make to customers in China,” the president and chief executive of the National Association of Manufacturers, Jay Timmons, wrote on Twitter on Friday.

While corporate earnings have held strong, several companies said last week that they were trimming their profit expectations as a result of the trade war.

On Friday, after China announced new tariffs and Mr. Trump ordered American companies out of China, the Standard & Poor’s 500 index slid 2.6 percent and the tech-heavy Nasdaq composite fell 3 percent. After the markets closed, the president announced more tariff increases.

China said on Friday morning that it would impose new tariffs on $75 billion of American imports. A few hours later, President Trump announced on Twitter that he would be raising tariffs further on $550 billion of goods coming from China.

The biggest shock was from Mr. Trump’s statement that he was ordering American companies to “immediately start looking for an alternative to China.”

The president said he had the power to do so as a result of a 1977 law that has traditionally been used to deal with security and military threats.

President Trump on Sunday at the G7 summit in Biarritz, France.
CreditErin Schaff/The New York Times

Over the weekend, some of Mr. Trump’s advisers tried to somewhat soften the blow of the president’s words.

Treasury Secretary Steven Mnuchin, speaking on “Fox News Sunday,” said that Mr. Trump had the authority to make such a demand if he declared a national emergency but that he had not yet done so.

“I think what he was saying is he’s ordering companies to start looking because he wants to make sure — to the extent we are in an extended trade war — that companies don’t have these issues and move out of China,” Mr. Mnuchin said. “And we want them to be in places where they are trading partners that respect us and trade with us fairly.”

There is still significant uncertainty on how many of the steps that China and Mr. Trump have announced will come into effect. The president has stepped back or delayed previous tariffs. And on Sunday the president said he was having “second thoughts” about the threats he made last week. But shortly thereafter, the White House press secretary, Stephanie Grisham, said that the president’s regret was that he had not raised tariffs even further.

American businesses have already begun taking steps to respond. The toymaker Hasbro said last month that it was planning to shift a significant portion of its manufacturing from China to other Asian countries by 2020.

The American toy industry is particularly reliant on Chinese factories, which account for 88 percent of its production, according to the National Retail Federation. But the figures are also large for other major portions of the retail industry.

David French, the senior vice president for government relations at the retail federation, said this weekend that companies were facing a difficult road because it could take years to make the kind of moves that the president has demanded.

It’s impossible for businesses to plan for the future in this type of environment,” Mr. French said in a statement. “The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers. Where does this end?”

Hasbro toys at a Target store in Manhattan. The toy company said last month that it was planning to shift a significant portion of its manufacturing from China to other Asian countries by 2020.
CreditJeenah Moon for The New York Times

President Trump has said that he expects China to pay the costs of the tariffs he has imposed. But the direct costs of the tariffs are generally paid by the companies importing goods from China, who can then pass them along to consumers.

The Consumer Technology Association, which represents the largest electronics companies, has said that the tariffs are already costing the American tech sector $1.3 billion a month, and could raise the price of cellphones by $70 and the price of

The latest whipsawing escalations in the United States’ trade war with China prompted a wide array of business organizations to warn over the weekend that American consumers and workers would soon be caught in the crossfire.

It is now looking increasingly likely that few large American companies will be able to sidestep the toll exacted by the new tit-for-tat tariffs that China and President Trump rolled out on Friday.

Many business leaders have kept a low profile as the trade war intensified, for fear of attracting President Trump’s ire, and in the hope that the threats of tariffs could be negotiating tactics that will lead to some sort of trade agreement.

But with several tariffs already in place, and President Trump staking out an even more aggressive stance on Friday, many industries are reckoning with just how serious the situation has become.

Joshua Bolten, the president and chief executive of the Business Roundtable, an organization representing the leaders of the largest American companies, said on Sunday that many C.E.O.s were already “poised right on top of the brake.”

“The risk is that everybody’s going to slam on the brake, and that would be a disaster,” Mr. Bolten said on “Face the Nation” on CBS.

President Trump’s latest moves, Mr. Bolten said, could “disrupt trade and commerce in a way that would cause huge damage — not just to the Chinese economy, but to the global economy and the U.S. economy.”

The American manufacturing sector shrank in August for the first time since 2009.
CreditRoss Mantle for The New York Times

The American economy has so far been relatively resilient as the two sides battle. But several recent signs suggest that the tit-for-tat is beginning to broadly hit American businesses.

The American manufacturing sector, for instance, shrank in August for the first time since 2009, according to data released last week from the research group IHS Markit.

“America’s manufacturing workers will bear the brunt of these retaliatory tariffs, which will make it even harder to sell the products they make to customers in China,” the president and chief executive of the National Association of Manufacturers, Jay Timmons, wrote on Twitter on Friday.

While corporate earnings have held strong, several companies said last week that they were trimming their profit expectations as a result of the trade war.

On Friday, after China announced new tariffs and Mr. Trump ordered American companies out of China, the Standard & Poor’s 500 index slid 2.6 percent and the tech-heavy Nasdaq composite fell 3 percent. After the markets closed, the president announced more tariff increases.

China said on Friday morning that it would impose new tariffs on $75 billion of American imports. A few hours later, President Trump announced on Twitter that he would be raising tariffs further on $550 billion of goods coming from China.

The biggest shock was from Mr. Trump’s statement that he was ordering American companies to “immediately start looking for an alternative to China.”

The president said he had the power to do so as a result of a 1977 law that has traditionally been used to deal with security and military threats.

President Trump on Sunday at the G7 summit in Biarritz, France.
CreditErin Schaff/The New York Times

Over the weekend, some of Mr. Trump’s advisers tried to somewhat soften the blow of the president’s words.

Treasury Secretary Steven Mnuchin, speaking on “Fox News Sunday,” said that Mr. Trump had the authority to make such a demand if he declared a national emergency but that he had not yet done so.

“I think what he was saying is he’s ordering companies to start looking because he wants to make sure — to the extent we are in an extended trade war — that companies don’t have these issues and move out of China,” Mr. Mnuchin said. “And we want them to be in places where they are trading partners that respect us and trade with us fairly.”

There is still significant uncertainty on how many of the steps that China and Mr. Trump have announced will come into effect. The president has stepped back or delayed previous tariffs. And on Sunday the president said he was having “second thoughts” about the threats he made last week. But shortly thereafter, the White House press secretary, Stephanie Grisham, said that the president’s regret was that he had not raised tariffs even further.

American businesses have already begun taking steps to respond. The toymaker Hasbro said last month that it was planning to shift a significant portion of its manufacturing from China to other Asian countries by 2020.

The American toy industry is particularly reliant on Chinese factories, which account for 88 percent of its production, according to the National Retail Federation. But the figures are also large for other major portions of the retail industry.

David French, the senior vice president for government relations at the retail federation, said this weekend that companies were facing a difficult road because it could take years to make the kind of moves that the president has demanded.

“It’s impossible for businesses to plan for the future in this type of environment,” Mr. French said in a statement. “The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers. Where does this end?”

Hasbro toys at a Target store in Manhattan. The toy company said last month that it was planning to shift a significant portion of its manufacturing from China to other Asian countries by 2020.
CreditJeenah Moon for The New York Times

President Trump has said that he expects China to pay the costs of the tariffs he has imposed. But the direct costs of the tariffs are generally paid by the companies importing goods from China, who can then pass them along to consumers.

The Consumer Technology Association, which represents the largest electronics companies, has said that the tariffs are already costing the American tech sector $1.3 billion a month, and could raise the price of cellphones by $70 and the price of laptops by $120, on average.

JPMorgan Chase analysts recently predicted that the overall costs to American families of the tariffs were likely to be between $1,000 and $1,500 a year.

“Tariffs are taxes on Americans, putting us on the wrong economic path and compromising our global leadership,” the president and chief executive of the technology association, Gary Shapiro, said on Friday. “How much longer will our families, companies and economy be forced to bear the financial burden of this misguided trade policy?”

China appears to be aiming its tariffs at parts of America where support for President Trump is particularly strong, like farm country in the Midwest. China’s actions on Friday, for instance, add 5 percentage points to the 25 percent tariff already paid on American soybeans.

The president of the American Farm Bureau, Zippy Duvall, said after the latest announcements that “continued retaliation only adds to the difficulties farm and ranch families are facing and takes the situation in the exact wrong direction.”

China also added new tariffs to cars made in America. Tesla, as well as the Germany carmakers Daimler and BMW, are the most vulnerable to the additional levies. Six of the top 10 vehicle models exported from the United States to China, the world’s biggest car market, are from the two German brands, according to the forecaster LMC Automotive.

In private, auto executives say that, for now, the uncertainty is a greater concern than the potential material impact of the tariffs. One auto executive who spoke on the condition of anonymity said the industry was more worried that it cannot predict what might happen next or how bad it might get.

JPMorgan Chase analysts recently predicted that the overall costs to American families of the tariffs were likely to be between $1,000 and $1,500 a year.

“Tariffs are taxes on Americans, putting us on the wrong economic path and compromising our global leadership,” the president and chief executive of the technology association, Gary Shapiro, said on Friday. “How much longer will our families, companies and economy be forced to bear the financial burden of this misguided trade policy?”

Trump’s Trouble in the Farm Belt

This means the trade fight has cost U.S. farmers a bundle when they least can afford it. In 2017 U.S. farmers sent 25%—some $140 billion—of production abroad. More than 17% went to China. But then the U.S. imposed tariffs against Chinese products, and Beijing retaliated with sizable tariffs on 90% of U.S. farm exports. American Farm Bureau Federation President Zippy Duvall says that “in 2018, U.S. agricultural exports to China declined $10 billion—about a 50 percent loss.”

China was once the second largest export market for U.S. agriculture but it’s now fourth. “This is a drastic reversal for what had been a growing market,” wrote Mr. Duvall in a recent letter to the President. “From 2000 through 2017, the value of our agricultural exports to China grew from 2 percent to 16 percent of total U.S. agricultural exports.”

American soybean farmers sent about 60% of their exports to China in 2017. But their Brazilian competitors pay a 3% Chinese tariff while Americans now pay 28%. In 2018 U.S. soybean exports to China fell 75%, and U.S. farmers had to cut prices to unload oversupply in other markets. The total value of soy exports fell $4.3 billion—a 20% decline.

Or consider pork exports, 40% of which has traditionally gone to Mexico and China. U.S. pork exports by volume to China dropped 58% in September 2018 from a year earlier and 80% since 2016. Mexico’s 20% tariff on U.S. pork exports, in retaliation for Mr. Trump’s steel tariffs, cost the pork industry an estimated $1.5 billion in 2018.

None of this comes as a surprise to Mr. Trump, who has been hearing complaints for months from his Farm Belt supporters. That’s why Mr. Trump is responding with the $16 billion in subsidies, most of which will be direct payments to farmers. These are in addition to the subsidies under traditional U.S. farm programs.

So in order to make up for losses from trade, Mr. Trump is dunning other American taxpayers. But as Bill Gordon, vice-president of the American Soybean Association, recently told the South China Morning Post, farmers don’t want welfare. “Here’s a handout to make you happy? That doesn’t make us happy. We want our markets back,” Mr. Gordon said.

The argument for enduring this pain is that it is the price of getting China to change its predatory trade practices. Short-term pain for some will lead to long-term gain for everyone. The game theory is that Mr. Trump has to show China’s Xi Jinping that he is willing to absorb more pain for longer than Mr. Xi can. But then the pain is in Kansas, not Washington.

Not long ago Mr. Trump said he wanted a China trade deal but lately he’s been suggesting he’d be as happy running for re-election in 2020 as the trade hawk who was willing to take on China. We wonder how Iowans will feel about that if farm incomes continue to decline for another 18 months.

To China, All’s Fair in Love and Trade Wars

The standard line from President Donald Trump and those who support his get-tough approach toward Beijing is that because China sells more to the U.S. than the other way around, Washington has the upper hand in its game of tariffs. “China buys MUCH less from us than we buy from them,” Trump recently tweeted, “so we are in a fantastic position.”

The intrusive Chinese state has all sorts of levers to control the economy and society, and in an environment that lacks rule of law, officials can pull them at their pleasure. They also have far more targets to aim at than the trade data suggest. Many American companies have substantial operations within China that are tremendously important to their bottom lines. General Motors and its partners, for instance, sold more than 3.6 million vehicles in China last year, almost all of them manufactured locally. Starbucks operates more coffee shops in China than in any other market aside from the United States. These businesses are vulnerable to government-inspired nefariousness, from product boycotts and state-press smear campaigns to regulatory investigations

The Chinese have employed such tactics in the past. In 2017, for instance, China’s government waged an undeclared war against South Korean business over a dispute regarding an American missile-defense system. When Seoul rebuffed Beijing’s demands that it cease deployment of the system—which the Chinese considered a threat to their security—China tried to compel the South Koreans by pressuring their companies and economic interests.

A primary target was Lotte, a Korean conglomerate with interests in candy, hotels, retail, and other businesses. Lotte committed the crime of providing land for the missile system. The Chinese government whipped up nationalist ire against the company through the state-controlled media. One op-ed in the Global Times, a newspaper run by the Communist Party, entitled “Lotte’s Development in China Should Come to an End,” thundered that “showing Lotte the door will be an effective warning to all the other foreign forces that jeopardize China’s national interests.” Protests erupted in front of supermarkets owned by the Korean group, while inspectors ordered outlets closed after supposed violations. Sales plummeted, and Lotte eventually exited from the business. That wasn’t all. Chinese shoppers also shied away from Korean-branded cars and cosmetics. Korean pop stars were denied entry visas; group tours to Seoul for big-spending Chinese travelers were canceled.

Canada is enduring such treatment right now. Angered that Canadian authorities (at the behest of Washington) arrested the chief financial officer of the Chinese telecom giant Huawei Technologies, Beijing blocked Canada’s exports of pork and canola, pinching the country’s agricultural sector. China has taken this step even though it isn’t in its own economic interest, since its domestic pork industry has been ravaged by swine flu. Similarly, in 2012, Chinese quarantine officers began impounding Philippine bananas amid a flare-up over contested claims in the South China Sea.

 

U.S.-China Trade Standoff May Be Initial Skirmish in Broader Economic War

The United States is increasingly wary of China’s emerging role in the global economy and the tactics it uses to get ahead, including state-sponsored hacking, acquisitions of high-tech companies in the United States and Europe, subsidies to crucial industries and discrimination against foreign companies.

The Trump administration has begun trying to limit China’s economic influence in the United States and abroad, warning about China’s ambitions in increasingly stark terms. Mike Pompeo, the secretary of state, compared China’s ambitions to Russia and Iran in a speech in London last Wednesday, saying Beijing poses “a new kind of challenge; an authoritarian regime that’s integrated economically into the West in ways that the Soviet Union never was.”

China, whose ambition is to dominate industries of the future, is pushing back. A column on Saturday in the Communist Party’s People’s Daily newspaper stated, “The United States is again waving the club of tariffs after misjudging China’s strength, capacity and will, further escalating trade friction between our two countries.”

The piece was written under the pen name Zhong Sheng — the “voice of China” — a name used when the paper publishes comments on foreign affairs that are authoritative.

Restraining China’s ambitions and methods is a tricky task — and there is concern that the Trump administration’s effort is creating a new red scare, fueling discrimination against China and its citizens that could ultimately hurt the United States. As many as 30 Chinese professors have had their visas to the United States canceled in the past year, or been put on administrative review, according to Chinese academics and their American counterparts.

“We’ve got decades of painful negotiating with China ahead,” said David Lampton, a China scholar at Stanford University. Mr. Lampton said a trade deal, if reached, would do little to resolve the bigger conflict. “It’s just a skirmish in an ongoing battle.”

.. While a trade deal could calm some tensions and establish more good will between the two nations, it is unlikely to achieve many of the ambitious goals that the administration has set for itself. Mr. Trump’s advisers, in particular the United States trade representative, Robert Lighthizer, have been focused on what the administration calls China’s practices of “economic aggression.”

But the administration has struggled to address the immensity of the problems in the text of a trade deal. People close to the talks say that the negotiators appear powerless to force any changes that aren’t in China’s interest.

Mr. Liu, who is leading China’s team in the trade negotiations, hinted at that uphill battle in a video statement released by the official Xinhua news agency.

Instead, a trade deal between the two countries seems more likely to bring change around the margins — tens of billions of dollars of soybean purchases, some tariffs lifted and changes to the text of Chinese laws or regulations that the country might ultimately disregard, particularly once another administration occupies the White House.

This is a decades-long endeavor,” said Robert Daly, the director of the Wilson Center’s Kissinger Institute on China and the United States. “This can’t be waved away over cake at Mar-a-Lago.”

The notion that the United States has one last shot to change China’s behavior is held by an array of people on both sides of the political spectrum. But it is an aggressive notion of American power to upend a rival system that has delivered prosperity for its people and put China on course to be the world’s largest economy.

Many in China see the United States as a declining power bent on enforcing its will on a world that no longer cowers before its hegemonic might. The troubles in American democracy and the long economic slump after 2008 persuaded many in China that its instincts to chart its own course were correct. In the eyes of many Chinese, their country is simply reclaiming its historic status as a dominant regional power in Asia.

It has also projected power across Asia, Africa and elsewhere while the United States has, on many fronts, retreated from its post-World War II commitment to the global order. But it has done so with little application of military force, in sharp contrast to what many in China see as American militarism.

Many in China have sought to avoid a trade conflict, which could have a larger impact on their economy than the United States’. But they have long thought the United States would have a difficult time accepting a true peer in economic, technology and military power, so consider the management of conflict with the United States to be an inevitable result of their own rise.

While the Trump administration accused China of breaking a trade deal, China’s resistance to the emerging terms stemmed from its belief that the United States was asking too much and offering too little in return. Many of the changes the United States seeks would limit what Chinese officials regard as a tried-and-true approach of using tens of billions of dollars from state-owned banks and government investment funds to turn previously small industries like car production or solar panel manufacturing into the largest industries of their kind in the world.

And the Chinese view some of the Trump administration’s demands as infringing on their sovereignty and giving America too much power over their economy — including requiring the country to codify changes through legislation in the National People’s Congress. To the increasingly nationalistic public in China, the American requests are reminiscent of 19th century history of unequal treaties forced on the country by foreign powers.

Mr. Trump on Saturday suggested China was simply delaying a deal in the hopes that a Democrat would win election in 2020 and continued his pugilistic approach, saying “the deal will become far worse for them if it has to be negotiated in my second term. Would be wise for them to act now, but love collecting BIG TARIFFS!”

In the United States, China’s unwillingness to bow to America’s demands is uniting lawmakers like the Democratic Senate leader, Chuck Schumer of New York, and Senator Marco Rubio, Republican of Florida.

That is a significant shift from the prevailing view in the United States since the death of Mao Zedong in 1976 that close economic engagement with China would produce an increasingly democratic country that would be closely tied to an international economic order founded mainly on Western liberal ideals.

That has not happened.

China has indeed grown in prosperity, leaping into the ranks of what the World Bank defines as upper-middle income countries. Its economy is now bigger than any other country except the United States. Its manufacturing sector is now bigger than those of the United States, Germany and South Korea combined.

But in the last five years, China has veered toward increasingly repressive authoritarianism at home and a rapid military buildup. The State Department estimates that Beijing has put 800,000 to two million Muslims in hastily built internment camps ringed with barbed wire in northwestern China. The Chinese government has built an archipelago of air bases on artificial islands in the South China Sea in between Vietnam, Malaysia, Indonesia and the Philippines. And China now has the world’s largest navy and has conducted

China has indeed grown in prosperity, leaping into the ranks of what the World Bank defines as upper-middle income countries. Its economy is now bigger than any other country except the United States. Its manufacturing sector is now bigger than those of the United States, Germany and South Korea combined.

But in the last five years, China has veered toward increasingly repressive authoritarianism at home and a rapid military buildup. The State Department estimates that Beijing has put 800,000 to two million Muslims in hastily built internment camps ringed with barbed wire in northwestern China. The Chinese government has built an archipelago of air bases on artificial islands in the South China Sea in between Vietnam, Malaysia, Indonesia and the Philippines. And China now has the world’s largest navy and has conducted military exercises as far away as East Africa and the Baltic Sea.

On the economic front, the competition is even fiercer. Trump administration officials warn that China is trying to dominate the global 5G infrastructure that will be the basis for future mobile communications and is competing to set other technological standards that will determine which global companies win.

China is extending low-cost loans and building infrastructure around the globe through its One Belt, One Road program, which critics warn is making poorer countries beholden to China. It is out-investing the United States in some high-tech industries, and is gaining dominance in certain segments, like mobile payment, new energy vehicles and areas of artificial intelligence.

While American companies have long hankered for access to China’s growing market, their position has begun to shift as they see China’s practices and treatment of foreign companies. A survey released by the American Chamber of Commerce in China in February showed that the majority of its members favored retaining tariffs on Chinese goods while trade negotiations continued.

China’s own experts say that the Beijing leadership has been caught off guard by the pace of change in American perceptions of Sino-American relations.

“Even if there is some kind of agreement between Xi and Trump, in the long run the strategic bilateral relationship is already in trouble,” said Zhang Jian, a professor in the School of Government at Peking University. “There is no coming back, even if there is a deal.”

China Prepares Policy to Increase Access for Foreign Companies

Some U.S. officials are likely to see Beijing’s move away from its controversial Made in China 2025 policy as more cosmetic than real

.. Odds that the new plan will go far enough in addressing U.S. complaints are long. President Xi and others in the Chinese leadership are used to exercising a strong hand in the economy. Many bureaucracies and state-owned enterprises benefit from the unfettered access to resources that come with big government initiatives and so don’t want to be hampered by the greater competition of a level playing field.

.. Officials in the Trump administration have called Made in China 2025 a threat to fair competition, saying it encourages state subsidies for domestic companies and forces technology transfer from foreign partners. Some U.S. officials are likely to see the changes as more cosmetic than real
.. A key concession under consideration would be dropping the numerical targets for market share by Chinese companies, these people said. Made in China 2025 sets defined goals of raising domestic content of core components and materials to 40% by 2020 and 70% by 2025, an increase that comes at the expense of foreign competitors.
.. President Xi’s economic adviser, Vice Premier Liu He, and other senior officials have criticized Made in China 2025 for creating waste. Cheap loans made available by various levels of government, for example, have led to extreme overcapacity among electric-vehicle battery makers in the past couple of years, making the sector less viable.

.. The Trump administration has pushed the “competitive neutrality” principle, making sure that it was part of the renegotiated North American Free Trade Agreement, known as the U.S.-Mexico-Canada Agreement. Under the concept, governments are prohibited from favoring state-owned companies over privately owned ones.

.. The idea was a favorite of prior U.S. administrations as well and became part of the Trans-Pacific Partnership

.. Vice Premier Liu, has told his U.S. counterparts, Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer, that China is planning to reduce auto tariffs and boost purchases of soybeans and other crops.

 

.. But the U.S. wants structural issues like Made in China 2025 and other policies addressed in any full trade deal.

.. “Any progress on addressing global concerns regarding the Made in China 2025 plan should be benchmarked not against new slogans and broad formulations,” said Jeremie Waterman, president of the China Center at the U.S. Chamber of Commerce. “It should be benchmarked against very detailed concerns regarding subsidies, standard setting, procurement and others.”