Looming China trade action divides industry, roils markets
Truck ban not as painful as feared, shipper says
US PRESIDENT Donald Trump’s promise to take tough action against China’s unfair economic practices was one of his most popular campaign ideas. But as the United States prepares stiff trade measures and China retaliates, stock markets have plummeted and some of America’s biggest companies are pushing back.
Industry giants like General Electric and Goldman Sachs, as well as agricultural companies, have lodged objections with the White House, saying tariffs on both sides of the Pacific and limitations on investments will cut off US companies from the world’s most lucrative and rapidly growing market.
China imposed tariffs on Monday on more than 100 US products, including pork, fruit, recycled aluminium and steel pipes. Fears of an incipient trade war between the world’s two largest economies sent the Standard & Poor’s 500 stock index tumbling 2.23 percent and pushed markets into correction territory. Tech stocks bore the brunt of the slump, as a spate of bad news about tech firms like Facebook, Tesla and Amazon spooked investors. Asian markets fell more modestly in early-Tuesday trading.
China’s action could be an escalation in a much broader trade dispute. The announcement was a direct response to the Trump administration’s tariffs on imports of steel and aluminium, which were directed at a range of countries, including China.
Since then, the White House has announced another trade measure targeted specifically at China that would place tariffs on at least $50 billion worth of products exported to the US and would restrict investment flows between the two economic giants. This week, the Trump administration is expected to announce a list of Chinese imports subject to tariffs, which could include high-tech products like semiconductors as well as cheap electronics and other goods that many Americans buy.
Josh Kallmer, the senior vice president for global policy at the Information Technology Industry Council, an advocate for companies like Google, Facebook, Apple, Microsoft and IBM, said his group had been largely supportive of the administration’s target- ing of China’s unfair trade practices. But the group had made it clear to the White House that it would not be pleased with any measure that had tariffs “as the primary or even a significant remedy”.
“The reason is that it would be a tax on consumers,” Kallmer said, “precisely the people we are trying to support.”
Many of the trade measures Trump has proposed, including the steel and aluminium tariffs, have divided his own advisers, the business community and the Republican Party. But the White House has boasted that its targeting of China’s trade practices has broad support from industries on the losing end of the Chinese approach.
Companies in technology, investment and other industries now say that the measures the administration is taking to help them may actually end up doing irreparable harm to supply chains they have built up. Any US company that wants to be a global player cannot afford to lose access to China, executives say.
Tech companies argue that the restrictive measures the administration is taking to help protect them could end up penalising American manufacturing, raising costs and making their companies less competitive globally. And industries most vulnerable to retaliation, like agriculture, are protesting about losing valuable export opportunities. While the Chinese did not target soybeans in their initial tariffs list, many in the soybean industry worry they will be penalised in a trade dispute given China’s importance as a market for exports.
The 25 percent tariff on pork that China imposed is expected to be particularly harmful, including in regions that supported the president, like Iowa, North Carolina and Indiana. Last year, US farmers sent more than $1 billion worth of pork to China.
“Because we’re so blessed to have America feed the world, we’re also the first industry to get slammed whenever there are trade difficulties between the US and other countries,” Denise Bode, the coordinator for the American Fruit and Vegetable Processors and Growers Coalition.
Companies are waiting anxiously for the administration to release a list of Chinese products this week that will be subject to tariffs – most likely the kind of high-tech products that the administration has accused China of targeting. The retail industry, which lobbied the administration and Congress against an early plan to impose tariffs on Chinesemade apparel and footwear, is now cautiously optimistic that its products will be exempt.
Restrictions on Chinese investment are expected to follow in the coming weeks. Administration officials have said those rules will aim to restore reciprocity with the Chinese, though it is not clear if the US will go so far as to bar Chinese companies from investing in the same industries that China restricts. The White House is also considering the use of an emergency economy powers act that could allow it to restrict Chinese investments.
Speaking on Monday on CNBC, the White House trade adviser, Peter Navarro, defended the administration’s tough actions on China and said investors should not fear a trade war.
“Everybody needs to relax,” Navarro said. “The economy is as strong as an ox.” SINCE a crackdown on oversized and illegal trucks began on February 10, the government has checked nearly 100,000 vehicles, taking more than 1,000 off the road and finding 3,000 others in violation of various regulations, according to Transport Ministry spokesman Va Sim Sorya.
The crackdown, like many new government policies, began following a speech from Prime Minister Hun Sen, during which the premier threatened to sack any provincial governors who allow oversized or overloaded trucks on roads on their provinces.
It was followed by a letter addressed to the prime minister from the Garment Manufacturers Association in Cambodia (GMAC) that argued that a large number of trucks transporting garment goods were in violation of the ban and called for a grace period to dampen the effect.
No such grace period was given, but the situation has improved for transporters, according to Sin Chanthy, president of the Cambodia Freight Forwarders Association.
“During the first month of enforcement, we were concerned that it would impact our delivery timeframes” Chanthy said yesterday. “But now the situation is not bad or tense, and doesn’t impact much on the container trucks.”
In its original letter, GMAC said the crackdown “posed a new threat to the garment, footwear, and travelling goods sectors, which are facing an increasingly competitive global market and shorter orders from buyers” and said the policy would affect businesses in a matter of days if it was not delayed.
Representatives from GMAC could not be reached for comment yesterday, but according to Chanthy, fears that the crackdown would ensnare the container trucks widely used in the garment industry proved overblown.
“During the first month of enforcement, we were concerned that it would impact our delivery timeframes” Chanthy said. “But now the situation is not bad or tense, and doesn’t impact much on the container trucks.”
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