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WASHINGTON: Washington is planning another tidal wave of tariffs on Chinese imports that represent a worst-case scenario for markets and major industries on both sides of the Pacific.
And on Monday, seven days of public hearings are due to begin as major businesses issue their loudest warnings yet about layoffs, lost business and America’s waning industrial predominance.
Some industries, such as steel and aluminum producers, have benefitted from President Donald Trump’s trade policies and strongly support tariffs.
But the lion’s share so far are pleading with his administration to spare the imports they depend on — if not to step back from the brink of an unprecedented all-out trade conflict that economists say would prove dire for global growth.
Should they take effect, the newest $300 billion round of tariffs — which follow last month’s sudden crackup in trade negotiations with Beijing — would mean stinging duties cover just about all of the more than half trillion dollars in goods that Americans buy from China every year.
Major trade bodies share Trump’s principle grievances with Beijing, accusing it of rampant industrial espionage and massive state intervention in markets.
But in a letter to Trump on Thursday, hundreds of US companies large and small, including retail giants Target and Walmart, warned Trump the new tariff round could cost two million jobs and cut US GDP growth by a full percentage point.
So far, Trump has imposed tariffs on more than $250 billion in Chinese goods but this has spared most consumer items from major price increases.
Still, William Reinsch, a trade policy expert at the Center for Strategic and International Studies, told AFP the new tariffs were likely to pinch ordinary consumers far more.
“Unlike the previous times, I think there’ll be a sharp negative reaction from the public,” he said.
“If these things go into effect in July, what you’re going to see is fairly immediate price increases on a whole bunch of things right at the point where people are gearing up to shop for the fall season, for winter clothes and for Christmas.”
Trump has pinned hopes for resolving the impasse on a planned meeting with his Chinese counterpart Xi Jinping later this month at the Group of 20 summit in Japan.
America makes no tea
Should Xi fail to attend, Trump told CNBC this week, he could impose the new tariffs “immediately” — although the period for public comment on the tariffs extends beyond the conclusion of the summit.
At the hearings, more than 300 people are scheduled to testify. And the US Trade Representative’s office has collected more than 1,200 written comments and requests to appear in person.
“We are not able to quickly or simply shift all manufacturing to other sourcing countries, resulting in price increases for the average US consumer,” wrote Patrice Louvet, CEO of Ralph Lauren Corporation. “This ultimately undermines American competitiveness.”
Oilfield services giant Halliburton warned of job cuts and decreased US oil-and-gas exploration if duties rise to 25 percent on barite, a key mineral used in drilling fluids for which China has the world’s largest reserves.
Smaller businesses also came forward.
“We would like it to be known that the retail segment of the economy is preparing for a big hit and pray that the present administration consults God,” said an anonymous retailer in western Kentucky that imports outdoor seating and artificial Christmas trees, among other items, but supported Trump’s trade policies overall.
Lu Yu, vice president of the China Chamber of Commerce of Food Stuffs, Native Produce and Animal Byproducts, said putting tariffs on Chinese tea made no sense.
“The USA is not a tea producing country,” she wrote.
“The tea industry of the USA does not need to be protected by tariffs and there is not any tea grower or group that would be protected.”
Trump’s departing chief economist Kevin Hassett told CNBC on Friday the possible Trump-Xi meeting at the G20 summit could yield rapid improvements.
“I think the hope is that at the G20 meeting the two presidents can get together to start to get closer to where we were a few months ago where we really, really close to having a deal,” he said.
But Trump’s commerce secretary, Wilbur Ross, told the Wall Street Journal on Sunday he thinks “the most that will come out of the G-20 might be an agreement to actively resume talks.”
“At the presidential level they’re not going to talk about the details of how do you enforce a trade agreement,” Ross said.
And the specter of such a massive hit to consumers’ wallets holds political peril for Trump.
Polling last month by Monmouth and Quinnipiac universities showed majorities disapproved of Trump’s trade policies and expected his tariffs to raise prices.
Reinsch of CSIS said Trump was left with a dilemma, as Beijing was not likely to meet his toughest demands.
“The president has a choice: accept a weaker agreement or continue the war,” he said, adding that either outcome would leave him vulnerable to attacks from Democrats.
“I don’t see a clean way out of this.” – AFP
TOKYO: – Asian shares got off to a shaky start on Monday as investors were cautious ahead of a closely-watched Federal Reserve meeting, while political tensions in the Middle East and Hong Kong kept risk-appetite in check.
MSCI’s broadest index of Asia-Pacific shares outside Japan opened slightly lower and was last little changed, while Japan’s Nikkei average stood flat.
Wall Street stocks ended lower on Friday as investors turned cautious before this week’s Fed meeting, while a warning from Broadcom on slowing demand weighed on chipmakers and added to U.S.-China trade worries.
“The week ahead is likely to provide some clarification for investors on three fronts that have been a source of uncertainty. The FOMC meeting, with updated forecasts, is centre stage,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
A private gauge on eurozone’s manufacturing sector as well as U.S.-China trade frictions will also be watched closely, Chandler said.
Financial markets have been sideswiped since a sudden escalation in Sino-U.S. trade tensions in early May, with growing anxiety among investors that a protracted standoff could tip the global economy into recession.
Adding to the tensions between the world’s two biggest economies, U.S. Secretary of State Mike Pompeo told Fox News on Sunday that U.S. President Donald Trump would raise the issue of Hong Kong’s human rights with China’s President Xi Jinping at a potential meeting of the two leaders at the G20 summit in Japan later this month.
On Sunday, hundreds of thousands of black-clad protesters in Hong Kong demanded that Beijing-backed city leader Carrie Lam step down over her handling of a bill that would have allowed extradition to China, resulted her to issue a rare apology.
Geopolitical tensions in the Middle East added another layer of uncertainty for investors after the United States blamed Iran for attacks on two oil tankers in the Gulf of Oman last week.
Hopes that global central banks will keep the money spigot open have helped to temper some of the fears, and all eyes are on the Fed’s two-day meeting starting on Tuesday.
Strong U.S. retail sales data on Friday rolled back expectations of a Fed rate cut at this week’s meeting to 21.7%, from 28.3% on Thursday, according to CME Group’s FedWatch tool. But bets of an easing at the July meeting remain high at 85%.
The Bank of Japan also meets this week and is widely expected to reinforce its commitment to retain a massive stimulus program for some time to come.
The retail report also sent short-dated U.S. Treasury yields higher, flattening the yield curve.
Benchmark 10-year notes was last at 2.091%, while two-year bond yield edged up, shrinking the spread between two- and 10-year yields to 23.6 basis points compared to more than 30 earlier this month.
A Reuters poll showed a growing number of economists expect the Fed policymakers to cut interest rates this year, although the majority still see it holding steady.
In currency markets, the dollar index against a basket of six major currencies climbed to 97.583 on Friday, its highest level in almost two weeks, after the U.S. retail sales data eased fears that the world’s largest economy is slowing sharply.
The index last stood at 97.511, while the euro fetched $1.1220, near the lower end of its weekly trading range.
Oil extended gains on Monday after the attacks on two oil tankers last week raised concerns about potential supply disruptions, but prices remained on track for a weekly loss on fears that trade disputes will dent global oil demand.
Brent futures rose 0.2% to $62.13 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 0.2% to $52.60.
Spot gold eased 0.1% to $1,340.25 an ounce after hitting a 14-month peak on Friday.
Bitcoin jumped overnight to $9,391.85, its highest level in 13 months. It was last quoted at $9150.15. – Reuters
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