Posts Tagged ‘global trade’

Prepare for Currency/Trade Wars; How Might China Respond to US Tariffs?

Prepare for Currency/Trade Wars; How Might China Respond to US Tariffs?

Courtesy of Mish

Patience of US legislators regarding the value of the Yuan has finally given out. Last Friday, Congress jumped into the fray after exceptionally harsh statements from Treasury Secretary Tim Geithner, who up until now had always preached diplomacy. Here is a brief sequence of events.

Patience Runs Out

MarketWatch reports Patience runs out on quiet diplomacy on China currency.

Sept. 15, 2010
Patience appears to have run out in Washington for the standard White House approach that favors quiet diplomacy for dealing with China over the dispute over the value of its currency.

In testimony to the House Ways and Means Committee, a wide array of experts said that quiet diplomacy has essentially been a failure. The only debate at the hearing was what new approach should be tried.

Geithner Enters the Battle

One day later Geithner calls for faster yuan appreciation

Sept. 16, 2010
“China needs to allow significant, sustained appreciation over time to correct this undervaluation and allow the exchange rate to fully reflect market forces,” Geithner said in testimony prepared for the Senate Banking Committee. Geithner will also talk about the yuan with the House Ways and Means Committee this afternoon.

“It is past time for China to move,” Geithner said.

An undervalued yuan has helped China to boost exports and encouraged U.S. companies to outsource manufacturing to China from the U.S., Geithner said. He added that the yuan is held at a undervalued level by “heavy intervention” even as Chinese officials have pledged to allow the yuan’s value to be guided more by market forces.

China Rebuffs Geithner

Responding to Geithner China says it won’t repeat Japan’s mistake

Sept. 20, 2010
China pledged not to repeat Japan’s mistake and allow its currency to rise in response to foreign pressure, countering criticism from U.S. lawmakers that the yuan is undervalued amid a growing cross-Pacific row over Beijing’s currency regime.

“China will not go down the path that Japan did and give in to foreign pressure on the yuan’s exchange rate,” Li Daokui, an economist and member of the monetary policy committee of the People’s Bank of China, was cited as saying in a report by the state-run China Daily.

Li’s comments appeared to reference to the 1985 Plaza Accord that resulted in coordinated government


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The Marriage of Mercantilism and Corporatism: When Free Trade Is Not ‘Free’

The Marriage of Mercantilism and Corporatism: When Free Trade Is Not ‘Free’

Courtesy of JESSE’S CAFÉ AMÉRICAIN

"The consequences of this policy are also stark and simple: in effect, China is taxing imports while subsidizing exports, feeding a huge trade surplus. You may see claims that China’s trade surplus has nothing to do with its currency policy; if so, that would be a first in world economic history. An undervalued currency always promotes trade surpluses, and China is no different." Paul Krugman

And he is exactly right. As regular readers know this matter of Chinese mercantilism and its toleration and acceptance by the West has been a key observation and objection here since 2000. Any economist who does not understand that devaluing and then maintaining an artificially low currency peg with a trading partner distorts the nature of that trade should review their knowledge of algebra.

And yet it was in 1994 during the Clinton Administration that China was permitted to obtain full trading partner "Most Favored Nation" status, while vaguely promising to float their recently devalued currency some day, and address the human rights issues that were endogenous to their non-democratic, totalitarian government.

"From 1981 to 1993 there were six major devaluations in China. Their amounts ranged from 9.6 percent to 44.9 percent, and the official exchange rate went from 2.8 yuan per U.S. dollar to 5.32 yuan per U.S. dollar. On January 1, 1994, China unified the two-tier exchange rates by devaluing the official rate to the prevailing swap rate of 8.7 yuan per U.S. dollar." Sonia Wong, China’s Export Growth

This served Mr. Clinton’s constituents in Bentonville quite well, and has some interesting implications for the Chinese campaign contributions scandals. It supported the Rubin doctrine of a ‘strong dollar’ while facilitating the financialization of the US economy and the continuing decline of the middle class wage earners, under pressue to surrender a standard of living achieved at great cost. "How I Learned to Stop Worrying and Love the Currency Collapse." and China’s Mercantilism: Selling Them the Rope

Not to limit this, George W. ratified the arrangement when he took office, and so it has gone on for almost fifteen years…
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Should China Dump Dollars for Commodities? What about the “Nuclear Option” of Dumping Treasuries? Can Global Trade Collapse?

Should China Dump Dollars for Commodities? What about the "Nuclear Option" of Dumping Treasuries? Can Global Trade Collapse?

Courtesy of Mish 

Shanghai Jade Buddha Temple November 2006 Photo: Roger Parker

Every time there is a little blip by China in its purchasing or holding of US treasuries, hyperinflationists come out of the woodwork ranting about the "Nuclear Option" of China dumping treasuries en masse.

Such fears are extremely overblown for several reasons.

1. China’s purchasing of US assets is primarily a balance of trade issue. If the US runs a trade deficit, some other countries run a trade surplus and thus accumulate dollars. This is purely a mathematical function as I have pointed out many times.

2. If China dumps treasuries for Euro-based assets, oil-based assets, yen-based assets or for that matter anything other than dollar based assets, the problem merely shifts elsewhere and those buyers would have to do something with the dollars such as buying US treasuries or other US assets. This too is purely a mathematical function.

3. If China dumped treasuries it would tend the strengthen the RMB and China has been extremely reluctant to let the RMB appreciate. Indeed, the US is begging China to revalue the RMB upward, but China resists.

While China may make short-term moves in its reserve holdings, the odds of China dumping treasuries or dollars in size is quite remote.

Capital Tsunami Is The Bigger Threat

Michael Pettis discusses those ideas and more in The capital tsunami is a bigger threat than the nuclear option.

An awful lot of investors and policymakers are frightened by the thought of China’s so-called nuclear option. Beijing, according to this argument, can seriously disrupt the USG bond market by dumping Treasury bonds, and it may even do so, either in retaliation for US protectionist measures or in fear that US fiscal policies will undermine the value of their Treasury bond holdings. Policymakers and investors, in this view, need to be very prepared for just such an eventuality.

… the idea that Beijing can and might exercise the “nuclear option” is almost total nonsense.

In fact the real threat to the US economy is not the dumping of USG bonds. On the contrary, in the next two years the US markets are likely to be swamped by a tsunami of foreign capital, and this will have deleterious effects on the US trade deficit, debt levels, and employment.


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Oil, Not China, Is The Real Destroyer Of America’s Trade Balance

Oil, Not China, Is The Real Destroyer Of America’s Trade Balance

Courtesy of Vincent Fernando at Clusterstock 

UBS’s head of Asia-Pacific economics argues that the real global trade imbalance isn’t U.S.-China, it is U.S.-oil. As shown below, current account surpluses from fuel exporting-nations have been a far larger driver of total global trade imbalances coming from emerging markets.

China’s current account surplus (in blue) has been large in recent years, as a percentage of the global economy, but it has been dwarfed by fuel exporters (in green):

Chart

Jonathan Anderson of UBS, via Caixin:

Looking at the movements from the late 1990s through 2006, when the overall U.S. deficit worsened from 2 percent of GDP to nearly 7 percent of GDP at the trough, a full three percentage points of that adjustment came from other advanced economies and from fuel imports; only two percentage points came from China and other non-fuel emerging markets. And the recent drop in the U.S. deficit had almost nothing to do with China; again, it was oil prices and developed trade that explains the entire swing over the past 18 months.

Chart

Thus the U.S. could use a little less finger-pointing at China… and a lot less foreign oil usage… if it really wants to correct its global trade imbalance.

This is a huge argument against U.S. trade protectionism since protectionism would miss the largest cause of America’s trade deficit while only hurting U.S. export prospects by pissing off trade partners.

 


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Trade Tensions Are Brewing……..

Trade Tensions Are Brewing……..

Courtesy of Jan-Martin Feddersen at Immobilienblasen

china, tiresJuts what the doctor ordered…… As i´ve feared last week the "conditions" for world trade are not getting better…… Lets all hope that the tensions don´t escalate……. Just in China to request WTO consultations with US over tyre dispute – Commerce Ministry China says: – US tyre decision violates WTO rules. – Wants dialogue with US on tyre tariffs. Source: RTRS

A Tale of Two Depressions VOX

The downward spiral in global trade volumes has abated, and the most recent month for which we have data (June) shows a modest uptick. Nonetheless, the collapse of global trade, even now, remains dramatic by the standards of the Great Depression.

world trade

Volume of world trade, now vs then

China Probes ‘Unfair Trade’ in U.S. Chicken and Auto Products 

Sept. 14 (Bloomberg) — China announced dumping and subsidy probes of chicken and auto products from the U.S., two days after President Barack Obama imposed tariffs on tires from the Asian nation.

Chinese industries complain that they’re being hurt by “unfair trade practices,” the nation’s Ministry of Commerce said on its Web site yesterday. The dumping investigation relates to poultry alone, a spokesman said in Beijing today. The ministry didn’t specify the value of imports of the products.

Rising protectionism may hamper world trade and undermine the global economy’s recovery from recession, the European Central Bank ( see end of the post for details )said last week.

The U.S. placed tariffs starting at 35 percent on $1.8 billion of tire imports from China, backing a United Steelworkers union complaint against the second-largest U.S. trading partner.

chicken in potChina Reacts Quickly and Badly to Tire Tariffs Naked Capitalism

It would be better if we were not proven correct on this one, but when the US imposed stiff tariffs on imported tires from China late on Friday, we noted, “This could get interesting in a bad way.” The Chinese responded quickly over the weekend to announce they were investigating US auto parts and chicken, which together account for roughly as much as the disputed tires ($1.2 billion versus $1.3 billion for tires).

But protectionism is driven by the desire to protect jobs. Unemployment has not peaked in the US, and some analysts suggest that China’s job


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Zero Hedge

Walmart Transforming 160 Parking Lots Into Drive-In Movie Theaters

Courtesy of ZeroHedge View original post here.

In May, readers may recall we said social distancing would revive drive-in movie theaters in a post-corona world. And boy, were we right.  

A press release via Walmart on Wednesday (July 1) said, "Walmart is transforming 160 of its store parking lots into contact-f...



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ValueWalk

The "Next Netflix" Has Finally Revealed Itself

By Mauldin Economics. Originally published at ValueWalk.

A sleeping giant tech stock has awoken. It’s already handing out monster gains. And as I’ll show you today, it’s just getting warmed up.

Q2 2020 hedge fund letters, conferences and more

In fact, it won’t be long before this stock is mentioned in the same breath as hall-of-famers like Netflix (NFLX), Facebook (FB), and Google (GOOG). That’s right. The next great tech stock is growing up before our eyes.

I don’t say that lightly. Within a few years, this compan...



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Phil's Favorites

Coronavirus deaths and swelling public sector debt share a data-quality problem

 

Coronavirus deaths and swelling public sector debt share a data-quality problem

Different countries report coronavirus data differently. Shutterstock.com

Courtesy of Marion Boisseau-Sierra, Cambridge Judge Business School

Watching scientists, politicians and journalists struggle to compare national death rates from the coronavirus pandemic, I had an acute case of déjà vu. Though the virus may be novel, the confusion generated by inconsistent data standards is anything but. It’s something I&...



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Biotech/COVID-19

Coronavirus deaths and swelling public sector debt share a data-quality problem

 

Coronavirus deaths and swelling public sector debt share a data-quality problem

Different countries report coronavirus data differently. Shutterstock.com

Courtesy of Marion Boisseau-Sierra, Cambridge Judge Business School

Watching scientists, politicians and journalists struggle to compare national death rates from the coronavirus pandemic, I had an acute case of déjà vu. Though the virus may be novel, the confusion generated by inconsistent data standards is anything but. It’s something I&...



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Chart School

Golds quick price move increases the odds of a correction

Courtesy of Read the Ticker

Every market corrects, maybe profit taking, maybe of allowing those who missed out, to get in!


The current open interest on the gold contract looks to high after a very fast price move, it looks like 2008 may be repeating. A quick flushing out of the weak hands open interest may take place before a real advance in price takes place. The correction may be on the back of a wider sell off of risk assets (either before of after US elections) as all assets suffer contagion selling (just like 2008).

This blog view is a gold price correction of 10% to 20% range is a buying opportunity. Of course we may see  a very minor price correction but a long time correction, a price or time is correction is expected, we shall watch and...

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The Technical Traders

Wild Volatility Continues As US Markets Attempt To Establish New Trend

Courtesy of Technical Traders

We’ve continued to attempt to warn investors of the risks ahead for the US and global markets by generating these research posts and by providing very clear data supporting our conclusions.  Throughout the entire months of May and June, we’ve seen various economic data points report very mixed results – and in some cases, surprise numbers as a result of the deep economic collapse related to the COVID-19 virus event.  This research post should help to clear things up going forward for most traders/investors.

As technical traders, we attempt to digest these economic data factors into technical and price analysis while determining where and what ...



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Kimble Charting Solutions

Nasdaq 100 Relative Strength Testing 2000 Highs

Courtesy of Chris Kimble

The tech bubble didn’t end well. BUT it did tell us that the world was shifting into the technology age…

Since the Nasdaq 100 bottomed in 2002, the broader markets have turned over leadership to the technology sector.

This can be seen in today’s chart, highlighting the ratio of Nasdaq 100 to S&P 500 performance (on a “monthly” basis).

As you can see, the bars are in a rising bullish channel and have turned sharply higher since the 2018 stock market lows. This highlights the strength of the Nasdaq 100 and large-cap tech stocks.

...

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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

The problem in the US seems to be widespread public resistance to recommended practices of social distancing and mask wearing. In countries where these practices have been practi...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Feb. 26, 1pm EST

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Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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