President Trump raised the stakes in the U.S. trade war yet again yesterday by threatening to slap tariffs on more than $500 billion worth of imports from China. The figure is roughly double the value of Chinese products on which Trump has already imposed or threatened to impose tariffs–and nearly equal to the total value of goods and services America purchased from China last year.
“I’m ready to go to 500,” the president declared in an interview with CNBC’s Joe Kernen. Trump called the move the “right thing to do for our country,” adding, “We have been ripped off by China for a long time.”
Those remarks were the latest sign (as if we needed further evidence) that trade negotiations between Washington and Beijing have collapsed. The White House says there are no plans for the two countries to discuss trade issues at this weekend’s meeting of G20 finance ministers in Argentina. Many analysts now fear there will be no significant movement towards resolution until after U.S. mid-term elections in November.
Trump economic adviser Larry Kudlow this week laid blame for the stalemate on the Chinese president. “The problem here is Xi,” Kudlow told Axios. “He doesn’t want to move, and they’ve offered the U.S. absolutely…no options regarding the issue of [intellectual property] theft and forced technology transfer.” Chinese foreign ministry spokesman Hua Chunying bristled at that suggestion, deeming it “shocking” and “beyond imagination” that a Trump advisor would make such “bogus accusations.”
As the trade war escalates, so have analysts’ estimates of potential economic consequences. Last week I noted UBS’s volte face from blasé to bearish. This week brings a JP Morgan assessment, cited in this Financial Times editorial, suggesting Trump’s tariffs don’t pose significant risk for the global economy. The bank concludes the combined impact of the $500 billion in tariffs Trump has threatened against China, the additional $275 billion in tariffs the White House is said to be mulling on auto imports, and the likely retaliation to those measures, would only reduce global growth 0.25 percentage points. The FT dismisses that view as “far too complacent.” The International Monetary Fund warned this week that a trade war could lower global growth by as much as 0.5%, or $430 billion, by 2020, with America “especially vulnerable.” Meanwhile, a host of recent reports suggest U.S. producers—including makers of American whiskey, soy bean farmers, lobster fisherman and cranberry farmers —already feel the pain.
Also yesterday, Trump took to Twitter to drag the Federal Reserve into the trade brawl, assailing the U.S. central bank for its apparent reluctance to goose U.S. exports with a weaker dollar. The Wall Street Journal’s Grep Ip explains why Trump’s anti-Fed outburst is in no one’s interest, least of all his own.
China was a hot topic at Brainstorm Tech in Aspen this week. New York Times columnist Tom Friedman allowed that he actually agreed with Trump on the need for the U.S. to get tough with China on technology transfer and intellectual property issues. But he expressed bafflement at the “madness of Trump’s method”: If the president really wanted to put pressure on China, why would he tear up the Trans-Pacific Partnership and pick fights with virtually all America’s allies and other trade partners at the same time?
A highlight for me at this year’s Brainstorm Tech was leading a lunchtime roundtable on Chinese innovation that included some of the world’s savviest China investors. (A deft summary of that discussion by Fortune’s Brian O’Keefe here.) But I was also moved by Tristan Harris’s impassioned appeal for us to reflect on the many ways in which technology is making us all miserable. It struck me that that’s a discussion I almost never hear in China.
More China news below.
Innovation and Tech
Social shopping. Pinduoduo is China’s second largest e-commerce site, surpassing JD.com and nestling behind Alibaba in number of daily active users. The three-year-old start-up is also leading China’s “Social+” e-commerce model. Pinduoduo’s app encourages users to group together with friends and bulk buy items to gain discounts. The company tripled its revenue last year and this week the young tech firm revealed plans to float on NASDAQ, hoping to raise $1.6 billion in a valuation up to $24 billion. Financial Times
Google doodle. Google withdrew from China officially in 2010, but the global behemoth has always maintained some presence in the market. This week, it released a game through WeChat’s mini program’s platform – a sort of in-house App Store. The game, called Guess My Sketch, is a Chinese version of Google’s Quick, draw! where players have 20 seconds to draw a simple object and Google’s AI bot attempts to guess what it is. Quick, draw! is essentially a training program for Google’s AI so the release of a Chinese version makes sense – there’s a lot of data to be gleaned from the world’s most populous country. TechCrunch
Didi bookings. Booking Holdings, the parent company behind online travel agents Booking.com and Kayak, pumped $500 million into Didi Chuxing. The partnership will allow Booking Holdings brands to offer ride-hailing through their apps and Didi customers will have the option to book hotels through Booking.com or Agoda. Didi has also launched a joint venture with Japan’s SoftBank called Didi Mobility Japan. The JV could capitalise on the huge numbers of Chinese tourists visiting Japan and will also give Didi the opportunity to expand its AI-driven infrastructure projects. Fortune
Economy and Trade
Trade warnings. China’s foreign ministry claims that the U.S.-led trade war has become the biggest “confidence killer” for the global economy. At a regular press briefing, Hua Chunying, a spokeswoman for the ministry, alleged that the United States is fabricating reasons for pursuing trade action and warned that if the U.S. “continues to be wilful, countries around the world will only harden their resolve to hit back.” Reuters
Anbang auction. China’s Anbang insurance is seeking to sell $10 billion of overseas properties. The insurer was one of China’s most acquisitive companies in recent years, signing some $30 billion worth of deals. Most famously, in 2014, Anbang bought the Waldorf Astoria in New York for $1.95 billion, but that unit will not be included in the upcoming sales. In February the government seized control of Anbang, fearing it posed a major financial risk, and in May the chairman who had overseen much of Anbang’s purchases was sentenced to 18 years in prison for fraud and embezzlement. Reuters
Economic flows. This week officials signed a plan to integrate key economies in the Yangtze River Delta over the next three years. This is just the latest of China’s integration plans: a similar scheme is in place for the northern areas of Beijing, Tianjin and Hebei (the Jing-Jin-Ji plan) and there has been much talk of integrating the Pearl River Delta into a “Greater Bay Area”, encompassing Guangzhou, Shenzhen, Hong Kong and other key cities. The Yangtze River Delta includes Shanghai as well as Alibaba’s tech-hub hometown of Hangzhou and is one of East China’s most productive regions, spanning finance, agriculture, industry and shipping. Global Times
Blocked stocks. Hong Kong missed out on Alibaba’s record-breaking IPO in 2014 because the stock exchange didn’t permit dual-class shares. Determined not to repeat the mistake, the HKEX began permitting dual-class shares this year and Xiaomi was the first to take advantage of the new policy. However, Xiaomi and the HKEX were delivered a blow last weekend when bourses on the mainland said they wouldn’t allow Xiaomi to trade on the Stock Connect – a scheme that lets mainland investors purchase Hong Kong-listed stocks from home – because its dual-class listing was too unfamiliar to mainland buyers. This was another setback for Xiaomi, which has had a bumpy launch, and shares fell almost 10% on the news. But on Wednesday this week officials from the HKEX reached an agreement with their mainland counterparts that would allow dual-class shares to be included going forward. But Xiaomi will still have to wait. South China Morning Post
In Case You Missed It
How e-commerce is transforming rural china The New Yorker
Get with the program: China’s coding kids Sixth Tone
Politics and Policy
Film review. A blockbuster movie may help expedite healthcare reform in China. Dying to Survive is a flick based on the true story of a cancer patient who illegally imports cheaper drugs from India and sells them to other sufferers.The film premiered on July 5 and has become the sixth highest grossing film in China ever. For many, including Premier Li Keqiang it seems, the film is an indictment of the healthcare system today (the man who inspired the movie was arrested only five years ago). On Wednesday this week Premier Li called on the government to do more to help cancer patients and reduce the cost of treatments. CNN
Party over. Hong Kong’s pro-independence party could become outlawed after Hong Kong police told local authorities it posed a threat to national security. The police cited a section of the colonial-era Societies Ordinance law to justify their position. If the ban is carried out, it will mark the first use of the Societies Ordinance law since Hong Kong was returned to Chinese sovereignty in 1997. The move has been divisive, with representatives of the U.K. and the U.S. both voicing their concerns. South China Morning Post