BUSINESS

BUSINESS

Saturday, June 23, 2018


THE TARIFFS WARS

China plans to expand military to 'WIN A WAR' and overtake the US

  • China's plans to reform and expand its military were laid bare in leaked documents that were published by the Chinese Central Military commission
  • Report talks about growing friction in the East and South China Sea, and heightened tensions with Japan and the US
  • It says that expansion of armed forces would allow to ‘more effectively create a situation, manage a crisis, contain a conflict, win a war...' 
  • Document describes US as a 'slower vehicle on the curve' and suggests that stronger army would allow China to surpass the declining superpower
China's plans to overhaul its military have been laid bare in leaked documents, revealing that it is Beijing's intention to expand its armed forces to 'manage a crisis, contain a conflict, win a war,' and make the country stronger than the US.
The documents were originally published by the Chinese Central Military commission back in February and were recently obtained and disseminated by Japan's Kyodo News Agency.
The leaked report talks about growing friction in the East and South China Sea, and heightened tensions with Japan and the US.
China's plans to reform and expand its military have been revealed in leaked documents, which talk about the need to have stronger armed forces in order to surpass the US
China's plans to reform and expand its military have been revealed in leaked documents, which talk about the need to have stronger armed forces in order to surpass the US
The document calls for a 'comprehensive protection' of China's security around the globe and projects that expanding its military would allow the country to ‘more effectively create a situation, manage a crisis, contain a conflict, win a war, defend the expansion of our country’s strategic interests in an all-round fashion and realize the goals set by the party and Chairman Xi.’
As cited by Newsweek, the report argues that ‘strong military might is important for a country to grow from being big to being strong,’ using Russia, Japan and the US as examples of this approach.
At the same time, a rising power - like China - should avoid coming into conflict with a more established power, the document asserts, and having a strong military could help 'escape the obsession that war is unavoidable.’
The leaked report describes the US as a 'slower vehicle on the curve' and suggests that more robust armed forces would allow China to surpass the declining superpower.
News of the documents’ release comes after china launched its first aircraft carrier and two new destroyers, as well as long-range air defence and anti-submarine technology.
Frenemies: The report detailing China’s military aspirations also comes amid a brewing trade war between the administrations of President Trump and China's Xi Jinping
Frenemies: The report detailing China’s military aspirations also comes amid a brewing trade war between the administrations of President Trump and China's Xi Jinping
China PM warns 'China will take measures in response' to tariffs
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After US Defense Secretary Jim Mattis met with Chinese leaders last month, state broadcaster CCTV quoted President Xi Jinping as saying in reference to the disputed South China Sea: 'Not a single inch of the territory left behind by our ancestors must be lost, while we are not seeking to take any bit of what belongs to others.'
The report detailing China’s military aspirations also comes amid a brewing trade war between the world’s two largest economies.
President Donald Trump has already imposed tariffs of 25 per cent on imported steel and 10 per cent on aluminum. And on Friday the US was to start taxing $34billion in Chinese goods and later add tariffs on an additional $16billion in goods.

Beijing has vowed to immediately retaliate with its own tariffs on US farm produc
Shoppers are facing higher prices on jeans, bourbon, orange juice and peanut butter as Theresa May backed EU trade reprisals against the US that come into force today.
Brussels has slapped higher duties on around £2.5billion of typical American products in retaliation for Donald Trump's decision to impose tariffs of 25 per cent on steel and 10 per cent on aluminium.
But the spat is on the verge of erupting into a full-blown trade war this afternoon after the US president vowed to hit car imports with a 20 per cent tax. 
The dramatic escalation could potentially deal a devastating blow to the UK, as 15 per cent of all car exports end up in the US.   
The PM is pictured at a Windrush ceremony in London today
The PM's spokesman today backed EU trade reprisals after Donald Trump (pictured right at a rally this week) imposed tariffs on steel and aluminium
Theresa May's spokesman today backed EU reprisals after Donald Trump (pictured right at a rally this week) imposed tariffs on steel and aluminium. The PM is pictured at a Windrush ceremony in London today 
The EU outlined a package of retaliatory tariffs today. It is adding 10 per cent to the cost of things like hair spray and toughened glass (top row), 25 per cent on jeans, Harley Davidson motorcycles (middle row), and a huge 50 per cent on Nike trainers and houshold appliances (bottom row) 
The EU outlined a package of retaliatory tariffs today. It is adding 10 per cent to the cost of things like hair spray and toughened glass (top row), 25 per cent on jeans, Harley Davidson motorcycles (middle row), and a huge 50 per cent on Nike trainers and houshold appliances (bottom row) 
The spat is on the verge of erupting into a full-blown trade war this afternoon after the US president vowed to hit car imports with a 20 per cent tax
The spat is on the verge of erupting into a full-blown trade war this afternoon after the US president vowed to hit car imports with a 20 per cent tax
Taking to Twitter this afternoon, Mr Trump said: 'Based on the Tariffs and Trade Barriers long placed on the U.S. and it great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!' 

What are tariffs and why has Trump's plan to impose them been met with such criticism?

Tariffs are charges which governments can slap on certain goods or products imported into the country.
Taxing items coming into a country makes them more expensive – and people less likely to buy them as a result.
Imposing such tariffs makes people more likely to turn to local products instead – theoretically protecting domestic jobs.
However, Governments usually try to negotiate minimum tariffs so that goods can be traded freely around the world.
This is because for many years most politicians have agreed that free trade leads to greater wealth and makes products cheaper to buy in the shops.
The US says the balance had shifted because China has massively ramped up the amount of steel it has produced in recent years and dumped it cheaply on the market.
This global steel glut has made it far harder for steel industries in other countries to compete - prompting plant closures and job losses.
Donald Trump has responded to domestic anger by imposing his hefty tariffs in a bid to protect the American steel industry.
But critics around the world have blasted the move - warning this will result in a tit for tat trade war which will only push up prices in the long term. The US is the largest export market for EU cars - making up a quarter of the total value of around £170billion a year.
Germany is responsible for just over half of the bloc's car exports.
But nearly 15 per cent of the 90,000 cars exported from the UK each year go to US markets. 
Hundreds of thousands of jobs in Britain rely on the car industry, with companies such as Nissan and Honda operating major plants. 
Shares in car firms such as Volkswagen and BMW dropped sharply after Mr Trump's tweet - although they did recover to some extent amid speculation that he might not be able to follow through on the threat.
Earlier, the Prime Minister's spokesman denied that the EU move was 'tit for tat' or excessive.
‘We believe plans the EU have put forward are measured and proportionate,’ the spokesman said 
Mrs May is also expected to raise the issue of trade when Mr Trump comes to the UK for the first time next month. 
'The Prime Minister will use the opportunity of the President’s visit next month to discuss trade,’ the spokesman added. 
Mr Trump's assault on imports came as he pushed his case that the US is being fleeced by the rest of the world, who refuse to open their own markets.
Next month the US will impose higher taxes on billions of pounds worth of Chinese goods, with Beijing vowing to hit back by targeting American soy beans and other farm products.
But the EU has unveiled a raft of countermeasures intended to hit US products from industrial heartlands that tend to be Trump strongholds.Canada and the EU are the biggest sources of steel for the US in terms of monetary value
Canada and the EU are the biggest sources of steel for the US in terms of monetary value
An analysis of goods traded across the Atlantic shows Europe is particularly vulnerable to tariffs on cars (top row) while the US would be hit hardest by levies on aircraft (second row) 
An analysis of goods traded across the Atlantic shows Europe is particularly vulnerable to tariffs on cars (top row) while the US would be hit hardest by levies on aircraft (second row) 
The majority of US goods targeted, such as tobacco, jeans, Harley Davidson motorcycles, cranberries and peanut butter, will face a tariff of 25 per cent.
Pleasure boats and make up are also being charged at that rate.  
However, 50 per cent is being imposed on footwear, some types of clothing, toilets and washing machines. 
Among dozens of specific sanctions, playing cards and hairspray are facing a 10 per cent levy.
Orange juice seems to have been picked out by Brussels as it is a major export for Florida, a swing state in US elections.
The impact on prices in the UK will depend on how much of the extra costs are absorbed by the manufacturers and retailers.
However, they will inevitably be pushed up to some extent. 
Orange juice seems to have been picked out by Brussels as it is a major export for Florida, a swing state in US elections 
Orange juice seems to have been picked out by Brussels as it is a major export for Florida, a swing state in US elections 
American peanut butter is among the goods being targeted by the EU as part of its response to the US duties on steel
German Chancellor Angela Merkel led resistance to Mr Trump at the G7 summit earlier this month after he accused other states of 'robbing' his country through their trade policies
German Chancellor Angela Merkel led resistance to Mr Trump at the G7 summit earlier this month after he accused other states of 'robbing' his country through their trade policies
India has said it will hike taxes on 29 products imported from the US - including some agricultural goods, steel and iron products.
South Korea, Argentina, Australia and Brazil have agreed to put limits on the volume of metals they export to the US in order to avoid levies.

UK's car industry in the firing line in trade war

The US is the largest export market for EU cars - making up a quarter of the total value of around £170billion a year.
Germany is responsible for just over half of the bloc's car exports.
But nearly 15 per cent of the 90,000 cars exported from the UK each year go to US markets. 
Hundreds of thousands of jobs in Britain rely on the car industry, with companies such as Nissan and Honda operating major plants.  Canada has announced it will impose higher charges on around £9.5billion of US exports from next month.
A fortnight ago Mexico put tariffs on around £2.2billion worth of American products such as steel, pork and bourbon.
Mrs May was among a group of premiers, spearheaded by German Chancellor Angela Merkel, who berated the US president over his imposition of punitive steel tariffs at a bad-tempered G7 summit earlier this month.
The powerful group of countries - the US, UK, France, Germany, Japan, Canada and Italy - eventually hammered out a statement committing to 'free, fair, and mutually beneficial trade' and tackling protectionism. 
But within minutes Mr Trump dramatically condemned the communique and launched a furious attack on Canadian host Justin Trudeau.
Despite the differences, Mr Trudeau announced that the leaders had managed to agree a joint communique at the summit which highlighted the importance of 'free, fair and mutually beneficial trade and investment' and said the G7 would 'continue to fight protectionism'. Mrs May (pictured centre left) was among a group of leaders who berated the US president about his imposition of punitive steel tariffs at the G7 summit in Canada
Mrs May (pictured centre left) was among a group of leaders who berated the US president about his imposition of punitive steel tariffs at the G7 summit in Canada
He said: 'We had some strong, firm conversations on trade and specifically on American tariffs.'
But after saying he would give his relationship with fellow world leaders 10 out of 10, Mr Trump hit out at his northern neighbour.
He tweeted that he would not now endorse the communique due to 'false statements' from the Canadian PM.
He wrote: 'Based on Justin's false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!'
He added: 'PM Justin Trudeau of Canada acted so meek and mild during our @G7 meetings only to give a news conference after I left saying that, 'US Tariffs were kind of insulting' and he 'will not be pushed around.' Very dishonest & weak. Our Tariffs are in response to his of 270 per cent on dairy!' 
Trump discusses trade and tariffs with G7 leaders in Canada

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Mr Trump and Mr Trudeau (pictured right) clashed bitterly at the G7 summit that took place in Canada earlier this month
Mr Trump and Mr Trudeau (pictured right) clashed bitterly at the G7 summit that took place in Canada earlier this month

Trump's tariffs explained: What are they, how has the world reacted and what are the implications for Britain and global trade? 

The European Union has announced its retaliatory tariffs after the imposition of new charges on steel and aluminium from Europe to America. 
The EU action immediately prompted Donald Trump to threaten a new round of tariffs on European cars sold to America. 
Here we explain all the key issues and the implications at stake.

What has Donald Trump's government done?

The US government has announced it will begin imposing steel and aluminium tariffs on US allies Canada, Mexico and the European Union.
Canada, Mexico and the EU together exported around £17billion worth of steel and aluminium to the US in 2017, equating to nearly half of the total steel and aluminium imports last year.
New tariffs: Donald Trump's government has imposed new trade tariffs on steel and aluminium imports into the US from the EU, Canada and Mexico

New tariffs: Donald Trump's government has imposed new trade tariffs on steel and aluminium imports into the US from the EU, Canada and Mexico

What does 'imposing a trade tariff' really mean?

That any steel and aluminium imports from the EU, Canada and Mexico to the US will be slapped with a 25 per cent and 10 per cent tax respectively.
The tariffs will hit a wide range of products, including plated steel, slabs, coil and rolls of aluminium, all of which are used extensively within the US manufacturing, oil and construction sectors. 

When do the new tariffs take effect?

The new tariffs imposed on Canada, Mexico and the EU took effect at midnight on Thursday 31 May. 

Why has Trump done this?

Trade played a major role in Trump's presidential campaign back in 2016. During that campaign, Trump blamed unfair global trade deals on job losses within the US.
Since 2000, 50,000 jobs have been lost in the steel industry and 40,000 in the aluminium factories. 
Speaking at a metals recycling facility in Monessen, Pennsylvania, in June 2016, Trump said: 'We tax and regulate and restrict our companies to death and then we allow foreign countries that cheat to export their goods to us tax-free. How stupid is this? How could it happen? How stupid is this?'.
He added: 'We are going to put American steel and aluminium back into the backbone of our country.' 
During the speech, Trump warned he would impose taxes and tariffs on foreign countries importing their products into the US.

Before this week, what tariffs had Trump already introduced?

On 1 March, Trump announced he was introducing a 25 per cent charge on steel imports and a 10 per cent charge on aluminium imports. In total, the tariffs would have an impact on around $48billion worth of trade.
By imposing the tariffs, Trump was primarily taking aim at China, which had been dubbed by the president as the 'bad guy' of global trade.
The tariffs were supposed to come into force the following week. 
After a backlash, Trump then initially suspended the tariffs for Argentina, Australia, Brazil, South Korea, Canada, Mexico and the EU from the tariffs, pending further negotiations.
If those negotiations did not make sufficient progress in Trump's eyes, then the tariffs would be imposed at a later date. This is exactly what ended up happening.
US Commerce Secretary Wilbur Ross has said talks with the EU, Canada and Mexico had not made enough progress to warrant a further reprieve, meaning the geographical reach of the tariffs has been extended.

What are the implications for Britain?

Around 7 per cent of the UK's steel output, 350,000 tonnes, was exported to the US last year. For this reason, the industry fears the tariffs could cause serious damage. 
The UK's steel sector remains a major employer, despite having shrunk significantly in recent decades.
Around 4,000 people are employed at Tata's giant Port Talbot steelworks in south Wales. British Steel, which in its current form was founded in 2016 from assets acquired from Tata by Greybull Capita and has production sites in Scunthorpe, Skinningrove and Teesside.
While accounting for less than 1 per cent of economic output, the steel sector is still regarded as strategically important for both manufacturing and defence. 
Adam Marshall, Director General of the British Chambers of Commerce, said: 'It is hugely disappointing that the US government has chosen to push ahead with these tariffs, which will hurt companies and communities in many areas of the UK, as well as their customers in the US.
'The UK government must reach out to and support the many supply chain businesses that face becoming the "collateral damage" of the Trump administration’s protectionist push. British ministers must also work hand in hand with the EU to avoid any further escalation, and to find a long-term solution.
As the UK leaves the EU, the American government’s decision to impose punitive tariffs is a helpful reminder that self-interest looms large in trade negotiations. Ministers should reflect on this carefully before they pursue any future trade deal between the UK and the USA.'  

How has Britain's government reacted to the announcement so far?  

A government spokesman said they were 'deeply disappointed' and that the UK and other EU countries, being close allies of the US, had not been 'permanently and fully exempted' from the tariffs.
UK reaction: A government spokesman said they were 'deeply disappointed' by the tariffs

UK reaction: A government spokesman said they were 'deeply disappointed' by the tariffs
He added: 'We will continue to work closely with the EU and US administration to achieve a permanent exemption, and to ensure that UK workers are protected and safeguarded.'
UK International Trade Secretary Liam Fox said the levy on steel was 'patently absurd'.
He added: 'It would be a great pity if we ended up in a tit-for-tat trade dispute with our closest allies.'
Barry Gardiner, of the Labour party, said the measures were 'based on a lie', adding the UK should not be 'bullied by the president... we believe in a rules-based system and Trump doesn't.'
It remains unclear whether the tariffs will have any implications for a future trade deal with the US after Brexit.

How has the EU reacted so far?

European Commission president Jean-Claude Juncker said he plans to take the US to the World Trade Organization over the American tariffs.
Fierce reaction: Juncker branded the tariffs 'totally unacceptable'

Fierce reaction: Juncker branded the tariffs 'totally unacceptable'
Juncker branded the tariffs 'totally unacceptable.'.
The EU has also issued a 10-page list of tariffs on US goods ranging from Harley-Davidson motorcycles to food goods.
The first round of new EU tariffs kicked in today - prompting an immediate threat from Donald Trump to add tariffs to European cars.  

What is the reaction from Canada and Mexico?

Canadian prime minister Justin Trudeau said the US's move was 'totally unacceptable' and rejected the claim that his country posed a national security threat to America.
In response, Canada plans to impose tariffs of up to 25 per cent on roughly $13billion worth of US exports from 1 July.
Mexican Foreign Minister Luis Videgaray said his country was planning new duties for imports of steel, pork, apples, grapes, blueberries and cheese from the US. 

How have the markets reacted?

With fears over a potential trade war looming large, in the immediate aftermath of the announcement, the Dow Jones dipped by around 1 per cent, France’s CAC lost half a per cent and Germany’s DAX fell by 1.4 per cent. In the UK, the FTSE 100 is currently up 0.66 per cent to 7,728.81. 

Will the tariffs end up being a success for the US?

Reaction on exactly how the tariffs will end up affecting the US in the long-run is mixed.
Professor Inderjeet Parmar, of the University of London, said: 'The impact of tariffs on steel and aluminium on US jobs is minimal as it will increase prices for other goods that use those metals like cars etc. and prices will go up in the US.'
He added: 'The US will want to open up UK financial and health services to US firms and prices once EU regulations on price and safety are gone. But the EU will not want those regulations to be abolished by the UK and will expect any deal with the UK to retain health and other standards in return for a deal with the EU.
'Generally, this is a big headache but not a war; it will place May in a tough position as the US is so close of an ally.”
Professor David Collins, Professor of International Economic Law at City, of the University of London, said: 'It is very difficult to speculate how President Trump thinks, and his tweets are not necessarily a good indication, but presumably he expects that in the longer term the steel and aluminium tariffs will benefit the US economy, even if in the short term there are problems in terms of higher costs to consumers and manufacturers.
'I suspect that he envisions the tariffs as a tactical manoeuvre to gain concessions from Canada and Mexico in NAFTA negotiations and possibly to secure the EU’s support for blocking China’s role in the over-supply of steel on global markets.'

What is China's role in all this?

China's position in the world of global trade plays a major role in the US government's latest tariff introductions.
In his presidential campaign, Trump outlined his plans for a crackdown on China, accusing the country of flooding the global market with cheap metals.
On a historical level, it is China, as well as Russia, that have been the US's main 'enemies'. By imposing the tariffs on the EU, Canada and Mexico, the president has, for the time being, taken the focus and heat away from China. 
Last year, Trump instructed the US Trade Representative to investigate Chinese violations of intellectual property rights, invoking Section 301 of the Trade Act of 1974. 
On 22 March, the USTR concluded that China had implemented unreasonable policies and unfair practices to acquire foreign technologies.
Trump has since announced measures to penalise China and hit its global trade operations. But for the moment, Trump has imposed more trade tariffs on his supposed allies than China.
The US has said it plans to impose 25 per cent tariffs on $50billion worth of Chinese imports 'shortly' after mid-June.
China has retaliated to Trump's stance by implementing retaliatory tariffs of up to 25 per cent on $3billion worth of food imports from the US, raising uncertainty over the possibility of a trade war between the two countries.

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