'You prepare for war': How one US firm tried escaping Trump's China tariffs

Current Affairs

When Larry Sloven heard last year that US tariffs threatened his China electronics business, he knew that setting up shop elsewhere would be a slog rather than an adventure.The 70-year-old had spent half his life building supply chains in southern China to produce goods for big-box US retailers. But he had never reshuffled one on short notice, with tariffs hanging over his head.
"It is the hardest thing I've ever had to do in all my 30 years in the business," said Sloven, president of Capstone International HK Ltd, a division of Florida-based Capstone Companies."You've got packaging, assembling, auditing, labour, overheads, components, logistics, transportation," he said. "I went from first gear to fourth gear very quickly."
Sloven, a native of Long Island, New York, cut his teeth in Asia in the 1970s sourcing lighting products from Japan. He then moved to Taiwan and then mainland China, making and sourcing electrical products for AT&T and Duracell, before becoming a buying agent for sporting goods retailer Dick's.
He joined Capstone in 2012 to manage its network of Chinese manufacturers from Hong Kong.Rising labour costs and tighter regulations in China had already led him to consider moving the business elsewhere in Asia. But the trade war forced his hand.
Through dozens of interviews and phone, Whatsapp and email exchanges over a year, Reuters documented Sloven's quest to uproot his supply chain operation, an effort entailing many close calls, bureaucratic headaches - and some good luck.

 Sloven is just one of thousands of entrepreneurs who have been forced by the trade war to upend their business operations in China in the biggest supply chain shift in a generation...Read More

US threat to pull China's WTO developing nation tag will fail: State media

International News

A US threat to pull recognition of China's "developing nation" status at the World Trade Organisation is a pressure tactic ahead of this week's trade talks and is bound to fail, a commentary in state media said Monday.
The reaction followed a memo issued on Friday by President Donald Trump to US Trade Representative Robert Lighthizer.
It said the WTO, which operates a global system of trade rules and settles disputes, uses "an outdated dichotomy between developed and developing countries that has allowed some WTO members to gain unfair advantages." Without "substantial progress" to reform WTO rules within 90 days, Washington will no longer treat as a developing country any WTO member "improperly declaring itself a developing country and inappropriately seeking the benefit of flexibilities in WTO rules and negotiations," said the statement, which focused mostly on China.
The memo came ahead of meetings in Shanghai on Tuesday and Wednesday between US and Chinese negotiators aiming to resolve a trade dispute that has led to tariffs on more than $360 billion worth of two-way trade involving the world's two largest economies.
Washington "obviously timed the memo to serve as a new bargaining chip" in the trade talks, the commentary from state-run Xinhua news agency said of the WTO threat.

 "But the tactic of imposing pressure is nothing new to China and has never worked," it said.Xinhua added that the US government's "latest hegemonic attempt" to coerce the WTO "is destined to hit a wall of opposition." Developing country status in the WTO allows governments longer timelines for implementing free trade commitments, as well as the ability to protect some domestic industry and maintain subsidies...Read More

Trade tensions are starting to pull foreign-exchange markets into the arena

International News
Trade tensions between the US and China are starting to pull foreign-exchange markets into the arena. Yet far from embracing their currencies as a weapon, many countries are being forced to take a defensive posture against the almighty dollar.

Central banks seem more intent on keeping their currencies steady and stopping money from escaping rather than engaging in devaluations to boost their competitiveness in trade. Officials in China, South Korea and Indonesia on Wednesday were among those taking steps to buoy their currencies as the prospect of more rapid depreciation raised the specter of capital outflows.

In the meantime, the standoff between the world’s two largest economies is pushing uneasy investors into the greenback and US policy makers may face problems if the stronger dollar -- which is currently near its highs for the year -- is seen as crimping their efforts to promote higher inflation.

The forces roiling currencies are magnifying the focus on China and how it will handle a cheapening yuan. Options traders are pricing in around a 35% chance that the renminbi will by year-end weaken past 7 per dollar -- a level unseen since the financial crisis. At the end of March, the probability was just 15%. That kind of depreciation would threaten to heighten tensions with the US and potentially drive emerging-market currencies broadly lower.

“The outcome of the trade war should be to bid the dollar, drain emerging-market foreign reserves,” and push investors into Treasuries, said Sebastien Galy, senior macro strategist at Nordea Investment Funds. “At the end of the day, there is only one winner, the dollar.”


 Markets have been buffeted by uncertainty as the trade impasse shows no sign of abating...Read More

Change or suffer consequences: Trump dares China with trade tariffs

International News

By threatening to raise taxes on Chinese imports, President Donald Trump is throwing down a challenge to Beijing: Agree to sweeping changes in China's government-dominated economic model or suffer the consequences.
The unexpected ultimatum, delivered via tweets on Sunday and Monday, shook up financial markets that had expected the world's two biggest economies to resolve a year-long standoff over trade, perhaps by the end of the week.
"It's a significant change in the president's tone," said Timothy Keeler, a partner at the law firm Mayer Brown and former chief of staff for the US Trade Representative.
"It certainly increases the possibility that you'll have no deal."
For weeks, Trump administration officials had been suggesting that the US and Chinese negotiators were making steady progress. A Chinese delegation is due to resume talks Wednesday in Washington.
Suddenly on Sunday, Trump said he had lost patience: "The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!" he tweeted.And he said he planned "shortly" to slap 25 per cent tariffs on another $325 billion in Chinese products, covering everything China ships to the United States.

 Michael Pillsbury, director of the Hudson Institute's Center on Chinese Strategy and an adviser to the Trump White House, said the president's tweets suggest frustration that Chinese leaders "are trying to take back concessions they already made."The two countries are engaged in high-stakes commercial combat over China's aggressive push to establish Chinese companies as world leaders in cutting-edge fields such as robotics and electric vehicles.

Trump's tariff threat provokes China to delay next round of trade talks

International News

China is considering delaying a trip by its top trade negotiators to Washington this week, according to people familiar with the matter, after US President Donald Trump threatened the country with steeper tariffs over the pace of trade talks.

Trump on Sunday raised pressure on Beijing to strike a trade deal by announcing he would increase tariffs on $200 billion of Chinese imports to 25 per cent from 10 per cent on Friday. He also floated the possibility of extending a new 25 per cent duty on another $325 billion in imports that aren’t now covered.

“Risks of a full blown trade war are escalating,” said Chua Hak Bin, a senior economist at Maybank Kim Eng Research Pte. in Singapore. “Trump’s threat may backfire as China will not want to negotiate with a gun pointing at their heads.”

China’s yuan plunged the most in more than three years and its equity markets were roiled as markets unwound bets on a resolution to a trade war that’s weighed on global commerce and forced companies to rethink supply chains. The Aussie dollar fell while the yen climbed.
Lengthy Talks

Chinese Vice Premier Liu He was scheduled to arrive in Washington on Wednesday with a delegation of about 100 people for what had been shaping up to be possibly the final round of negotiations. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin visited Beijing last week for talks they described as productive.


 The US had been targeting May 10 to announce a deal, that would be finalized and signed by Trump and Chinese President Xi Jinping later at an official summit, people familiar with the negotiations said last week.