Tag Archives: China

China Car Sales Tank 16.6% In April, Falling For Record 11 Months In A Row

No country has better exemplified the global automobile recession than China. Sales for the world’s largest auto market continue to deteriorate, with the latest report confirming that passenger vehicle sales in China tanked yet again – this time dropping 16.6% year-over-year to 1.54 million units, following a 12% decline in March and an 18.5% slide in February. In addition, April SUV sales fell 14.7% to 642,220 units.

https://www.zerohedge.com/s3/files/inline-images/China%20auto%20april.jpg?itok=_gmc0bJ4

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Why America Has All The Leverage In China Trade Negotiations, In 3 Charts

Those curious who is more impacted by the sudden re-escalation in trade hostilities between the US and China can get a quick answer by looking at the market reaction to Sunday’s unexpected news: while the S&P is down barely 1%, overnight Chinese stocks plunged nearly 6%, their biggest drop in over three years, indicating just how much more sensitive to every twist and turn in trade relations Chinese stocks are.

Of course, one can counter just how smaller – and far less relevant – the Chinese stock market is in comparison to the S&P500, which is also the basis for the vast majority of household net worth for Americans, and global investors (whereas in China, it is the local housing that is far more critical and accounts for roughly 70% of household net worth).

But it’s not just the stock market that shows why China should tread very lightly in its ongoing negotiations with Trump, or why the US president has decided suddenly to re-escalate. Below we lay out [ ] charts showing just why the US indeed continues to have the upper hand in negotiations with China, starting with the relative importance of the US and European economies to China rather than vice versa.

As the first chart below from Deutsche Bank shows, the US and Europe are “much more important for China than China is for US and Europe” as China remains the nation with the highest beta, or the highest relative impact, from a 1% move in either direction for either the US or the Euro area.

https://www.zerohedge.com/s3/files/inline-images/US%20China%20relative%20importance.jpg?itok=iXqy1JCi

Second, whereas the US is now actively contemplating the launch of MMT, and exploding the US twin deficit by issuing virtually unlimited amounts of debt – which it ostensibly can do as long as the US Dollar is the world’s reserve currency – China is already near its leverage peak. In fact, as shown in the chart below, both China’s willingness and ability to lever up is now quite limited according to Deutsche Bank’s Torsten Slok.

https://www.zerohedge.com/s3/files/inline-images/China%20willingness%20and%20ability.jpg?itok=rL6mXCii

Last, and certainly not least, is what we said back in January represented a “tectonic shift” in China’s economy, when we observed that this year, for the first time in history, China’s current account deficit will turn negative meaning that China will henceforth need financing from the rest of the world, and specifically the US. Which is why, as we said five months ago, it is not Beijing that has leverage over the US, but rather the US whose ability – and desire – to allocate capital to China could mean all the difference for China’s economic growth, or lack thereof.

https://www.zerohedge.com/s3/files/inline-images/China%20current%20account%20deficit.jpg?itok=E8NcTR6h

Finally, and tangentially, assuming trade talks collapse and Trump follows through on his threat of hiking taxes on Chinese imports, it would, as Torsten Slok shows in his latest chart, push US tariffs – which are already higher than most advanced economies – higher than many emerging market countries making the US one of the leading protectionist countries in the work.

https://www.zerohedge.com/s3/files/inline-images/US%20tariff%20levels.jpg?itok=0aUb3gwr

That alone would cripple China’s economy, and is perhaps the main reason why Trump decided to once again flex his muscles, if so far only on twitter.

Source: ZeroHedge

It Begins: China’s Largest Property Developer Will Sell All Homes At A 10% Discount

Back in 2017, ZeroHedge explained why the “fate of the world economy is in the hands of China’s housing bubble.” The answer was simple: for the Chinese population, and growing middle class to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth would keep rising. However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing as three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US, with the remainder invested in financial assets.

https://www.zerohedge.com/sites/default/files/inline-images/China%20vs%20US%20Real%20Estate.jpg?itok=5IqhgbP6

Beijing knows this, of course, which is why China periodically and consistently reflates its housing bubble any time it feels the broader economy is slowing, hoping that any subsequent popping of the bubble, which happened in late 2011 and again in 2014, will be a controlled, “smooth landing” process. For now, Beijing has been successful in maintaining price stability at least according to official data, allowing the air out of the “Tier 1” home price bubble which peaked in early 2016, while preserving modest home price appreciation in secondary markets.

https://www.zerohedge.com/s3/files/inline-images/china%20housing.png?itok=0vmkt2rm

How long China will be able to avoid a sharp price decline remains to be seen, but in the meantime another problem faces China’s housing market: in addition to being the primary source of household net worth – and therefore stable and growing consumption – it has also been a key driver behind China’s economic growth, with infrastructure spending and capital investment long among the biggest components of the country’s goalseeked GDP. One result has been China’s infamous ghost cities, built only for the sake of Keynesian spending to hit a predetermined GDP number that would make Beijing happy.

Meanwhile, in the process of reflating the latest housing bubble, another dangerous byproduct of this artificial housing “market” has emerged: tens of millions of apartments and houses standing empty across the country. As we reported recently, according to recent research, roughly 22% of China’s urban housing stock is unoccupied, according to Professor Gan Li, who runs the main nationwide study. That amounts to more than 50 million empty homes.

https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/china%20empty%20housing.jpg

The reason for the massive empty inventory glut: to keep supply low and prices artificially elevated by taking out as much inventory off the market as possible. This, however, works both ways, and while it helps boost prices on the way up as the economy grow and speculators flood the housing market with easy money, the moment the trend flips the spike in supply as empty units are offloaded will lead to a panic liquidation of homes, resulting in what may be the biggest housing market crash ever observed, and putting the US home bubble of 2006 to shame.

Indeed, as Bloomberg noted, the “nightmare scenario” for Chinese authorities is that owners of unoccupied dwellings rush to sell when cracks start appearing in the property market, causing a self-reinforcing downward price spiral.

Which is why preserving the narrative (or rather myth) of constantly rising prices is so critical for China: any cracks in the facade of the price appreciation story could have a dire consequence first for the housing market, and then, the broader economy whose growth is already the slowest in modern Chinese history, as any scramble to liquidate inventory could promptly result in a bidless market as the tens of millions of empty units are suddenly exposed for both buyers and sellers to see.

* * *

While the key role of China’s housing market in the country’s economy, and thus the world’s, has long been known, a recent troubling development is that despite what Beijing deems stable home prices, the foundations behind the housing market are starting to crack. As the WSJ recently reported, in early December, a group of homeowners stormed the sales office of their Shanghai complex, “Central Washington”, whose developer, Shanghai Zhaoping Real Estate Development, was advertising new apartments at a fraction of the prices of the ones sold earlier in the year. One apartment owner said the new prices suggested the value of the apartment she bought from the developer in March had dropped by about 17.5%.

“There are people who bought multiple homes who are now trying to sell one to pay off the mortgage on another,” said Ran Yunjie, a property agent. One of his clients bought an apartment last year for about $230,000. To find a buyer now, the client would have to drop the price by 60%, according to Ran.

Meanwhile, in a truly concerning demonstration of what will happen when the bubble finally bursts, in October we reported that angry homeowners who paid full price for units at the Xinzhou Mansion residential project in Shangrao attacked the Country Garden sales office in eastern Jiangxi province last week, after finding out it had offered discounts to new buyers of up to 30%.

“Property accounts for roughly 70 per cent of urban Chinese families’ total assets – a home is both wealth and status. People don’t want prices to increase too fast, but they don’t want them to fall too quickly either,” said Shao Yu, chief economist at Oriental Securities. “People are so used to rising prices that it never occurred to them that they can fall too. We shouldn’t add to this illusion,” Shao added, echoing Ben Bernanke circa 2005.

The bottom line is that just like true price discovery for US capital markets is prohibited (and sees Fed intervention any time there is an even modest, 10-20% drop in asset prices) or else the risk of an all out panic is all too real, in China true price discovery is also not permitted, however when it comes to the country’s all important, and wealth effect boosting, real estate.

Which is a problem, because whereas China suddenly appears to be suffering from all the conventional signs of deflation in the auto retail sector, where as we noted previously, neither lower prices nor easier loans have managed to put a dent the ongoing demand plunge…

https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/chart_1.jpg

… the same ominous price cuts – which are clearly meant to boost flagging demand – are starting to emerge in China’s housing sector.

Case in point, according to China’s Paper, Hui Ka Yan, the Chairman of Evergrande, China’s biggest property developer, and China’s second richest person announced it must ramp up home sales and to do that it would sell all its properties at a 10% discount after its home sales tumbled in January amid a cooling market.

https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/evergrande%20Hui%20Ka%20Yan.jpg?itok=bNqhX9XU

Evergrande Chairman Hui Ka Yam

The fact that Evergrande has had financial difficulties for the past year is not new. In November, Evergrande, which carries the industry’s largest debt pile of any Chinese housing developer, was caught in a vicious funding squeeze and raised eyebrows with a $1.8BN, 5-year bond deal, which it had to pay a whopping 13.75% coupon, prompting analysts to say the move “carried a whiff of desperation.” The fact that chairman Hui Ka Yan, China’s second-richest person, bought $1bn of it himself, added to a sense that outside investors were shunning the company.

In many ways, Evergrande had no choice: after the property market boomed for the past three years, helping to power the economy through Xi Jinping’s crucial political transition year of 2017, in 2018 the market slowed sharply, after local governments shifted focus to controlling frothy prices and China Development Bank, the policy lender, phased out a $1 trillion subsidy program for homebuyers in smaller cities, where Evergrande’s projects are concentrated, the FT reported.

https://www.zerohedge.com/s3/files/inline-images/china%20evergrande%20debt.jpg?itok=bvj4wh7p

Even the official China News Service, usually a cheerleader for the economy, acknowledged recently that the property market “was a bit chilly”. Nomura chief China economist Ting Lu put it more starkly, forecasting a “frigid winter”.

The bigger problem for Evergrande, which had $208 billion in total liabilities at the end of June 2018 — the most of any Chinese developer — including $43bn maturing in 2019, is that should China’s housing market suffer a steep downturn, it will likely be the company to suffer the most, if for no other reason than its massive leverage which stood at a net debt to equity ratio of 400%.

Commenting on the bond sale, a high-yield debt underwriter at a western bank in Hong Kong told the FT that “Evergrande is very levered, so, yes, they do need cash,” said “That said, they are not a name we see as having a near-term liquidity crisis. That cannot be said about other smaller players.”

That was in November; and while there are no signs that the funding situation at Evergrande has deteriorated sharply since then – especially since the company is widely seen as systematically important and Beijing would never let it fail (although the same was said about Kaisa, another Chinese property developer that did default not too long ago), it now appears that the company has decided to start liquidating properties in an unexpected scramble to either gain market share, or to obtain much needed funding.

In any case, the fact that China’ largest property developer is now slashing prices across the board by as much as 10%, means that a deflationary hurricane is about to blow across what most see as the most important sector in China’s economy, and worse, should other property developers follow in slashing prices launching a race to the bottom, nobody knows how far prices could truly fall should a liquidation domino effect ensue.

What is most troubling however, is that as recently as November, the property slowdown was seen to be in large part due to efforts by city governments to restrain runaway price increases, which has included draconian interventions such as price controls and sales bans.

However, now that Evergrande is rushing to slash prices, it appears that runaway home prices are no longer a concern for Beijing, and in fact, a far greater concern is how Beijing may intervene to prevent what could soon be a price plunge spiral; many have already speculated that Beijing will have no choice but to bar Evergrande’s sales. If it doesn’t, or if homeowners have already figured out that their home prices are floating in the sky on a bubbly foundation that has now burst, the knock on effect could be devastating as instead of an asset, China’s most popular and aspirational “wealth effect” product could turn into a liability overnight.

If that happens, no amount of intervention by Beijing could stop the avalanche of selling that would ensue, not to mention the deflationary shockwave that a hard landing – i.e. crash – in China’s housing market would launch across the entire world…

Source: ZeroHedge

Chinese Workers Forced to Crawl in Street After Missing Sales Targets

Shock video shows staffers suffering cruel punishment

https://www.infowars.com/wp-content/uploads/2019/01/Crawl.jpg

Workers from a Chinese beauty products company have been forced to crawl on the street after failing to reach their annual targets.

The staff were on all fours as they made their way through busy traffic in the Chinese city of Tengzhou, according to local reports.

Pedestrians of the city in eastern China were shocked by the scene as they stopped to watch as the employees moving forward on their hands and knees, videos show.

Source: by Tracy You | Daily Mail

Revealing The Naked Truth Of China’s Real Estate Slowdown

Warren Buffett has famously told Berkshire Hathaway investors: “You only find out who is swimming naked when the tide goes out.”

Buffett’s market wisdom can be applied to the Chinese property market.

Now, the tide is going out and the boom days are over, the industry is rapidly slowing as credit growth is the slowest on record – pointing to a weakening in the economy in coming months.

As for “swimming naked when the tide goes out,” well, it seems like one real estate firm, in southwest China used topless models covered in body paint as a last-ditch effort to unload a new property development before the market implodes.

https://www.zerohedge.com/sites/default/files/inline-images/models%20real%20estate.jpg?itok=Req8pfzX

Nanning Weirun Investment Company, a real estate developer in Nanning, capital of the southwestern Guangxi Zhuang, hired a bunch of models to advertise its condominiums by using their bare skin as a canvas, said Asia Times.

https://www.zerohedge.com/sites/default/files/inline-images/models.png?itok=EuyUbaud

Floor plans of the condos were painted on the back of each model, and their breasts were painted with logos and other advertising slogans.

https://www.zerohedge.com/sites/default/files/inline-images/buy%20a%20home%3F.png?itok=xNc7GmRG

While it is unclear if the topless models helped to spur sales, Asia Times indicated that the stunt attracted many people to the showroom last Friday.

https://www.zerohedge.com/sites/default/files/inline-images/condo%20layout.jpg?itok=lrm-K1hX

Hundreds of Sina Weibo users, China’s Twitter, criticized the promotion and called it disgusting, as others thought it was an interesting method, in the attempt to generate sales in a slowing market.

An employee at Nanning Weirun told the website Btime.com that the bodypainting promotion was a one-off event to drive sales.

The strategy is one of the more unconventional approaches being taken by desperate developers to attract new buyers as GDP growth, and the housing market are expected to fall in the first half of 2019.

Was the marketing stunt worth it for the developer?

Probably not, as the city planning authority suspended the firm’s marketing permit on Monday.

Video: Revealing the naked truth of China’s real estate slowdown

Source: ZeroHedge

The “Nightmare Scenario” For Beijing: 50 Million Chinese Apartments Are Empty

Back in 2017, we explained why the “fate of the world economy is in the hands of China’s housing bubble.” The answer was simple: for the Chinese population, and growing middle class, to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth would keep rising. However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing as three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US, with the remainder invested financial assets.

https://www.zerohedge.com/sites/default/files/inline-images/China%20vs%20US%20Real%20Estate.jpg?itok=5IqhgbP6

Beijing knows this, of course, which is why China periodically and consistently reflates its housing bubble, hoping that the popping of the bubble, which happened in late 2011 and again in 2014, will be a controlled, “smooth landing” process. For now, Beijing has been successful in maintaining price stability at least according to official data, allowing the air out of the “Tier 1” home price bubble which peaked in early 2016, while preserving modest home price appreciation in secondary markets.

https://www.zerohedge.com/sites/default/files/inline-images/china%20housing%20prices%20nob%202018.jpg.png?itok=-mOQzvpR

How long China will be able to avoid a sharp price decline remains to be seen, but in the meantime another problem faces China’s housing market: in addition to being the primary source of household net worth – and therefore stable and growing consumption – it has also been a key driver behind China’s economic growth, with infrastructure spending and capital investment long among the biggest components of the country’s goal seeked GDP. One result has been China’s infamous ghost cities, built only for the sake of Keynesian spending to hit a predetermined GDP number that would make Beijing happy.

Meanwhile, in the process of reflating the latest housing bubble, another dire byproduct of this artificial housing “market” has emerged: tens of millions of apartments and houses standing empty across the country.

According to Bloomberg, soon-to-be-published research will show that roughly 22% of China’s urban housing stock is unoccupied, according to Professor Gan Li, who runs the main nationwide study. That amounts to more than 50 million empty homes.

https://www.zerohedge.com/sites/default/files/inline-images/china%20empty%20housing.jpg?itok=Du2u0gko

The reason for the massive empty inventory glut: to keep supply low and prices artificially elevated by taking out as much inventory off the market as possible. This, however, works both ways, and while it helps boost prices on the way up as the economy grow and speculators flood the housing market with easy money, the moment the trend flips the spike in supply as empty units are offloaded will lead to a panic liquidation of homes, resulting in what may be the biggest housing market crash ever observed, and putting the US home bubble of 2006 to shame.

Indeed, as Bloomberg notes, the “nightmare scenario” for Chinese authorities is that owners of unoccupied dwellings rush to sell when cracks start appearing in the property market, causing a self-reinforcing downward price spiral.

https://www.zerohedge.com/sites/default/files/inline-images/2018.01.16%20-%20China%202_0.JPG?itok=NKo1S80f

Worse, the latest data, from a survey in 2017, also suggests Beijing’s efforts to curb property speculation – which alongside shadow banking and the persistent threat of sudden bank runs (like the one discussed last week) is considered by Beijing a key threat to financial and social stability – have failed.

“There’s no other single country with such a high vacancy rate,” said Gan, of Chengdu’s Southwestern University of Finance and Economics. “Should any crack emerge in the property market, the homes to be offloaded will hit China like a flood.”

How did the Chinese researcher obtain this troubling number? To find the percentage of vacant housing, thousands of researchers spread out across 363 Chinese counties last year as part of the China Household Finance Survey, which Gan runs at the university.

Gan said that the vacancy rate, which excludes homes yet to be sold by developers, was little changed from a 2013 reading of 22.4%. And while that study showed 49 million vacant homes, Gan puts the number now at “definitely more than 50 million units.

Meanwhile, Beijing – which is fully aware of these stats, and is also aware that even a modest price decline could be magnified instantly as millions of “for sale” units hit the market at the same time – is worried. That’s why Chinese authorities have imposed buying restrictions and limited credit availability, only to see money flooding into other areas. Rampant price gains also mean millions of people are shut out from the market, exacerbating inequality.

In fact, China’s president Xi famously said in October last year that “houses are built to be inhabited, not for speculation”, and yet a quarter of China’s housing is just that: empty, and only serves to amplify speculation.

While holiday homes and the empty dwellings of migrants seeking work elsewhere account for some of the deserted properties, Gan found that investment purchases have been the biggest factor keeping the vacancy rate high. That’s despite curbs across the country meant to discourage buying of multiple dwellings.

https://www.zerohedge.com/sites/default/files/inline-images/china%20first%20third%20homes.jpg?itok=XrW3_Ces

There is another economic cost to this speculative frenzy: the drop in supply puts upward pressure on prices and crowds young buyers out of the market, according to Kaiji Chen, who co-authored a Fed paper called “The Great Housing Boom of China.” 

And, as Americans so fondly recall, the result of chasing unaffordable homes for the purpose of price speculation has resulted in yet another unprecedented debt bubble: according to Caixin, outstanding personal home mortgages in China have exploded seven fold from 3 trillion yuan ($430 billion) in 2008 to 22.9 trillion yuan in 2017, according to PBOC data

https://www.zerohedge.com/sites/default/files/inline-images/china%20mortgage%20loans%202.jpg?itok=gIHvrds0

By the end of September, the value of outstanding home mortgages had surged another 18% Y/Y to a record 24.9 trillion yuan, resulting in a trend that as Caixin notes, has turned many people into what are called “mortgage slaves.”

It has also resulted in yet another housing bubble: home mortgage debt now makes up more than half of total household debt in China. As of the third quarter, it accounted for 53% of the 46.2 trillion yuan in outstanding household debt.

For now, few are losing sleep over what will be the next massive housing bubble to burst. An example of a vacant home is a villa on the outskirts of Shanghai that 27-year-old Natalie Feng’s parents bought for her. The two-story residence was meant to be a weekend escape for the family of three. In reality, it’s empty most of the time, and Feng says it’s too much trouble to rent it out.

“For every weekend we spend there, we need to drive for an hour first, and clean up for half a day,” Feng said. She joked that she sometimes wishes her parents hadn’t bought it for her in the first place. That’s because any apartment she buys now would count as a second home, which means she’d have to make a bigger down payment.

* * *

What is troubling is that despite relatively stable home prices, the foundations behind the housing market are cracking. As the WSJ recently reported, in early December, a group of homeowners stormed the sales office of their Shanghai complex, “Central Washington”, whose developer, Shanghai Zhaoping Real Estate Development, was advertising new apartments at a fraction of the prices of the ones sold earlier in the year. One apartment owner said the new prices suggested the value of the apartment she bought from the developer in March had dropped by about 17.5%.

“There are people who bought multiple homes who are now trying to sell one to pay off the mortgage on another,” said Ran Yunjie, a property agent. One of his clients bought an apartment last year for about $230,000. To find a buyer now, the client would have to drop the price by 60%, according to Ran.

Meanwhile, in a truly concerning demonstration of what will happen when the bubble finally bursts, last month we reported that angry homeowners who paid full price for units at the Xinzhou Mansion residential project in Shangrao attacked the Country Garden sales office in eastern Jiangxi province last week, after finding out it had offered discounts to new buyers of up to 30%.

“Property accounts for roughly 70 per cent of urban Chinese families’ total assets – a home is both wealth and status. People don’t want prices to increase too fast, but they don’t want them to fall too quickly either,” said Shao Yu, chief economist at Oriental Securities. “People are so used to rising prices that it never occurred to them that they can fall too. We shouldn’t add to this illusion,” Shao added, echoing Ben Bernanke circa 2005.

But the biggest surprise once the music finally stops may be that – as a fascinating WSJ report revealed one year ago –  China’s housing downturn is likely far, far worse than meets the eye, as under Beijing’s direction more than 200 cities across China for the last three years have been buying surplus apartments from property developers and moving in families from condemned city blocks and nearby villages. China’s Housing Ministry, which is behind the purchases, said it plans to continue the program through 2020. The strategy, supported by central-government bank lending, has rescued housing developers and lifted the property market.

https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/building%20out%20china%20builders%20wsj_0.jpg

In other words, while China already has a record 50 million empty apartments, the real number – when excluding the government’s own stealthy purchases of excess inventory – is likely significantly higher. It is this, and not China’s stock market, that has long been the biggest time bomb for Beijing, and if Trump and Peter Navarro truly want to crush China in their ongoing trade war, they should focus on destabilizing the housing market: the Chinese stock market was, and remains just a distraction.

To summarize:

  • China has more than 50 million vacant apartments
  • Mortgage loans have grown 8-fold in the past decade
  • Prices are kept steady thanks to constant government purchases of surplus inventory
  • Home prices are already cracking, with some homebuilders forced to cut prices by 30%.
  • Homebuyers revolt, forming angry militias and storm homesellers’ offices when prices dip

For now, China has been able to maintain the illusion of stability to preserve social order. However, should the housing slowdown accelerate significantly and tens of millions in empty units suddenly hit the market, then the “working class insurrection” that China has been preparing for since 2014…

https://www.zerohedge.com/sites/default/files/inline-images/China%20insurrection%201%20%281%29.jpg

… will become an overnight reality, with dire consequences for the entire world.

Source: ZeroHedge

Trump & Lighthizer Announce Round #2 Tariffs on $200 Billion of Chinese Imports

…When you plant your trees in another man’s orchard, don’t be surprised when you pay for your own apples…

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President Trump has instructed U.S. Trade Representative Robert Lighthizer to execute Round Two of tariffs on Chinese imports. The first round applied to $50 billion in products. The current round applies a 10% tariff to $200 billion (effective Sept. 24, 2018), until January 1st, 2019, when the tariff increases to 25%.

The list of products is particularly focused, and happily we note it includes almost all Chinese processed food imports.

Chinese food processing is sketchy, and China has refused to comply with most international food safety programs. However, President Trump spared smart watches from Apple and Fitbit and other consumer products such as bicycle helmets and baby car seats.

In a statement announcing the Round-Two tariffs, President Trump warned China if they take retaliatory action against U.S. farmers or industries, “we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”  That would hit Apple and all consumer good imports. Here’s the announcement and the list of products:

Washington, DC – As part of the United States’ continuing response to China’s theft of American intellectual property and forced transfer of American technology, the Office of the United States Trade Representative (USTR) today released a list of approximately $200 billion worth of Chinese imports that will be subject to additional tariffs.

In accordance with the direction of President Trump, the additional tariffs will be effective starting September 24, 2018, and initially will be in the amount of 10 percent. Starting January 1, 2019, the level of the additional tariffs will increase to 25 percent.

The list contains 5,745 full or partial lines of the original 6,031 tariff lines that were on a proposed list of Chinese imports announced on July 10, 2018.

[…] In March 2018, USTR released the findings of its exhaustive Section 301 investigation that found China’s acts, policies and practices related to technology transfer, intellectual property and innovation are unreasonable and discriminatory and burden or restrict U.S. commerce.

Specifically, the Section 301 investigation revealed:

  • China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to require or pressure technology transfer from U.S. companies.
  • China deprives U.S. companies of the ability to set market-based terms in licensing and other technology-related negotiations.
  • China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets to generate large-scale technology transfer.
  • China conducts and supports cyber intrusions into U.S. commercial computer networks to gain unauthorized access to commercially valuable business information.
  • After separate notice and comment proceedings, in June and August USTR released two lists of Chinese imports, with a combined annual trade value of approximately $50 billion, with the goal of obtaining the elimination of China’s harmful acts, policies and practices.

Unfortunately, China has been unwilling to change its policies involving the unfair acquisition of U.S. technology and intellectual property. Instead, China responded to the United States’ tariff action by taking further steps to harm U.S. workers and businesses. In these circumstances, the President has directed the U.S. Trade Representative to increase the level of trade covered by the additional duties in order to obtain elimination of China’s unfair policies. The Administration will continue to encourage China to allow for fair trade with the United States.

A formal notice of the $200 billion tariff action will be published shortly in the Federal Register.  (read more)

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A PDF list of the Round #2 impacted products is Available HERE.

Source: by Sundance | The Conservative Tree House
***

China Retaliates: Beijing To Levy $60BN In Tariffs On US Goods Effective Sept 24

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As expected, Beijing did not waste much time responding to Trump’s latest tariffs, and moments ago China issued a statement disclosing what its planned retaliation would look like.