U.S. Food Supply Is Under Pressure

Empty shelves sure don't reassure hungry shoppers, that's for sure. 

At WSJ, "Parents Want Schools to Be Open. Schools Are Struggling to Comply":

.@MelissaTweets Remember we were talking about hoarding/no supplies of water in March 2020 (at my Costco, for example)? Well, here’s my local Ralph’s this morning, MLK Day, January 17th, 2022. Short supply: 💧 💦 💧 pic.twitter.com/ktSJaa8Xv3

— Donald Douglas 📘 (@AmPowerBlog) January 18, 2022

The U.S. food system is under renewed strain as Covid-19’s Omicron variant stretches workforces from processing plants to grocery stores, leaving gaps on supermarket shelves.

In Arizona, one in 10 processing plant and distribution workers at a major produce company were recently out sick. In Massachusetts, employee illnesses have slowed the flow of fish to supermarkets and restaurants. A grocery chain in the U.S. Southeast had to hire temporary workers after roughly one-third of employees at its distribution centers fell ill.

Food-industry executives and analysts warn that the situation could persist for weeks or months, even as the current wave of Covid-19 infections eases. Recent virus-related absences among workers have added to continuing supply and transportation disruptions, keeping some foods scarce.

Nearly two years ago, Covid-19 lockdowns drove a surge in grocery buying that cleared store shelves of products such as meat, baking ingredients and paper goods.

Now some executives say supply challenges are worse than ever. The lack of workers leaves a broader range of products in short supply, food-industry executives said, with availability sometimes changing daily.

Supermarket operators and food makers say that overall supplies are ample, despite the continuing labor shortages and difficulties transporting goods. They say that shoppers will find what they are looking for, but may have to opt for different brands.

Eddie Quezada, produce manager at a Stop & Shop store in Northport, N.Y., said Omicron has stretched his department more than any previous wave of the pandemic, with one in five of his staff contracting Covid-19 in early January. Deliveries also have taken a hit, he said: Earlier in the month he received only 17 of the 48 cases of strawberries he had ordered.

“There is a domino effect in operations,” Mr. Quezada said.

At a Piggly Wiggly franchisee in Alabama and Georgia, about one-third of pickers needed to organize products and load trucks at the grocery chain’s distribution centers were out sick in the first week of January, said Keith Milligan, its controller. The company has been struggling to get food to stores on time due to driver shortages and staffing issues that haven’t improved, Mr. Milligan said, leaving Piggly Wiggly to change its ordering and stocking plans daily in some cases. Frozen vegetables and canned biscuits are running low, he said.

In-stock levels of food products at U.S. retailers hit 86% for the week ended Jan. 16, according to data from market-research firm IRI. That is lower than last summer and pre-pandemic levels of more than 90%. Sports drinks, frozen cookies and refrigerated dough are especially low, with in-stock levels in the 60% to 70% range. In-stock rates are lower in states such as Alaska and West Virginia, IRI data show.

“We were expecting supply issues to get resolved as we go into this period right now. Omicron has put a bit of a dent on that,” Vivek Sankaran, chief executive of Albertsons Cos., said on a Jan. 11 call with analysts. He said the Boise, Idaho-based supermarket giant expects more supply challenges over the next month or so.

Similar challenges at packaged-food and meatpacking plants mean that shortages could linger, industry officials and analysts said. The Agriculture Department showed cattle slaughter and beef production over the week of Jan. 14 were down about 5% from a year earlier, with hog slaughtering down 9%. Chicken processing was about 4% lower over the week ending Jan. 8, the USDA said. Labor shortages are also affecting milk processing and cheese production, according to the agency.

Because it often takes weeks for meat to reach store shelves from the plants, the current Omicron-related labor problems at producers could prolong supply issues, said Christine McCracken, executive director of meat research at agricultural lender Rabobank. “This might mean less meat for longer,” she said.

Lamb Weston Holdings Inc., the top North American seller of frozen potato products, said in January it expected labor challenges to continue affecting production rates and throughput in its plants, where staffing shortages have already disrupted operations. Conagra Brands Inc., which makes Birds Eye frozen vegetables and Slim Jim meat snacks, said earlier this month that more of its employees have been testing positive for Covid-19 at a time when elevated consumer demand already is outpacing the company’s available supplies...

Keep reading.

 

Maria Bartiromo, The Cost

Maria Bartiromo, The Cost: Trump, China, and American Revival.

Electric Vehicle Batteries Exploding at General Motors' Orion Assembly Plant, Lake Orion, Michigan

You have to read the whole thing.

The Orion plant shifted to manufacturing 100 percent electricity vehicles, the Chevrolet Bolt, and with an epidemic of battery explosions, G.M. laid off the entire workforce.

Because the shift to green energy is going so swimmingly

At Pirate's Cove, "Oops: GM Electric Vehicle Batteries Keep Exploding":

The crisis involving the Chevrolet Bolt was a painful reminder for the auto industry that despite treating the electric vehicle era as essentially inevitable - a technical fait accompli - significant obstacles to manufacturing the cars, and especially their batteries, continue to threaten that future...

Yes, threatening the future, as I've been blogging recently.

Be smart. Don't buy an electric vehicle.  

Surging American Demand Ripples Through the Global Economy

The economy is expected to grow at an annualized rate of 7 percent for the fourth quarter, but big numbers won't help the White House. Voters are really souring on this administration, most likely from relentless inflationary pressures, felt everyday at the gas pumps especially. 

At WSJ, "Booming U.S. Economy Ripples World-Wide":

FRANKFURT—A booming U.S. economy is rippling around the world, leaving global supply chains struggling to keep up and pushing up prices.

The force of the American expansion is also inducing overseas companies to invest in the U.S., betting that the growth is still accelerating and will outpace other major economies.

U.S. consumers, flush with trillions of dollars of fiscal stimulus, are snapping up manufactured goods and scarce materials.

U.S. economic output is set to expand by more than 7% annualized in the final three months of the year, up from about 2% in the previous quarter, according to early output estimates published by the Federal Reserve Bank of Atlanta. That compares with expected annualized growth of about 2% in the eurozone and 4% in China for the fourth quarter, according to JPMorgan Chase.

Major U.S. ports are processing almost one-fifth more container volume this year than they did in 2019, even as volumes at major European ports like Hamburg and Rotterdam are roughly flat or lag behind 2019 levels. The busiest U.S. container ports are leaping ahead of their counterparts in Asia and Europe in global rankings as volumes surge, according to shipping data provider Alphaliner.

In Europe, “durable goods consumption is showing nothing like the boom that is ongoing in the United States,” said Fabio Panetta, who sits on the European Central Bank’s six-member executive board, in a speech last month. Consumption of durable goods has surged about 45% above 2018 levels in the U.S., but is up only about 2% in the eurozone, according to ECB data.

Factory gate prices in China are far outpacing consumer prices, signaling a gulf between weak domestic demand and strong overseas demand that is powered in particular by U.S. hunger for China’s manufactured goods.

While tangled global supply chains also play a role in driving global inflation, economists and central bankers are increasingly pointing to ultrastrong U.S. demand as a root cause.

“Are we crowding out consumers in other countries? Probably,” said Aneta Markowska, chief financial economist at Jefferies in New York. “The U.S. consumer has a lot more purchasing power as a result of fiscal policy than consumers elsewhere. Europe could be in a stagflationary scenario next year as a consequence.”

The U.S. accounts for almost nine-tenths of the roughly 22-percentage-point surge in demand for durable goods among major advanced economies since the end of 2019, according to data from the Bank of England.

“Very strong U.S. demand is certainly where [global supply bottlenecks] started,” said Lars Mikael Jensen, head of network at container ship giant A.P. Moller-Maersk A/S.

“It’s like a queue on a highway. The increase in volume in the U.S…takes ships away from other markets,” said Mr. Jensen. “Problems in one place will trigger problems somewhere else, we live in a global world.”

The U.S. economy will likely grow by around 6% in 2021 and 4% or more in 2022, the highest rates for decades, analysts say. Strong U.S. growth momentum is expected to push the unemployment rate to the lowest level in almost seven decades by 2023, according to Deutsche Bank analysts.

U.S. economic output is likely to surpass its pre-pandemic path early next year, while output in China and emerging markets will remain about 2% below that path through 2023, according to JPMorgan Chase.

U.S. wages are growing by about 4% a year, above the precrisis trend rate, compared with less than 1% growth in the eurozone, according to data from the Bank for International Settlements, a Switzerland-based bank for central banks.

“We threw a lot of support at [the economy] and what’s coming out now is really strong growth, really strong demand, high incomes and all that kind of thing,” said Federal Reserve Chairman Jerome Powell after the central bank’s recent meeting. “People will judge in 25 years whether we overdid it or not.”

The Fed said it would more quickly scale back its Covid-19 bond purchases and set the stage for a series of interest-rate increases beginning next spring.

In Europe, the ECB pledged to continue buying bonds at least through October 2022, and said it was unlikely to raise interest rates next year. Underlying U.S. inflation, annualized over two years, has risen above 3%, roughly double the level in the eurozone, according to data that adjust for the impact of the pandemic and changes in volatile food and energy prices.

“The strong post-pandemic recovery that was originally expected for 2022 still hasn’t materialized,” said Timo Wollmershäuser, head of forecasts at Germany’s Ifo think tank. The institute recently lowered its growth forecast for Germany in 2022 by 1.4 percentage points, to 3.7%, citing ongoing supply bottlenecks and a new wave of Covid-19.

The Fed’s assertiveness is pushing up the value of the U.S. dollar and putting pressure on emerging-market central banks to increase interest rates even before their own economic recoveries are assured or risk depreciating currencies and runaway inflation.

Mexico’s central bank on Dec. 16 said it would increase its benchmark interest rate by 0.5 percentage point to 5.50% after inflation rose to a 20-year high of 7.4%.

In Europe, the ECB pledged to continue buying bonds at least through October 2022, and said it was unlikely to raise interest rates next year. Underlying U.S. inflation, annualized over two years, has risen above 3%, roughly double the level in the eurozone, according to data that adjust for the impact of the pandemic and changes in volatile food and energy prices.

“The strong post-pandemic recovery that was originally expected for 2022 still hasn’t materialized,” said Timo Wollmershäuser, head of forecasts at Germany’s Ifo think tank. The institute recently lowered its growth forecast for Germany in 2022 by 1.4 percentage points, to 3.7%, citing ongoing supply bottlenecks and a new wave of Covid-19.

The Fed’s assertiveness is pushing up the value of the U.S. dollar and putting pressure on emerging-market central banks to increase interest rates even before their own economic recoveries are assured or risk depreciating currencies and runaway inflation.

Mexico’s central bank on Dec. 16 said it would increase its benchmark interest rate by 0.5 percentage point to 5.50% after inflation rose to a 20-year high of 7.4%.

Russia’s central bank said Friday it would increase its key interest rate by 1 percentage point to 8.5%, and might raise rates again soon, after inflation hit a near six-year high of 8.4%.

Businesses are pouring money into the U.S., looking to take advantage of what some expect to be a sustainable increase in demand. In some cases, they are bringing production closer to American consumers, looking to avoid supply shocks related to the pandemic and global trade wars...

Still more.

 

Five-Star Emporium of Ambition in Kinshasha

Following-up, "A Power Struggle Over Cobalt Rattles the Clean Energy Revolution."

At NYT. "On the Banks of the Furious Congo River, a 5-Star Emporium of Ambition":

KINSHASA, Democratic Republic of Congo — The lobby of the Fleuve Congo Hotel was a swirl of double-breasted suits and tailored dresses one April morning. Shiny gold watches dangled from wrists. Stilettos clacked across marble floors. Smooth jazz played as men in designer loafers sipped espressos.

Situated on the banks of the muddy, furious Congo River, the Fleuve is an emporium of ambition in a nation that, despite extreme poverty and chronic corruption, serves up raw materials crucial to the planet’s battle against climate change.

The soil in the Democratic Republic of Congo is bursting with cobalt and other metals used in the production of electric car batteries, wind turbines and other mainstays of the green energy revolution. Practically everyone who passes through the hotel, where the air conditioning battles the sweltering heat, seems determined to grab a piece of the wealth.

Just off the lobby that day, near a sumptuous brunch buffet, sat Dikembe Mutombo, the 7-foot-2 former NBA all-star player. He had teamed up in his quest for mineral riches with Gentry Beach, a Texas hedge-fund manager who is a family friend and major fund-raiser to former President Donald J. Trump. Mr. Mutombo shared his table with a top Congolese mining lawyer turned politician whose office is conveniently located in a complex near the hotel.

As the clean energy revolution upends the centuries-long lock of fossil fuels on the global economy, dealmakers and hustlers converge on the Fleuve Congo Hotel.

Felix Tshisekedi, the Congolese president, top in the gray suit, arrived this spring at the Fleuve Congo Hotel in Kinshasa.Credit...

Situated on the banks of the muddy, furious Congo River, the Fleuve is an emporium of ambition in a nation that, despite extreme poverty and chronic corruption, serves up raw materials crucial to the planet’s battle against climate change.

The soil in the Democratic Republic of Congo is bursting with cobalt and other metals used in the production of electric car batteries, wind turbines and other mainstays of the green energy revolution. Practically everyone who passes through the hotel, where the air conditioning battles the sweltering heat, seems determined to grab a piece of the wealth.

Just off the lobby that day, near a sumptuous brunch buffet, sat Dikembe Mutombo, the 7-foot-2 former NBA all-star player. He had teamed up in his quest for mineral riches with Gentry Beach, a Texas hedge-fund manager who is a family friend and major fund-raiser to former President Donald J. Trump. Mr. Mutombo shared his table with a top Congolese mining lawyer turned politician whose office is conveniently located in a complex near the hotel.

Mr. Mutombo is among a wave of adventurers and opportunists who have filled a vacuum created by the departure of major American mining companies, and by the reluctance of other traditional Western firms to do business in a country with a reputation for labor abuses and bribery.

The list of fortune hunters includes Erik Prince, the security contractor and ex-Navy SEAL; Jide Zeitlin, the Nigerian-born former chief executive of the parent company of Coach and Kate Spade; and Aliaune Thiam, the Senegalese-American musician known as Akon.

All have been drawn to Congo’s high-risk, high-reward mining sector as the demand for cobalt has skyrocketed because automakers around the world are speeding up plans to convert from gasoline- to electric-powered fleets.

Most recently, Ford Motor, General Motors and Toyota announced they would spend billions of dollars to build battery factories in the United States. The price of cobalt has doubled since January, and more than two-thirds of the global supply is here in Congo.

The Fleuve became the go-to luxury destination after a politically connected Chinese businessman — himself a mining dealmaker — was awarded a contract to run what had once been an abandoned 1970s-era office building. The now five-star hotel has usurped the elite status of its competitor next door, built in the 1960s with U.S. government financing, and it is the kind of place where swashbucklers arrive by private plane trailed by paparazzi, and where some guests keep suitcases of cash and nuggets of gold locked in their rooms.

The frenzied atmosphere at the hotel reflects a pivotal moment for the country — and the world — as the clean energy revolution upends the centuries-long lock of fossil fuels on the global economy.

“Congo is the one who is going to deliver the EV of the future,” Mr. Mutombo, the retired basketball player, said of electric vehicles. “There is no other answer.”

But such bravado signals trouble to some seasoned business people, who see a lot of show and little substance in the new class of deal seekers.

“The country has become the prey of international adventurers,” said Jozsef M. Kovacs, who built the neighboring hotel, originally an InterContinental, which once hosted waves of executives from major Western mining companies that had billions of dollars in capital available to them and decades of mining experience. A handful of those traditional investors remain in Congo, including Robert Friedland, founder of Vancouver, B.C.-based Ivanhoe Mines. But Ivanhoe’s operations are now in large part financed by Chinese investors, who dominate the industrial mining sector in Congo.

“You don’t have a lot of these Fortune 500 mining companies,” said Luc Gerard Nyafé, a regular at the Fleuve who advises the Congolese president and is pursuing mining interests here. “That is something that needs to change.”

But for now, at least, the adventurers have taken center stage, and sometimes their ambitions converge at the Fleuve. Ambassadors, mercenaries, celebrities, musicians, athletes, entrepreneurs — they all pass through...

A Power Struggle Over Cobalt Rattles the Clean Energy Revolution

I thought I'd posted on this topic earlier. The Times has been running a series on global demand for cobalt, to supply manufacturers of electric vehicles with, apparently, the most basic mineral needed in the industry.

Behold green neoimperialism.

I'll post more, but for now, see, "The quest for Congo’s cobalt, which is vital for electric vehicles and the worldwide push against climate change, is caught in an international cycle of exploitation, greed and gamesmanship":

KISANFU, Democratic Republic of Congo — Just up a red dirt road, across an expanse of tall, dew-soaked weeds, bulldozers are hollowing out a yawning new canyon that is central to the world’s urgent race against global warming.

For more than a decade, the vast expanse of untouched land was controlled by an American company. Now a Chinese mining conglomerate has bought it, and is racing to retrieve its buried treasure: millions of tons of cobalt.

At 73, Kyahile Mangi has lived here long enough to predict the path ahead. Once the blasting starts, the walls of mud-brick homes will crack. Chemicals will seep into the river where women do laundry and dishes while worrying about hippo attacks. Soon a manager from the mine will announce that everyone needs to be relocated.

“We know our ground is rich,” said Mr. Mangi, a village chief who also knows residents will share little of the mine’s wealth.

This wooded stretch of southeast Democratic Republic of Congo, called Kisanfu, holds one of the largest and purest untapped reserves of cobalt in the world.

The gray metal, typically extracted from copper deposits, has historically been of secondary interest to miners. But demand is set to explode worldwide because it is used in electric-car batteries, helping them run longer without a charge.

Outsiders discovering — and exploiting — the natural resources of this impoverished Central African country are following a tired colonial-era pattern. The United States turned to Congo for uranium to help build the bombs dropped on Hiroshima and Nagasaki and then spent decades, and billions of dollars, seeking to protect its mining interests here.

Now, with more than two-thirds of the world’s cobalt production coming from Congo, the country is once again taking center stage as major automakers commit to battling climate change by transitioning from gasoline-burning vehicles to battery-powered ones. The new automobiles rely on a host of minerals and metals often not abundant in the United States or the oil-rich Middle East, which sustained the last energy era.

But the quest for Congo’s cobalt has demonstrated how the clean energy revolution, meant to save the planet from perilously warming temperatures in an age of enlightened self-interest, is caught in a familiar cycle of exploitation, greed and gamesmanship that often puts narrow national aspirations above all else, an investigation by The New York Times found.

The Times dispatched reporters across three continents drawn into the competition for cobalt, a relatively obscure raw material that along with lithium, nickel and graphite has gained exceptional value in a world trying to set fossil fuels aside.

More than 100 interviews and thousands of pages of documents show that the race for cobalt has set off a power struggle in Congo, a storehouse of these increasingly prized resources, and lured foreigners intent on dominating the next epoch in global energy.

In particular, a rivalry between China and the United States could have far-reaching implications for the shared goal of safeguarding the earth. At least here in Congo, China is so far winning that contest, with both the Obama and Trump administrations having stood idly by as a company backed by the Chinese government bought two of the country’s largest cobalt deposits over the past five years.

As the significance of those purchases becomes clearer, China and the United States have entered a new “Great Game” of sorts. This past week, during a visit promoting electric vehicles at a General Motors factory in Detroit, President Biden acknowledged the United States had lost some ground. “We risked losing our edge as a nation, and China and the rest of the world are catching up,” he said. “Well, we’re about to turn that around in a big, big way.”

China Molybdenum, the new owner of the Kisanfu site since late last year, bought it from Freeport-McMoRan, an American mining giant with a checkered history that five years ago was one of the largest producers of cobalt in Congo — and now has left the country entirely.

In June, just six months after the sale, the Biden administration warned that China might use its growing dominance of cobalt to disrupt the American push toward electric vehicles by squeezing out U.S. manufacturers. In response, the United States is pressing for access to cobalt supplies from allies, including Australia and Canada, according to a national security official with knowledge of the matter.

American automakers like Ford, General Motors and Tesla buy cobalt battery components from suppliers that depend in part on Chinese-owned mines in Congo. A Tesla longer-range vehicle requires about 10 pounds of cobalt, more than 400 times the amount in a cellphone.

Already, tensions over minerals and metals are rattling the electric vehicle market.

Deadly rioting in July near a port in South Africa, where much of Congo’s cobalt is exported to China and elsewhere, caused a global jump in the metal’s prices, a surge that only worsened through the rest of the year.

Last month, the mining industry’s leading forecaster said the rising cost of raw materials was likely to drive up battery costs for the first time in years, threatening to disrupt automakers’ plans to attract customers with competitively priced electric cars.

Jim Farley, Ford’s chief executive, said the mineral supply crunch needed to be confronted.

“We have to solve these things,” he said at an event in September, “and we don’t have much time.”

Automakers like Ford are spending billions of dollars to build their own battery plants in the United States, and are rushing to curb the need for newly mined cobalt by developing lithium iron phosphate substitutes or turning to recycling. As a result, a Ford spokeswoman said, “we do not see cobalt as a constraining issue.” ...

Still more. 

China’s Xi Emphasizes ‘Peaceful Reunification’ With Taiwan, Days After Record Show of Force

Well, just in case, we have Marines deployed to Taipei, in case something comes up.

At WSJ, "Taiwanese people would not bow to Chinese pressure, President Tsai Ing-wen said in a speech Sunday":

Chinese President Xi Jinping called for a “peaceful reunification” with Taiwan days after China’s People’s Liberation Army sent a record 56 bombers and other aircraft on sorties near the self-ruled island in a single day.

Taiwanese President Tsai Ing-wen answered in a speech the following day, saying Taiwanese people would not bow to Chinese pressure. “The historical task of the complete reunification of the motherland must be fulfilled, and can definitely be fulfilled,” Mr. Xi said in Beijing on Saturday, adding that achieving that goal by peaceful means is in the interests of people in Taiwan.

Mr. Xi’s remarks were part of a speech that marked the 110th anniversary of the revolution that overturned Qing imperial rule in China. In the decades that followed, the Communists and Nationalists jostled for control of China, which later led to a split between China and Taiwan amid a civil war. Nationalist forces withdrew to the island, and communist leader Mao Zedong proclaimed the founding of the People’s Republic in 1949.

The Communist Party considers Taiwan part of China, despite never having ruled the island, and has vowed to take control of it, by force if necessary.

Mr. Xi has long spoken of realizing what Beijing has called a peaceful reunification with Taiwan, but his remarks came as concerns within the U.S. mounted over China’s yearslong military buildup and recent threatening moves against the island.

The PLA has flown 150 sorties near Taiwan so far this month, a blitz that has sparked expressions of concern from the U.S., U.K. and Germany.

On Thursday, The Wall Street Journal reported that a small number of American troops have been secretly training local military forces on the island.

Taiwan’s independence is the biggest obstacle to Beijing’s goal of unification and poses a “serious hidden danger to national rejuvenation,” Mr. Xi said. “Those who forget their ancestors, betray the motherland or split the country have always been doomed. They will definitely be spurned by the people and judged by history,” he added...

 

Stocks Close Sharply Lower as Bond Yields Hover Near Three-Month High

I hope my retirement accounts aren't taking a hit, yikes!

At WSJ, "Tech shares pull S&P 500, Nasdaq down more than 2%, while bond yields rally on inflation concerns":

U.S. stocks tumbled Tuesday, logging their sharpest pullback since May, as rising bond yields deepened a rout in shares of technology companies.

For much of the past decade, many investors had piled into shares of fast-growing technology companies, wagering they would deliver relatively robust profit growth even in a sluggish economic environment. This week, that trade hit a roadblock.

With the economy out of the worst of the pandemic-fueled crisis, the Federal Reserve signaled last week that it could start to reverse its pandemic stimulus programs as soon as November and raise interest rates sometime next year. That appears to have prompted an unwind of some of the market’s most enduring trades—pushing Treasury yields to their highest level in months and sending investors out of popular technology stocks.

Investors agree the economic outlook has improved significantly since 2020. But many wonder how well the market will be able to stand on its own once the Fed begins to taper its monthly asset purchases—especially since they credit much of the market’s rebound from its pandemic low to extraordinary levels of monetary and fiscal support from Washington. Some investors have also expressed concerns about the economic outlook. Inflation has made a surprising comeback this year, something some worry will start to cut into companies’ profit margins. The fast-spreading Delta variant of Covid-19 has also complicated economists’ efforts to forecast the global economy’s growth outlook.

“People are realizing, or at least remembering, that central banks are going to have to start raising rates,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. “The patient has become used to being given all these drugs, but soon those drugs are going to have to be reduced.”

The S&P 500 fell 90.48 points, or 2%, to 4352.63, marking its second straight day of losses and worst one-day percentage decline since May. The tech-heavy Nasdaq Composite Index slid 423.29 points, or 2.8%, to 14546.68, while the Dow Jones Industrial Average shed 569.38 points, or 1.6%, to 34299.99.

All three major indexes are on course to end the month lower.

Tuesday’s market selloff was broad, pulling all but one of the S&P 500’s sectors down for the day.

Traders yanked money out of the technology sector. Shares of companies like Facebook, Google parent Alphabet and Microsoft, each of which had vastly outperformed the broader market this year, fell more than 3.5% apiece.

Meanwhile, selling pressure accelerated in the government bond market. The yield on the benchmark 10-year Treasury note rose for a sixth consecutive day Tuesday, climbing from 1.482% Monday to 1.534%, its highest level since late June. Bond yields rise as prices fall.

Shares of energy companies avoided the broader selloff...

 

Global Markets Swoon as Worries Mount Over Superpowers' Plans

Well, my investment portfolios are going to take a hit, but they'll swing back, despite what bonehead Biden does.

At NYT, "The S&P 500 closed down 1.7 percent over a number of jitters, like China’s sputtering real estate market and the phasing out of stimulus measures in the United States":

Investors on three continents dumped stocks on Monday, fretting that the governments of the world’s two largest economies — China and the United States — would act in ways that could undercut the nascent global economic recovery.

The Chinese government’s reluctance to step in and save a highly indebted property developer just days before a big interest payment is due signaled to investors that Beijing might break with its longstanding policy of bailing out its homegrown stars.

And in the United States, the globe’s No. 1 economy, investors worried that the Federal Reserve would soon begin cutting back its huge purchases of government bonds, which had helped drive stocks to a series of record highs since the coronavirus pandemic hit.

The sell-off started in Asia and spread to Europe — where exporters to China were slammed — before landing in the United States, where stocks appeared to be heading for their worst performance of the year before a rally at the end of the trading day. The S&P 500 closed down 1.7 percent, its worst daily performance since mid-May, after being down as much as 2.9 percent in the afternoon.

The catalyst for the swoon was the continued turmoil at China Evergrande Group, one of that country’s top three developers of residential properties. The company has an estimated $300 billion in debt, and an interest payment of more than $80 million is due this week.

Analysts said Evergrande’s plight was severe enough that it would be unlikely to survive without Chinese government support. “The question is to what degree are there spillover risks within Chinese equities and then cascading into the global markets,” said John Canavan, lead analyst at Oxford Economics.

Few entities move markets the way the American and Chinese governments can, by their actions and inaction, and the worldwide tumble on Monday made this clear. Until recently, investors seemed content to ignore a variety of issues complicating the recovery — including the emergence of the Delta variant and the supply chain snarls that have bedeviled consumers and manufacturers alike.

But beginning this month, as Evergrande began to teeter and the likelihood of the Fed’s scaling back — or tapering — its bond-buying programs grew, the market’s protective bubble began to deflate. Some U.S. investors are also concerned that tax increases are in the offing — including on share buybacks and corporate profits — to help pay for a spending push by the federal government, the signature piece of which is President Biden’s proposed $3.5 trillion budget bill. Separately, Congress also must act to raise the government’s borrowing limit, a politically charged process that has at times thrown markets for a loop.

On Monday, those currents combined, reflecting the interconnectedness of the global markets as investors everywhere sold their holdings.

The decline was ugliest in Asia, where Evergrande’s woes — its shares fell 10.2 percent — dragged down other Chinese real estate companies’ stocks by 10 percent or more. Markets on the Chinese mainland were closed for the day, but Hong Kong’s Hang Seng index fell 3.3 percent.

For decades, Chinese growth was driven by investment in infrastructure, including the market for residential property, which was financed with huge sums of borrowed money. Banks often lent to developers at the direction of the government, which looked at property building as a source of jobs and economic growth.

“Beijing says lend, so you lend; when or even whether you get your money back is secondary,” wrote analysts with China Beige Book, an economic research firm.

Many lenders therefore viewed companies such as Evergrande as having an implicit guarantee from the government, meaning that if the company couldn’t pay its debts, the government would ensure creditors get repaid...

Pfft.

We should be hammering the Chinese economy: Dump all Chinese listings off U.S. capital markets and retaliate against Chinese currency manipulation, protectionist trade practices, and theft of U.S. technological know-how. And if Xi attacks Taiwan, we should bomb Chinese cities and military-industrial centers and destroy the Chinese navy.

Still more.

Xi Jinping Aims to Rein In Chinese Capitalism, Hew to Mao’s Socialist Vision

Rein in? Yeah, we need to rein in Beijing, the freakin' lyin', cheatin,' heathen rogue regime of the new new world order. 

Jeez, I can't stand China. (Though I'm around Chinese folks all the time in Irvine, and they're just fine; indeed, I see them as hitting the lottery, coming here, getting citizenship, bringing their folks over from the Mandarin prison state; hittin' the lottery indeed.)

At Wall Street Journal, "Going beyond curbing tech giants, he wants the Communist Party to steer flows of money and set tighter limits on profit making":

Xi Jinping’s campaign against private enterprise, it is increasingly clear, is far more ambitious than meets the eye.

The Chinese President is not just trying to rein in a few big tech and other companies and show who is boss in China.

He is trying to roll back China’s decadeslong evolution toward Western-style capitalism and put the country on a different path entirely, a close examination of Mr. Xi’s writings and his discussions with party officials, and interviews with people involved in policy making, show.

For most of the 40 years after Deng Xiaoping first unleashed economic reforms in China, Communist Party leaders gave market forces wider room to flourish. That opening helped lift hundreds of millions of people out of poverty and created trillions of dollars in wealth, but also led to rampant corruption and eroded the ideological basis for continued Communist rule.

In Mr. Xi’s opinion, private capital now has been allowed to run amok, menacing the party’s legitimacy, officials familiar with his priorities say. The Wall Street Journal examination shows he is trying forcefully to get China back to the vision of Mao Zedong, who saw capitalism as a transitory phase on the road to socialism.

Mr. Xi isn’t planning to eradicate market forces, the Journal examination indicates. But he appears to want a state in which the party does more to steer flows of money, sets tighter parameters for entrepreneurs and investors and their ability to make profits, and exercises even more control over the economy than now. In essence, this suggests that he aims to rewrite the rules of business in what could someday be the world’s biggest economy.

“China has entered a new stage of development,” Mr. Xi declared in a speech in January. The goal, he said, is to build China into a “modern socialist power.”

Mr. Xi’s overhaul has generated more than 100 regulatory actions, government directives and policy changes since late last year, according to a Journal tally, including steps aimed at breaking the market dominance of companies such as e-commerce behemoth Alibaba Group Holding Ltd., conglomerate Tencent Holdings Ltd. and ride-sharing leader Didi Global Inc.

The government’s recent measures to tame housing prices are worsening a cash crunch at China Evergrande Group , a heavily indebted real-estate developer, sending chills across global markets. Beijing is unlikely to bail out Evergrande the way it has rescued many state firms, analysts say, and could further tighten the regulatory screws on other private developers.

Mr. Xi has signaled plans to go much further. During a leadership meeting in August, he emphasized a goal of “common prosperity,” which calls for a more equal distribution of wealth. This would be achieved in part through more government intervention in the economy and more steps to get the rich to share the fruits of their success.

An Aug. 29 online commentary circulated by state media called it a “profound revolution” for the country.

“Xi does think he’s moving to a new kind of system that doesn’t exist anywhere in the world,” said Barry Naughton, a China economy expert at the University of California, San Diego. “I call it a government-steered economy.”

A number of countries closely regulate industry, labor and markets, set monetary policy and provide subsidies to help boost their economies. In Mr. Xi’s version, the government would have a level of control that would allow it to steer the economy and industry along a path of its choosing, and channel private resources into strengthening state power.

The big risk for China and Mr. Xi is that the push winds up suppressing much of the entrepreneurial energy that has powered China’s boom and years of innovation.

For foreign businesses, the campaign likely means more turbulence ahead. Western companies have always had to toe the party line in China, but they are increasingly asked to do more, including sharing personal user data and accepting party members as employees. They could be pressed to sacrifice more profits to help Beijing achieve its goals.

“Supervision over foreign capital will be strengthened,” said a person familiar with the thinking at China’s top markets regulator, “so it won’t be able to obtain ultra-high profits in China through monopoly and capital-market operations.”

The Information Office of the State Council, China’s top government body, didn’t respond to questions for this article.

Before this year, Mr. Xi was distrustful of capital, but he had other priorities. Now, having consolidated power, he is putting the whole government behind his plans to make private business serve the state.

A once-in-a-decade leadership transition due for late 2022, when Mr. Xi is expected to break the established system of succession to stay in power, provided an impetus to act and show he is doing something big for the people to justify longer rule, officials involved in policy making say.

At internal meetings, some of them say, Mr. Xi has talked about the need to differentiate China’s economic system. Western capitalism, in his view, focuses too heavily on the single-minded pursuit of profit and individual wealth, while letting big companies grow too powerful, leading to inequality, social injustice and other threats to social stability.

Early this year, when Facebook Inc. and Twitter Inc. took down former U.S. President Donald Trump’s accounts, Mr. Xi saw yet another sign America’s economic system was flawed—it let big business dictate what a political leader should do or say—officials familiar with his views said.

A few months later, when the Chinese Communist party celebrated its centenary on July 1, Mr. Xi donned a Mao suit and stood behind a podium adorned with a hammer and sickle, pledging to stand for the people. After the speech, he sang along with “The Internationale” broadcast across Tiananmen Square. In China, the song, a feature of the socialist movement since the late 1800s, has long symbolized a declaration of war by the working class on capitalism.

Such gestures, once dismissed as political stagecraft, are being taken more seriously by China watchers as it becomes evident Mr. Xi is more ideologically driven than his immediate predecessors.

The difference between his vision and Western-style capitalism, he has said at internal meetings, is that in China, “Capital serves the people.”

Industries that Mr. Xi views as being led astray by a capitalist spirit, including not only tech but also after-school tutoring, digital gaming and entertainment, are bearing the immediate brunt.

A policy aimed at turning private education companies into nonprofit entities all but killed New Oriental Education & Technology Group Inc., which has provided English lessons to generations of students studying abroad. Its shares have plunged about 90% this year.

Founder Yu Minhong, nicknamed “Godfather of English Training” in China, broke into tears during a recent company meeting, according to an employee. “It’s devastating to him, and to all of us,” the employee said.

Mr. Xi’s policy changes have dashed more than $1 trillion in stock-market value and erased over $100 billion of wealth for entrepreneurs such as Alibaba founder Jack Ma and Tencent’s Pony Ma. Private companies and their owners are being encouraged to donate profits and wealth to help with Mr. Xi’s common-prosperity goals. Alibaba alone has pledged the equivalent of $15.5 billion. State-owned companies, having already bulked up under Mr. Xi’s rule, are marching into areas that were pioneered by private firms but are increasingly seen as crucial to national security, such as management of digital data.

A ministry supervising state companies, the State-owned Assets Supervision and Administration Commission, is mapping plans to set up more government-controlled providers of cloud services for data storage, people familiar with the agency’s workings say. Such services have been dominated by private companies, including Alibaba and Tencent.

The city of Tianjin has ordered companies it supervises to migrate data from private-sector cloud platforms to state-owned ones within two months of the expiration of existing contracts, and by September 2022 at the latest, according to an official notice dated Aug. 12. More localities are expected to follow suit, the people say.

Government-controlled entities are acquiring stakes and filling board seats in more companies to make sure they fall in line with the state’s goals. ByteDance Ltd., owner of the video-sharing app TikTok, and Weibo Corp. , which runs Twitter-like microblogging platforms, recently have sold stakes to state-backed companies.

Mr. Xi is fully in charge of the campaign, instead of delegating details to Vice Premier Liu He, his chief economic adviser, as in the past. A central party office reporting directly to Mr. Xi has been sending out directives instructing ministries to take actions and coordinate policies...

 

The Right Way on Trade?

From Gordon Hanson, at Foreign Affairs, "Can Trade Work for Workers? The Right Way to Redress Harms and Redistribute Gains":

For decades, the promise of globalization has rested on a vision of a world in which goods, services, and capital would flow across borders as never before; whatever its other features and components, contemporary globalization has been primarily about trade and foreign investment. Today’s globalized economy has been shaped to a large extent by a series of major trade agreements that were sold as win-win propositions: corporations, investors, workers, and consumers would all benefit from lowered barriers and harmonized standards. American advocates of this view claimed that deals such as the North American Free Trade Agreement would supercharge growth, create jobs, and strengthen the United States’ standing as the world’s largest and most important economy. According to then President George H. W. Bush, “NAFTA means more exports, and more exports means more American jobs.”

A quarter of a century later, such optimism appears profoundly misplaced. NAFTA and other deals did boost growth, and free trade remains a net benefit for the U.S. economy as a whole. But the overall gains have been far less dramatic than promised, and many American workers suffered when well-paid manufacturing jobs dried up as factories moved abroad. Those who managed to stay employed saw their wages stagnate. The federal government, meanwhile, did little to build a safety net to catch those who lost out.

Unsurprisingly, Americans have complicated views on trade. Although a majority of voters see free trade as a good thing, barely one-third believe that it creates jobs or lowers prices. In response, political elites and elected officials across the ideological spectrum have scrambled to distance themselves from free-trade policies and from the major pacts of the past. For its part, the Biden administration has made a noble-sounding but vague pledge to pursue a “worker-centric” trade policy. The specifics are still unclear, but such an approach will likely include more aggressive so-called Buy American provisions, which require government agencies to give preference to U.S. products when making purchases; increased pressure on trading partners to respect workers’ collective-bargaining rights; and a hawkish relationship with China. Despite the rhetoric, these proposals put the administration well within the bounds of existing U.S. trade policy—tweaking margins here and there.

That approach is unlikely to fix the problems caused by free trade—which, despite the appeal of protectionist talking points, isn’t going anywhere. Instead, the Biden administration should establish targeted domestic programs that protect workers from the downsides of globalization. A responsible policy would capture the gains of free trade but make up for domestic losses. In recent years, the United States has done neither...

Still more.

 

China 'Floods' U.S. With Spies

From Gordon Chang, at Gatestone, "Espionage Emergency: China 'Floods' America with Spies."

Sky News Australia had the bombshell breaking news the other day, "Leak reveals Chinese Communist Party members working in Aust, UK and US consulates."

And from Ed Driscoll, at Instapundit, "REPORT: Chinese Communists Have Infiltrated Top Companies, Governments In US, UK, Australia."

FLASHBACK: From 2017, "Killing C.I.A. Informants, China Crippled U.S. Spying Operations."

PREVIOUSLY: "Chinese Communist Party Pushing Narrative of the Superiority of its Authoritarian Political Model."

Chinese Communist Party Pushing Narrative of the Superiority of its Authoritarian Political Model

I hear Buddy Holly singing up there near the Pearly Gates, "That'll Be the Day..." 

At NYT, "China’s Combative Nationalists See a World Turning Their Way":

In one Beijing artist’s recent depiction of the world in 2098, China is a high-tech superpower and the United States is humbled. Americans have embraced communism and Manhattan, draped with the hammer-and-sickle flags of the “People’s Union of America,” has become a quaint tourist precinct.

This triumphant vision has resonated among Chinese.

The sci-fi digital illustrations by the artist, Fan Wennan, caught fire on Chinese social media in recent months, reflecting a resurgent nationalism. China’s authoritarian system, proponents say, is not just different from the West’s democracies, it is also proving itself superior. It is a long-running theme, but China’s success against the pandemic has given it a sharp boost.

“America isn’t that heavenly kingdom depicted since decades ago,” said Mr. Fan, who is in his early twenties. “There’s nothing special about it. If you have to say there’s anything special about it now, it’s how messed up it can be at times.”

China’s Communist Party, under its leader, Xi Jinping, has promoted the idea that the country is on a trajectory to power past Western rivals.

China stamped out the coronavirus, the messaging goes, with a resolve beyond the reach of flailing Western democracies. Beijing has rolled out homegrown vaccines to more than a million people, despite the safety concerns of scientists. China’s economy has revived, defying fears of a deep slump from the pandemic.

“In this fight against the pandemic, there will be victorious powers and defeated ones,” Wang Xiangsui, a retired Chinese senior colonel who teaches at a university in Beijing, averred this month. “We’re a victor power, while the United States is still mired and, I think, may well become a defeated power.”

The firm leadership of Mr. Xi and the party has earned China its recent success, say newspapers, television programs and social media...

Everyone Loses in the U.S.-Chinese Clash?

I was just skimming through my old copies of Foreign Affairs and came across this piece, from last year, by Weijian Shan.

It's amazing how quickly it's out of date, and badly wrong, considering the corona epidemic and its effects. President Trump has always been a nationalist on trade, and while he's been woefully uneven on China --- both praising and disparaging Beijing, often during the same press conference --- the strategy that Shan denounces is exactly what the U.S. should pursue.

Here, "The Unwinnable Trade War: Everyone Loses in the U.S.-Chinese Clash—but Especially Americans":

It is in the best interests of both the U.S. and China to move away from zero-sum thinking and put an end to the ad hoc decoupling that the trade war has threatened, argues Weijian Shan.https://t.co/oV4by2z06x

— Foreign Affairs (@ForeignAffairs) October 13, 2019

The trade war has not really damaged China so far, largely because Beijing has managed to keep import prices from rising and because its exports to the United States have been less affected than anticipated. This pattern will change as U.S. importers begin to switch from buying from China to buying from third countries to avoid paying the high tariffs. But assuming China’s GDP continues to grow at around five to six percent every year, the effect of that change will be quite modest. Some pundits doubt the accuracy of Chinese figures for economic growth, but multilateral agencies and independent research institutions set Chinese GDP growth within a range of five to six percent.

Skeptics also miss the bigger picture that China’s economy is slowing down as it shifts to a consumption-driven model. Some manufacturing will leave China if the high tariffs become permanent, but the significance of such a development should not be overstated. Independent of the anxiety bred by Trump’s tariffs, China is gradually weaning itself off its dependence on export-led growth. Exports to the United States as a proportion of China’s GDP steadily declined from a peak of 11 percent in 2005 to less than four percent by 2018. In 2006, total exports made up 36 percent of China’s GDP; by 2018, that figure had been cut by half, to 18 percent, which is much lower than the average of 29 percent for the industrialized countries of the Organ-ization for Economic Cooperation and Development. Chinese leaders have long sought to steer their economy away from export-driven manufacturing to a consumer-driven model.

To be sure, the trade war has exacted a severe psychological toll on the Chinese economy. In 2018, when the tariffs were first announced, they caused a near panic in China’s market at a time when growth was slowing thanks to a round of credit tightening. The stock market took a beating, plummeting some 25 percent. The government initially felt pressured to find a way out of the trade war quickly. But as the smoke cleared to reveal little real damage, confidence in the market rebounded: stock indexes had risen by 23 percent and 34 percent on the Shanghai and Shenzhen exchanges, respectively, by September 12, 2019. The resilience of the Chinese economy in the face of the trade war helps explain why Beijing has stiffened its negotiating position in spite of Trump’s escalation.

China hasn’t had a recession in the past 40 years and won’t have one in the foreseeable future, because its economy is still at an early stage of development, with per capita GDP only one-sixth of that of the United States. Due to declining rates of saving and rising wages, the engine of China’s economy is shifting from investments and exports to private consumption. As a result, the country’s growth rate is expected to slow. The International Monetary Fund projects that China’s real GDP growth will fall from 6.6 percent in 2018 to 5.5 percent in 2024; other estimates put the growth rate at an even lower number. Although the rate of Chinese growth may dip, there is little risk that the Chinese economy will contract in the foreseeable future. Private consumption, which has been increasing, representing 35 percent of GDP in 2010 and 39 percent last year, is expected to continue to rise and to drive economic growth, especially now that China has expanded its social safety net and welfare provisions, freeing up private savings for consumption.

The U.S. economy, on the other hand, has had the longest expansion in history, and the inevitable down cycle is already on the horizon: second-quarter GDP growth this year dropped to 2.0 percent from the first quarter’s 3.1 percent. The trade war, without taking into account the escalations from September, will shave off at least half a percentage point of U.S. GDP, and that much of a drag on the economy may tip it into the anticipated downturn. (According to a September Washington Post poll, 60 percent of Americans expect a recession in 2020.) The prospect of a recession could provide Trump with the impetus to call off the trade war. Here, then, is one plausible way the trade war will come to an end. Americans aren’t uniformly feeling the pain of the tariffs yet. But a turning point is likely to come when the economy starts to lose steam.

If the trade war continues, it will compromise the international trading system, which relies on a global division of labor based on each country’s comparative advantage. Once that system becomes less dependable—when disrupted, for instance, by the boycotts and hostility of trade wars—countries will start decoupling from one another.

China and the United States are joined at the hip economically, each being the other’s biggest trading partner. Any attempt to decouple the two economies will bring catastrophic consequences for both, and for the world at large. Consumer prices will rise, world economic growth will slow, supply chains will be disrupted and laboriously duplicated on a global scale, and a digital divide—in technology, the Internet, and telecommunications—will vastly hamper innovation by limiting the horizons and ambitions of technology firms...

The End of the World Trade Organization?

Who cares, really?

The conflict between economic regionalism and global economic openness, embodied in the post-WWII multilateral trade regime, has been a longtime topic in international relations theory.

The Trump administration is accelerating the shift to regionalism.

Not to mention Brexit, which should go through on January 31st, thanks to the Conservative triumph in the general election.

All is not lost, as bilateral trade agreements will take the place of wider multilateral pacts.

In any case, at the Los Angeles Times, "House passage of USMCA marks major shift away from free-trade policies":

WASHINGTON —  The House of Representatives on Thursday overwhelmingly passed the new North American trade deal, voting in unusually bipartisan fashion just a day after impeaching President Trump strictly on party lines. 

Approval of the trade bill, which now goes to the Senate for almost certain ratification, did far more than help Trump notch a major achievement: It marked a significant change in U.S. economic strategy toward the rest of the world.

For much of the last 70 years, throughout the Cold War and down to more recent times, Washington used America’s vast wealth and economic power to build friendships and alliances that bolstered national security.

That strategy included a fundamental commitment to free trade — opening the large U.S. market to products from all over the world. For the most part, American companies and their workers had to compete against foreign businesses and labor with little or no protection from the federal government.

As Trump has long complained, that free-trade policy cost millions of American jobs. But leaders of both parties and economic experts considered it worth the price because it boosted American growth, generating many new jobs, and opened new opportunities for many U.S. companies to profit in a global economy. At the same time, it helped cement U.S. leadership in the world.

“In the post-World War II era, we were so much more powerful and so much richer than everybody else that we could improve the living standards at home and still give away the store on trade,” said Clyde Prestowitz, a former top trade negotiator in President Reagan’s administration.

“And we’re now culminated at a moment in which the cost of our old policy is really hard to bear, and so we’re de facto changing our policy,” he said.

The march toward free global markets with lower tariffs and other barriers always had exceptions. Beginning in the 1970s, U.S. companies began to complain about unfair competition: dumping of textiles and steel by foreign producers subsidized by their governments, for instance, or the sale of below-cost television sets, electronics and other consumer goods.

Reagan and his successors responded to these complaints with demands for import quotas and other measures. But overall, the United States remained committed to a broad strategy of free trade — relying on market forces and competition to determine outcomes.

While Republican business leaders complained about specific instances of what they saw as unfair tactics, such as currency manipulation and intellectual property theft, they largely remained committed to the overall free-trade strategy.

Democrats, responding to their union supporters, complained that American workers were paying a heavy price for a system that primarily benefited corporations and upper-income Americans.

The original North American Free Trade Agreement, which passed the House in 1993 by a margin of only 34 votes, highlighted the political unease about trade.

The agreement, however, fit squarely into that strategy of using trade in part for geopolitical reasons. It aimed to make Mexico more prosperous and hence make the United States more secure at a time when radical, leftist regimes seemed to be on the rise in Latin America. Economically, many saw it as a bulwark against rising competition from a unified Europe and Asian tiger economies.

NAFTA tore down tariffs and shaped North America into a powerful economic bloc — three-way trade in goods now reaches $1.3 trillion — but it was in many ways outdated in a global economy driven much more by technology and data.

Trump long attacked NAFTA, calling it one of the worst trade agreements ever and promising to renegotiate it. As president, he has attacked the whole system of free trade, undermining the World Trade Organization, which the U.S. helped create in the 1990s, and starting trade wars not only with China but with longtime U.S. allies such as Europe, Canada and Mexico.

He has enjoyed quiet but significant Democratic support on the issue. Witness the large bipartisan majority for the new version of NAFTA.

Renamed United States-Mexico-Canada Agreement, or USMCA, the measure won approval by the Democratic-majority House 385-41, a remarkable show of unity at a time of deep partisan acrimony.

Not that there wasn’t the usual jostling and one-upmanship which have characterized relations between congressional Democrats and Trump.

“Of course we’ll take credit for it, because what he proposed did not fill the bill of what he described,” House Speaker Nancy Pelosi said shortly before the vote, referring to Democrats’ successful pressure on the administration to amend the trade deal to strengthen enforcement of labor and environmental protections.

Earlier Wednesday night, at a rally in Battle Creek, Mich., Trump insisted that Pelosi and other Democrats had no choice but to pass USMCA.

“She had a lot of pressure, especially from manufacturing areas, farm areas, a lot of pressure to sign it.... I had a lot of union labor vote for me, tremendous amount of labor,” he said...

More.

President Trump's Assault on Free Trade

I'd argue some of the recent developments in the trade with China haven't been so great.

The cycle of increasing retaliation, with ever more punitive tariffs, will bring steep costs to both sides, and in the case of the U.S., employment sectors will be harmed and consumers will pay more for crucial goods and services affected by the dispute. Some businesses and agricultural interests are already screaming in pain as it is.

That said, China is an egregiously unfair competitor seeking to dislodge the U.S. as the world's leading economy. It will do anything to achieve its goals, including lying, cheating, and stealing. And so far no president has gone as far as President Trump to push back against China's unfair trade (and currency) practices.

I applaud the administration. And frankly, criticism against the new regime is of the "sky is falling" variety. The American economy is massive and diverse. Some sectors, in manufacturing, for example, are past their prime, and no amount of get-tough approaches will revive their glory. Still, it's about more than jobs and income. It's about who sets the rules of the game, and which side gets to keep its dignity and pride. If you watch the Netflix documentary "American Factory" you'll see that Chinese businesses are ruthless capitalists (ironically) who will to squeeze their labor force and supply chains to maximize the bottom line. Forget about organizing a union; you'll drive yourself right to the unemployment line.

In any case, FWIW, at Foreign Affairs, "Trump’s Assault on the Global Trading System: And Why Decoupling From China Will Change Everything":

“The Trump administration may end up destroying the old system without having drafted a blueprint for its successor.”https://t.co/lZrjZminVr

— Foreign Affairs (@ForeignAffairs) August 31, 2019

Donald Trump has been true to his word. After excoriating free trade while campaigning for the U.S. presidency, he has made economic nationalism a centerpiece of his agenda in office. His administration has pulled out of some trade deals, including the Trans-Pacific Partnership (TPP), and renegotiated others, including the North American Free Trade Agreement (NAFTA) and the U.S.-Korea Free Trade Agreement. Many of Trump’s actions, such as the tariffs he has imposed on steel and aluminum, amount to overt protectionism and have hurt the U.S. economy. Others have had less obvious, but no less damaging, effects. By flouting international trade rules, the administration has diminished the country’s standing in the world and led other governments to consider using the same tools to limit trade arbitrarily. It has taken deliberate steps to weaken the World Trade Organization (WTO)—some of which will permanently damage the multilateral trading system. And in its boldest move, it is trying to use trade policy to decouple the U.S. and Chinese economies.

A future U.S. administration that wants to chart a more traditional course on trade will be able to undo some of the damage and start repairing the United States’ tattered reputation as a reliable trading partner. In some respects, however, there will be no going back. The Trump administration’s attacks on the WTO and the expansive legal rationalizations it has given for many of its protectionist actions threaten to pull apart the unified global trading system. And on China, it has become clear that the administration is bent on severing, not fixing, the relationship. The separation of the world’s two largest economies would trigger a global realignment. Other countries would be forced to choose between rival trade blocs. Even if Trump loses reelection in 2020, global trade will never be the same.

BATTLE LINES

The first two years of the Trump administration featured pitched battles between the so-called globalists (represented by Gary Cohn, then the director of the National Economic Council) and the nationalists (represented by the Trump advisers Steve Bannon and Peter Navarro). The president was instinctively a nationalist, but the globalists hoped to contain his impulses and encourage his attention-seeking need to strike flashy deals. They managed to slow the rollout of some new tariffs and prevent Trump from precipitously withdrawing from trade agreements.

But by mid-2018, the leading globalists had left the administration, and the nationalists—the president among them—were in command. Trump has a highly distorted view of international trade and international negotiations. Viewing trade as a zero-sum, win-lose game, he stresses one-time deals over ongoing relationships, enjoys the leverage created by tariffs, and relies on brinkmanship, escalation, and public threats over diplomacy. The president has made clear that he likes tariffs (“trade wars are good, and easy to win”) and that he wants more of them (“I am a Tariff Man”).

Although the thrust of U.S. policy over the past 70 years has been to pursue agreements to open up trade and reduce barriers, every president has for political purposes used protectionist measures to help certain industries. President Ronald Reagan, for example, capped imports to protect the automotive and steel industries during what was then the worst U.S. recession since the Great Depression. Trump, however, has enjoyed a period of strong economic growth, low unemployment, and a virtual absence of protectionist pressure from industry or labor. And yet his administration has imposed more tariffs than most of its predecessors.

Take steel. Although there is nothing unusual about steel (along with aluminum) receiving government protection—the industry maintains a permanent presence in Washington and has been an on-again, off-again beneficiary of trade restrictions since the Johnson administration—the scope of the protection provided and the manner in which the Trump administration gave it last year were unusual. In order to avoid administrative review by independent agencies such as the nonpartisan, quasi-judicial U.S. International Trade Commission, the White House dusted off Section 232 of the Trade Expansion Act of 1962. This Cold War statute gives the president the authority to impose restrictions on imports if the Commerce Department finds that they threaten to harm a domestic industry the government deems vital to national security.

The Trump administration’s national security case was weak. More than 70 percent of the steel consumed in the United States was produced domestically, the imported share was stable, and there was no threat of a surge. Most imports came from Canada, Germany, Japan, Mexico, and other allies, with only a small fraction coming from China and Russia, thanks to antidumping duties already in place on those countries. The number of jobs in the U.S. steel industry had been shrinking, but this was due more to advances in technology than falling production or imports. In the 1980s, for example, it took ten man-hours to produce a ton of steel; today, it takes just over one man-hour. Even the Defense Department was skeptical about the national security motivation.

Prior administrations refrained from invoking the national security rationale for fear that it could become an unchecked protectionist loophole and that other countries would abuse it. In a sign that those fears may come true, the Trump administration recently stood alongside Russia to argue that merely invoking national security is enough to defeat any WTO challenge to a trade barrier. This runs counter to 75 years of practice, as well as to what U.S. negotiators argued when they created the global trading system in the 1940s.

The Trump administration dismissed all those concerns...

More.

Paul Blustein, Schism

Well, this is timely.

Out next month, at Amazon, Paul Blustein, Schism: China, America, and the Fracturing of the Global Trading System.

Dow Drops 623 Points as U.S.-China Trade War Escalates (VIDEO)

At Barron's, "The Dow’s Week Turned Ugly After Trump Sparred With China and Powell."

And ABC World News Tonight. Notice Trump's "I am the chosen one" comments:

....having fun. I was smiling as I looked up and around. The MANY reporters with me were smiling also. They knew the TRUTH...And yet when I saw the reporting, CNN, MSNBC and other Fake News outlets covered it as serious news & me thinking of myself as the Messiah. No more trust!

— Donald J. Trump (@realDonaldTrump) August 24, 2019

Arrest of Meng Wanzhou Further Roils U.S.-China Relations

Bloomberg has an excellent piece, "China's Ire Finally Flares as U.S. Opens Huawei CFO Case."

And at the Los Angeles Times, "The arrest of a top Huawei executive is 'a shot into the heart' of China's tech ambitions, analysts say":

The arrest of a top executive at one of the most successful Chinese global companies threatens to upend a delicate detente between the U.S. and China in their months-long trade war.

Meng Wanzhou, deputy chairwoman and chief financial officer of telecommunications giant Huawei, was arrested Saturday during a transit stop at a Vancouver airport and could face possible extradition to the U.S. and an appearance in federal court in New York.

A U.S. law enforcement official, who was not authorized to discuss the case by name, said the action against Meng involves violations of U.S. sanctions against Iran. Another U.S. official described the violations as serious. Neither official provided specifics.

The arrest comes at a sensitive time as Washington and Beijing aim to strike a trade deal before March 1. White House officials told CNN that Meng could be used as leverage in trade talks. It’s unclear whether President Trump knew about the arrest in advance, though national security advisor John Bolton told National Public Radio that he did.

Now any trade agreement has to overcome what will probably be viewed as a provocation in the eyes of China’s leadership, given Huawei’s importance.

“Huawei embodies the existential angst of China hard-liners in the U.S. concerned about China's ostensible grand plan for global domination of new high-tech industries,” said Eswar Prasad, a professor of trade policy at Cornell University. “Meanwhile, such actions by U.S. and other governments crystallize fears among Chinese leaders that the real intention is to hold back China’s economic progress and transformation.”

China demanded the immediate release of Meng, who is among the cream of China’s corporate elite. She is the daughter of tech billionaire Ren Zhengfei, Huawei’s founder and CEO and a former engineer in the People's Liberation Army.

Chinese officials said she had not broken any laws, accused the United States and Canada of violating her rights and demanded an explanation as to why she was arrested.

Huawei said in a statement it was unaware of any wrongdoing by Meng.

Chinese state media accused the U.S. of harassing Huawei to gain advantage in the worldwide competition for control of next-generation 5G cellular networks.

U.S. officials have not officially confirmed the reasons for Meng’s arrest. The U.S. has long considered Huawei a front for the Chinese government and military.

The arrest “wasn't a shot across the bow, but a shot into the heart of the ship” because Meng was basically considered an official of the Chinese government, a former U.S. official involved in national security matters said, speaking on condition of anonymity.

President Trump and Chinese President Xi Jinping agreed Saturday to suspend planned tariff hikes for 90 days to allow negotiations on a deal to end the trade conflict.

In a sign that China wanted to push for a deal despite anger over Meng’s arrest, officials said Thursday that trade talks would go ahead on agricultural products, automobiles and energy.

Meng’s arrest, significant because of her elite connections and prominent corporate position, triggered shock in China. The arrest is doubly sensitive because it threatens the rise of one of China’s top cutting-edge brands, now the world’s second-largest smartphone company, surpassing Apple in sales this year.

The state-owned Global Times reflected Chinese outrage over her arrest in an editorial accusing Washington of “resorting to a despicable rogue approach” in a bid to hurt the company. The paper also tweeted Thursday that China should be ready for an escalation of the trade war, warning that Meng’s arrest was vivid evidence that Washington would not soften its stance against Beijing.

“It is clear that Washington is maliciously finding fault with Huawei and trying to put the company in jeopardy with U.S. laws,” the editorial said.

Washington is demanding sweeping changes to China’s industrial policy, in particular its state support for key high-tech industrial firms, forced transfers of technology by American companies doing business in China, and tolerance or tacit encouragement of intellectual property theft...

Still more.

White House Economic Adviser Peter Navarro Says 'There's a Special Place in Hell' for Canadian Prime Minister Justin Trudeau (VIDEO)

I love this! At LAT, "White House officials accuse Canadian leader of 'stab in the back,' intensifying fight with U.S. ally":

White House officials lashed out at the leader of Canada, one of America’s closest allies, with extraordinary ferocity Sunday as they accused him of trying to make President Trump look weak heading into his summit with the leader of North Korea.

Two of Trump’s top economic advisors branded Canadian Prime Minister Justin Trudeau a backstabber, betrayer and double-crosser who pulled a “sophomoric political stunt” that threatened to embarrass Trump before his much-anticipated meeting with Kim Jong Un in Singapore on Tuesday.

“There’s a special place in hell for any foreign leader that engages in bad-faith diplomacy with President Donald J. Trump and then tries to stab him in the back on the way out the door,” White House trade advisor Peter Navarro said on “Fox News Sunday.”

The administration’s actions drew rebukes from Canada’s foreign minister as well as Democrats and some Republicans in Washington, including Sen. Jeff Flake (R-Ariz.), who on Twitter called out his party members after Navarro’s comments: “Fellow Republicans, this is not who we are. This cannot be our party.”

The White House anger stemmed from Trudeau’s criticism of Trump’s trade policies at a news conference Saturday after the annual Group of 7 summit, which Trudeau hosted at a resort in Charlevoix, Quebec.

Trump left the summit early, and an administration official told reporters he had joined a lengthy communiqué from the world leaders crafted on Friday and Saturday.

That night, however, Trump abruptly announced via Twitter that he would not sign the joint statement, calling Trudeau “very dishonest & weak” for his trade criticism.

Navarro sharply criticized the G-7 final statement, referring to it as “that socialist communiqué.”

Larry Kudlow, the director of the White House National Economic Council, offered a somewhat different account, saying Sunday that Trump agreed with the language in the communiqué, which Kudlow helped draft. The statement outlined a shared commitment to work on a variety of economic, social, environmental and security issues.

And at the New York Times:

"All Canadians will support the prime minister in standing up to this bully," a former Canadian ambassador to the United States said. "Friends do not treat friends with such contempt." https://t.co/k5In4Fm6dC

— The New York Times (@nytimes) June 11, 2018