Trade Friction Escalates; China and Canada Face U.S. Sanctions
Author: Greg Valliere
August 7, 2020
LEGISLATION IS STALLED on Capitol Hill, but the Trump Administration is determined to make policy via executive orders on a wide range of issues — including trade, as relations between the U.S. and China deteriorate; even Canada is a target.
AS IF RELATIONS WITH CHINA couldn’t get any worse, the Trump Administration yesterday issued executive orders against TikTok and WeChat, which would prohibit the firms from doing business in the U.S. — they wouldn’t be allowed on aps of U.S. firms like Google and and Apple.
MICROSOFT IS STILL IN THE RUNNING to purchase TikTok before an apparent Sept. 15 deadline, but Trump is demanding a fee to the U.S. China is likely to retaliate; Beijing said yesterday that it would “pursue all remedies.” With the U.S. election approaching, Trump (and many Democrats) are eager to punish China for its lack of transparency on the coronavirus, and its blatant hacking of U.S. firms.
MEANWHILE, THE “BUY AMERICAN” drive intensified, as the Administration issued an executive order yesterday that “essential” drugs and medical supplies must be manufactured in this country. “We cannot rely on China and other nations across the globe that could one day deny us products in a time of need,” Trump said.
THE BUY AMERICA MOVEMENT has widespread support in Congress, and is a major threat to the generic drug industry; many generic drugs are manufactured in China and India. Trump’s order affects purchases by the Departments of Health and Human Services, Defense and Veterans Affairs (this order will be delayed as the FDA determines which drugs are “essential”).
AND IN STILL ANOTHER MOVE AIMED AT CHINA, several news services reported yesterday that Trump is seriously considering an executive order to “delist” Chinese firms that trade on U.S. stock exchanges unless they meet American auditing requirements. Many Democrats support this crackdown.
THE U.S. CAN’T EVEN GET ALONG WITH CANADA: Yesterday Trump announced a 10% tariff on Canadian aluminum shipments to the U.S. This almost certainly will prompt a retaliation from Prime Minister Justin Trudeau, who’s probably happy to have an issue that might deflect attention away from his latest domestic controversy. “We will always stand up for our aluminum workers,” he declared.
“CANADA IS TAKING ADVANTAGE OF US, AS USUAL,” Trump proclaimed yesterday, even though all sides signed a new NAFTA deal on July 1.
THE AGGRESSIVE PRE-ELECTION TRADE STANCE by the U.S. also could heat up controversies with Western Europe over taxation of American tech companies, which could lead to more tariffs. A dispute over aircraft subsidies could be closer to resolution, however.
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THE STIMULUS TALKS, CLEARLY STALLED, may result in executive orders from President Trump that would defer evictions and perhaps impose a payroll tax cut. It’s unclear whether these actions could survive a legal challenge, and that process could be time-consuming, delaying aid that virtually all economists agree is crucial.
TRUMP WANTS TO PROD CONGRESS, but both sides are far apart. This could be a self-inflicted disaster, transforming the economy — which exceeded expectations this summer — into a renewed slump this fall. A weak jobs report at 8:30 this morning could jump-start the talks; a strong report would reduce pressure for more aid.
A STIMULUS PACKAGE COSTING ABOUT $1.5 TRILLION seemed like a logical compromise, but logic often does not apply in Washington.
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