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In stark contrast to attempts in numerous western countries to stifle free speech online, Russian President Vladimir Putin defended Internet freedom during a conference...
A prominent Swedish lawmaker asserts that Hungarian billionaire George Soros's influence on European politics and policies make him "one of the most dangerous men,"
Internal memo says China should prepare for “worst case scenario” of “armed conflict” with USA, according to Reuters
A leaked Chinese memo recommends the country prepare for a
“worst-case” scenario of “armed confrontation” with the United States
amid global backlash over the coronavirus pandemic, according to
Reuters.
Chinese leaders are concerned about anti-China
sentiment spreading across the globe as controversy grows over China’s
handling of the coronavirus during the outbreak’s early stages, but it’s
unknown if the memo reported by Reuters currently reflects the
sentiment of Beijing or if it’s intended to put the country on a war
footing.
“An internal Chinese report warns that Beijing faces a
rising wave of hostility in the wake of the coronavirus outbreak that
could tip relations with the United States into confrontation, people
familiar with the paper told Reuters,” the outlet reported,
stating that it didn’t see the memo directly. “The report, presented
early last month by the Ministry of State Security to top Beijing
leaders including President Xi Jinping, concluded that global anti-China
sentiment is at its highest since the 1989 Tiananmen Square crackdown,
the sources said.”
It is known that the US and China have both stepped up military activity
in the disputed South China Sea over the past few days, with both the
USS Bunker Hill and the USS Barry sailing near islands claimed by China
and several other countries.
And the Czech Republic installed signs
informing their Chinese tourists of the events of the 1989 Tiananmen
Square protests, and to put this into context, China has spent the past
several decades censoring all information on the ’89 protests involving
‘Tank Man’ that an entire generation of Chinese citizens have grown up completely unaware the protests ever happened.
“China’s early coverup of the outbreak – including silencing
and/or disappearing whistleblowing doctors and journalists, lying about
the transmissibility of the virus while hoarding personal protective
equipment (PPE), quarantining Wuhan domestically while allowing
international travel and using the World Health Organization to run
cover – has drawn global scorn as COVID has infected over 3.5 million
and killed nearly 250,000 in five months,” Zero Hedge reported.
Having tumbled yesterday on the first set of headlines reporting on the Trump administration's plans to seek 'COVID reparations' amid accusations of Chinese 'meddling' in the US election (obviously not in
favor of Trump), the Chinese yuan legged dramatically lower in this
evening's illiquid session which sees most of Asia closed for May Day,
after Bloomberg reports that Trump is exploring blocking a
government retirement fund from investing in Chinese equities considered
a national security risk.
Trump made his initial threats from the Rose Garden at the White
House Monday after he was pressed by a reporter over a German newspaper
report suggesting that China should be issued a $160 billion invoice for
the impact on Europe's economy.
"We have ways of doing things a lot easier than that," Trump told the coronavirus press briefing. "Germany’s
looking at things, and we’re looking at things, and we’re talking about
a lot more money than Germany’s talking about."
"We haven’t determined the final amount yet. It’s very substantial," Trump added, suggesting it would be significantly more than the $160 billion floated in German media.
Asked whether he was considering the use of tariffs or even a debt
write-offs for China (something which Larry Kudlow vehemently rejected
earlier on Thursday), Trump would not offer specifics.
“There are many things I can do,” he said. “We’re looking for what happened.”
Since then various plans have been proposed, but Trump escalated the war of words further, during an Oval Office interview with Reuters published Wednesday night, saying that he thinks that China is determined to see him lose the November election
based on Beijing’s response to the coronavirus, and that he is
considering various ways to punish the Chinese government which he he
again blamed for allowing the virus to spread across the world.
"China will do anything they can to have me lose this race," Trump
said in the interview and said he was looking at different options in
terms of consequences for Beijing over the virus. “I can do a lot,” he
said.
Which was quickly followed by denials from Chinese Foreign Ministry spokesman Geng Shuang, saying that China has no interest in interfering in internal U.S. affairs
(unless of course that 'affair' involves investigating the origin of
COVID-19). China hopes some people in U.S. won’t drag country into its
internal processes, Geng said.
And tonight, Bloomberg reports that, after months of pressure from
concerned lawmakers, according to a person familiar with the internal
deliberations, the Trump admin is planning an executive order to
block a 2017 decision that The Thrift Savings Plan, the federal
government’s retirement savings fund, would transfer a massive $50
billion to an international fund which would mirror the MSCI All-Country
World Index.
The issue being China's addition to the index, and thus the fund
being forced to allocate significant capital to the Chinese stock
markets, at a time when the gloves between the two nations are clearly
off.
Needless to say, the optics of the US halting capital from entering
China would be staggering and could result in a reversion of China-bound
capital flows across all Western countries until the current war of
words between Trump and Xi rages. The only problem is that, as we noted
yesterday, this particular war of words could last a long time, since
there is no longer any impetus to kiss and make up, and if anything,
Trump will only escalate the anti-China sentiment into the election (and
after), to keep pounding that the collapse resulting from the
coronavirus pandemic is not his fault, but rather's Beijing, even as
China pursues a mirror image approach, blaming the US for launching the
pandemic.
The most obvious market reaction for now is in Offshore Yuan which
has collapsed in the last two days, extending losses tonight...
Source: Bloomberg
Bloomberg reports that Senator Marco Rubio, a Florida Republican, applauded reports of the move in a statement Thursday.
“It’s outrageous that five unelected bureaucrats appointed by the
previous administration have ignored bipartisan calls from Congress to
reverse this short-sighted decision, and I applaud President Trump for
directing his administration to take swift action preventing this from
going forward,” he said.
We would expect China to be furious at this discussion and wonder
what they will do to stall this move - one suggestion, given the
weakness in US equity futures overnight, is to push volatility back into
US markets - to shake the faith in the dramatic market rebound (that
The Fed enabled).
The "worst case" trade war scenario was avoided in Osaka on Saturday when Trump agreed to restart trade talks with Xi, holding off new tariffs on Chinese exports, and signaling a pause in the trade hostilities between the world’s two largest economies; Trump added that while existing tariffs would remain in place the
US president eased restrictions on Huawei as part of what is now the
second ceasefire between the two superpowers in two months, removing an
immediate threat looming over the global economy even as a lasting peace
remains elusive.
"We had a very good meeting with President Xi of China, excellent, I
would say excellent, as good as it was going to be," he said. "We
discussed a lot of things and we're right back on track and we'll see
what happens", Trump told reporters after an 80-minute meeting with
Chinese President Xi Jinping on the sidelines of a summit of leaders of
the G-20 major economies in Osaka, western Japan.
“We’re holding back on tariffs and they’re going to buy farm products,” he said vaguely at a news conference, without giving any details of China’s future agricultural product purchases. “If
we make a deal, it will be a very historic event.” He gave no timeline
for what he called a complex deal but said he was not in a rush. “I want
to get it right.”
Whereas Trump and top admin officials alleged that Beijing had
reneged on provisions of a tentative trade deal, it was not immediately
clear if Xi agreed to return to previous agreements as part of the new
truce.
Trump, however, did relent on one of the major sticking points, saying U.S. firms would be allowed to sell components to Huawei, the
world’s biggest telecom network gear maker, where there was no national
security problem. The president said the U.S. commerce department would
meet in the next few days on whether to take it off a list of firms
banned from buying components and technology from U.S. companies without
government approval.
"I like our companies selling things to other people, so I allowed
that to happen," Trump said. “We’re talking about equipment where
there’s no great national security problem with it.” In recent months,
the Trump administration has been lobbying allies around the world not
to buy Huawei equipment, which the U.S. says could be used for Chinese
espionage.
Huawei was delighted by the news on its verified Twitter account:
“U-turn? Donald Trump suggests he would allow #Huawei to once again
purchase U.S. technology!”
Predictably, China also welcomed the step. “If the U.S. does what it
says, then of course, we welcome it,” said Wang Xiaolong, the Chinese
foreign ministry’s envoy for G20 affairs.
Trump said he had not yet decided how to allow U.S. companies to
continue selling to Huawei or whether to remove the tech giant from the
Commerce Department’s entity list. He said he would meet with advisors
next week to determine how to proceed.
U.S. microchip makers also applauded the move. “We are encouraged the
talks are restarting and additional tariffs are on hold and we look
forward to getting more detail on the president’s remarks on Huawei,”
John Neuffer, president of the U.S. Semiconductor Association, said in a
statement. Recently, Broadcom warned of a broad slowdown in demand as a
result of Huawei sanctions and slashed its revenue forecast.
And yet, it was not clear how long the exemption would last. Trump
said he had agreed with Xi to wait until the very end of trade talks to
resolve broader issues around Huawei, including Washington’s lobbying
campaign against allies buying its 5G equipment.
“Huawei is a complicated situation,” Trump said. “We’re leaving Huawei toward the end. We’ll see where we go with a trade agreement.”
The concession will likely draw criticism in Washington where
national security hawks have urged Trump not to ease any pressure
against Huawei. The company has long been the target of concern at the
Pentagon and intelligence agencies in part over what the U.S. claims are
its close ties to the Chinese military.
Huawei is one of few potent levers we have to make China play fair on trade.
If President @realDonaldTrump backs off, as it appears he is doing, it will dramatically undercut our ability to change China’s unfair trades practices.https://t.co/rja8CDs2T4
By agreeing to weaken restrictions on #Huawei, Trump not only undermined his own government, he undermined the entire argument #Huawei is a real national security threat. #facepalmhttps://t.co/BzuM8QA0Na
In exchange for his Huawei concession, Trump said Xi Jinping had promised to buy “tremendous” amounts of U.S. agricultural products. “We’re
going to give them a list of things we’d like them to buy,” Trump said
at a news conference following the Group of 20 summit in Osaka, Japan.
However, as Bloomberg notes, the first indications the second fragile
truce will collapse soon is that the Chinese official media reports said
only that the U.S. president hopes China will import more American goods as part of the truce, without an actual confirmation it will do so.
For now, however, the second truce, after a similar ceasefire was
announced on December 1 at the Buenos Aires G-20 summit, has been
achieved, offering relief from a nearly year-long trade standoff in
which the countries have slapped tariffs on billions of dollars of each
other’s imports, disrupting global supply lines, roiling markets and
dragging on global economic growth.
In a lengthy statement on the two-way talks, China’s foreign ministry
quoted Xi as telling Trump he hoped the United States could treat
Chinese companies fairly. On the issues of sovereignty and respect, Xi
said that "China must safeguard its core interests."
“China is sincere about continuing negotiations with the
United States ... but negotiations should be equal and show mutual
respect,” the foreign ministry quoted Xi as saying.
Trump had threatened to extend existing tariffs to almost all Chinese
imports into the United States if the meeting brought no progress on
wide-ranging U.S. demands for reforms.
The return to the negotiating table ends a six-week stalemate that has unnerved companies and investors, and
at least temporarily reduces fears that the world’s two largest
economies are headed into a new cold war, which they still are but only
after the current stalemate ends allowing the S&P to rise above
3,000 in the the meantime. Because, as Bloomberg notes, it’s
unclear how they can overcome differences that led to the collapse of a
previous truce reached at the G-20 in November.
* * *
While Trump and Xi were all smiles at their press briefing, the bad
blood between the two leaders behind the scenes is clearly still there.
Xi spent much of the summit’s first day Friday promising to open up the
Chinese economy, and attacking the U.S. (without naming it) for its
attack on the global trading system. As Bloomberg reported, Xi took a
"not-so-subtle swipe" at Trump’s “America first” trade policy in remarks
to African leaders on Friday, warning against “bullying practices” and
adding that “any attempt to put one’s own interests first and undermine
others’ will not win any popularity.” Xi also called out the U.S. over
Huawei and said the G-20 should uphold the “completeness and vitality of
global supply chains.”
For now, however, there is optimism.
“Returning to negotiations is good news for the business community
and breathes some much needed certainty into a slowly deteriorating
relationship,” said Jacob Parker, a vice-president of China operations
at the U.S.-China Business Council. But "now comes the hard work
of finding consensus on the most difficult issues in the relationship,
but with a commitment from the top we’re hopeful this will put the two
sides on a sustained path to resolution,” he said.
Others were more skeptical, and warned the pause - just like the first ceasefire - will not last.
“Even if a truce happens this weekend, a subsequent breakdown of
talks followed by further escalation still seems likely,” Capital
Economics said in a commentary on Friday, quoted by Reuters.
The United States says China has been stealing American intellectual
property for years, forces U.S. firms to share trade secrets as a
condition for doing business in China, and subsidizes state-owned firms
to dominate industries. Meanwhile, China has said the United States is
making unreasonable demands and must also make concessions.
The talks collapsed in May after Washington accused Beijing of
reneging on reform pledges. Trump raised tariffs to 25% from 10% on $200
billion of Chinese goods, and China retaliated with levies on U.S.
imports.
The U.S.-China feud had cast a pall over the two-day G20 gathering,
with leaders pointing to the threat to global growth. In their
communique, the leaders warned of growing risks to the world economy but
stopped short of denouncing protectionism, calling instead for a free,
fair trade environment after talks some members described as difficult.
* * *
Finally, global markets will breathe a sigh of relief on news of the
resumption in U.S.-China trade talks, even as an official deal remains
elusive, and there is no indication of how the two countries will bridge
the most difficult aspect of a feud that has emerged beyond simple
trade and now affects most aspects of US and Chinese life.
The flip-side is that with trade talks back on, the Fed will feel far
less pressure to ease in July, and since in June stocks exploded higher
on hopes that the Fed will cut rates as much as 50bps next month, such a
reversal in US-China relations could potentially prevent Powell from
capitulating, and leave the Fed on hold, an outcome which would lead to a
sharp drop in US capital markets. Indeed, in recent weeks, the S&P
has returned to record highs, treasury yields have tumbled to their
lowest level in years. The Japanese yen, a traditional beneficiary of
flight to quality, has gained, while the U.S. dollar has slipped across
the board, including against China’s yuan.
Russia has dismissed the political crisis engulfing Venezuela as an attempted coup while expressing concern over the role of external states and the potential for foreign military intervention, calling Juan Guaido's move to declare himself president illegal.
Kremlin Spokesman Dmitry Peskov said Thursday, “We are very concerned by statements that don’t rule out some kind of external intervention,” as cited by Bloomberg. “We consider such intervention unacceptable,” Peskov added while describing the internal unrest spilling into the streets after the catalyst of Monday's failed military revolt of 27 officers in an opposition neighborhood of Caracas an “attempt to usurp power”.
Prior meeting at the Novo-Ogaryovo state residence outside Moscow on December 5, 2018. Image source: AFP
This follows President Trump's declaration that the US would only recognize the unelected head of the opposition-held National Assembly as "the President of the Venezuelan National Assembly, Juan Guaido, as the Interim President of Venezuela." A senior Trump administration official followed by saying “all options are on the table”.
The Russian Foreign Ministry said further in website statement that Washington's joining a growing list of about a dozen other countries to recognize Guaido “is aimed at deepening the split in Venezuelan society, increasing the conflict on the streets, sharply destabilizing the internal political system and further escalation of the conflict.” And in words eerily similar to the brief international exchange of words over prior US action in places like Libya and Syria the ministry said that external armed intervention would be “fraught with catastrophic consequences.”
The foreign ministry further described that the situation “has reached a dangerous point” and called on the international community to engage in diplomacy and mediation between the Maduro government and opposition.
And separately, a senior Russian official on Thursday warned the Trump administration against what he called the "catastrophic scenario"of military intervention in the region. "We warn against this," Russia's deputy foreign minister, Sergei Ryabkov, said in an interview with International Affairs magazine, as cited in USA Today. "We believe that this would be a catastrophic scenario that would shake the foundations of the development model we see in the Latin American region."
Wednesday clashes with police, image via Rafael Hernández
In early December of last year President Nicholas Maduro visited Moscow to meet with President Vladimir Putin at a time when tensions with both countries and Washington were soaring. The leaders discussed Russia's offering to throw cash-strapped Venezuela a multi-billion dollar life-line despite Caracas in the past being unable to pay its debts. During that trip, Maduro had called Russia a “brother country” with which Venezuela had “raised the flag for the creation of a multipolar and multicentric world.”
This meeting was followed by Russia briefly deploying two nuclear-capable "Blackjack" bombers to Venezuela as part of a joint training exercise meant to underscore the two countries' growing military relations.
Meanwhile Russia is not the only country to express fear of external meddling and an "illegal" coup attempt, but predictably Syria, Turkey, and China have also declared intentions to stick by Maduro while voicing that the Venezuelan people alone should decide their fate.
Secretary of State Mike Pompeo has authorized the addition of 33 alleged
Russian spies, defense and intelligence officials to the US sanctions
list. The blacklisting took place following an executive order from
President Trump authorizing Steven Mnuchin, in consultation with Pompeo,
to employ all powers granted to the President "by IEEPA and certain
CATSAA sections" for implementation of certain sanctions with respect to
Russia.
US is placing nearly three dozen alleged spies and military officers from #Russia on a sanctions blacklist.
A White House official said the new measures were aimed at "imposing costs on Russia in response to its malign activities."
Washington has also imposed new sanctions on a Chinese military unit
over the purchase of Russian jets and missiles.The Chinese sanctions are
to come into effect immediately.
Trump has been criticized by Congress for not using his legal powers
to target Russia’s defense industry and gas export pipelines, and with
the Mueller probe still continuing, Trump has been eager to show an
"unfriendly" side to Putin in advance of the probe's release.
Unlike other occasions, which saw the ruble slide on any incremental
sanctions or blacklist news, today the ruble - following the lead from
the rest of the EM space - is trading stronger on the day, and is the
third best performing currency of the week. Earlier in the day, the
First Deputy Governor of the Russian Central Bank, Ksenia Yudaeva, said
that even if FX drop, the central bank will stick to its recent promise
of not engaging in FX purchases by the end of the year which is why the
Ruble may have more upside to go, even as Russian stocks hit a new all
time high.
There will be no more delaying the announcement of the $200BN in China tariffs.
Moments ago, Trump said that the "China Trade Announcement" which
likely refers to the $200BN in second round tariffs, will come after the
market close, perhaps so that stocks - which arguably can no longer
discount the future - won't be impacted?
TRUMP SAYS CHINA TRADE ANNOUNCEMENT COMING AFTER MARKET CLOSE
It is unclear if the tariffs will carry a 10% or 25% tax,
although according to the latest reports it will be the former, and
potentially increase if China still refuses to "fold" to Trump demands.
What happens next? First, visually this is what the trade war with China will look like after today:
As a reminder, the list of the first $50bn in tariffs contained 1,333
tariff lines of products. It was based on "extensive interagency
economic analysis", and would "target products that benefit from China’s
industrial plans", such as Made in China 2025, while "minimizing the
impact on the U.S. economy". The second $200bn list share the
same considerations on US economy and consumers, though China's
industrial policy was no longer a focus. All finalized lists also took into account public comments received.
So far the US has carefully avoided consumer and China dependent products. As a result, the trade war so far has had little impact on US economy and consumers.
But this will change as the tariff list expands to by another 200bn.
Within the currently proposed 200bn list, about 78bn are
consumer products (Figure 7). These include different types furniture
(24bn), travel bags(2.2bn), vacuum cleaners (1.8bn), vinyl
flooring(1.7bn), window/wall air conditioners (1.3bn), etc.
Similarly, reliance on China increases sharply for the 200bn products in
tariff pipeline. China import shares are above 20% for most of the
products, and for about half of them, China's share are more than 50%
(Figure 8).
Furthermore, many of the consumer products subject to tariff also happen to have very high China import share. China's import share is about 93% for air conditioners, 78% for vacuum cleaners, and 60-90% for various types of furniture. Therefore,
we believe each dollar of tariff imposed on this 200bn list is a lot
more painful for the US than one dollar of tariff imposed on the first
50bn list.
Not surprisingly, US domestic resistance on the latest $200bn list appeared stronger than before. The majority of the industry representatives were against it during the six-day public hearing. Will the US be able to accommodate their complaints by exempting these products and finding other products to tariff instead?
In other words, while so far US consumers - and capital
markets - have been spared from the tit-for-tat escalation, once Trump
greenlights the next round of $200BN in tariffs, US purchasers of cheap
Chinese imports will find them not so cheap anymore, hitting
not only the pocket book of the US consumer, but also downstream
corporations who will see their profit margins shrink rapidly, and which
also explains the recent panic in various Fed and private sector
surveys about the growing threat of ever greater tariffs.
* * *
Trump's action also means that trade talks with China scheduled for
later this week will be canceled, and all eyes will be on how China
retaliates. Recall that as the WSJ reported last night, Chinese
officials involved in advising the leadership are proposing to
step up the trade fight a notch by restricting China’s sales of
materials, equipment and other parts key to U.S. manufacturers’ supply
chain.
While the announcement is not news, as the market had plently of
warnings, the Nasdaq has slumped to session lows with both the Dow and
the S&P following lower:
“That
has to be, in the history of propaganda in the 20th and 21st centuries,
one of the most outrageous claims that I can think of,” John Bolton
statedin response to Moscow's charge that anti-Assad
insurgents in Idlib are preparing a chemical false flag in order to
hasten a US attack on Damascus, according to a new Wall Street Journal report.
“Along with the United States and France, we have been clear that we will respond swiftly and appropriately
if the Assad regime repeats its appalling use of chemical weapons,” he
vowed, echoing statements the national security advisor began making weeks ago during a trip to Jerusalem.
The WSJ has revealed the White House is now in
direct talks with the U.K. and France over plans for a possible third
round of coordinated strikes on Syria should the Syrian Army use chemical weapons during its Idlib assault.
After a speech in Washington on Monday, Bolton told reporters, “We’ve
been in consultation with the British and the French, who joined us in
the second strike, and they also agree that another use of chemical
weapons will result in a much stronger response.”
The news comes a day after Bolton indicated during a speech that the US and its allies Syria would respond with much "stronger" and harsher action against Damascus.
Also, early this week there were reports
that Germany is mulling over whether to agree to a request by the
United States that it join any potential strikes on Syria, though such a
move is expected to be too politically divisive for Germany to agree.
Thus far a Russian air attack on Idlib is underway, with
international reports saying about 70 strikes have occurred on Idlib in
the past days. Syria pro-government forces have amassed around Idlib
Province and are said to number as many as 100,000. If true this would be the largest mustering of Syrian forces for any single battle throughout the seven year long conflict.
Meanwhile the United Nations has warned of an impending humanitarian
disaster, and a UN Security Council meeting chaired by the US is set to
be held on Tuesday morning, according to the WSJ.
On Monday the WSJ reported that unnamed US officials now claim to be in possession of intelligence which they say shows Assad has already given the order to conduct a chlorine gas attack in an absolutely unprecedented level of "pre-crime" telegraphing of events on the battlefield.
The anonymous officials told the WSJ of "new U.S.
intelligence" in what appears an eerily familiar repeat of precisely how
the 2003 invasion of Iraq was sold to the American public (namely, "anonymous officials" and vague assurances of unseen intelligence) —albeit posturing over Idlib is now unfolding at an intensely more rapid pace:
Fears of a massacre have been fueled by new U.S. intelligence
indicating Mr. Assad has cleared the way for the military to use
chlorine gas in any offensive, U.S. officials said. It wasn’t clear from the latest intelligence if Mr. Assad also had given the military permission to use sarin gas,
the deadly nerve agent used several times in previous regime attacks on
rebel-held areas. It is banned under international law.
It appears Washington is now saying an American attack on Syrian government forces and locations is all but inevitable.
However, this time the stakes are much higher asRussia has built up an unprecedented number of warships in the Mediterranean Sea along the Syrian coast in response to prior reports that the U.S., France, and Great Britain could be preparing an attack.
* * *
Meanwhile, does anyone remember this fake news from 15 years ago?...
Liberteon