Checkpoint Asia

Washington Preparing to Throw the Kitchen Sink at China

More US sanctions in the works as Beijing defies Trump by ramping up subsidies — this war is only just getting started

Dear emerging markets fund manager: If you think the trade war is ending this year, I want my money back.

China is returning to its subsidy playbook and plans on subsidizing companies hit by tariffs. The latest recipient is tech companies, according to an article in the South China Morning Post on Friday.

State subsidies to favored industries were a key issue in trade negotiations. China has no interest in rolling them back. They’re not even signaling a willingness to try. Any Memorial Day happy talk tweets by Trump over the weekend should be glossed over and ignored. We are in a “no deal” situation now.

What makes it worse is the fact that Washington is throwing everything plus the kitchen sink at Beijing.

Here’s a list of anti-China measures coming from Democrats and Republicans. Some of them are old, but are being resuscitated as the trade war heats up.

“The U.S. strategy is intended to signal to allies and multinational corporates that ‘it’s on’,” says Brian McCarthy, chief strategist for Macrolens in Stamford, Conn.  “The message to allies in Europe and Asia is that – like it or not – it’s time to pick a side.  And to corporates with supply chain vulnerabilities in China – like it or not – it’s time to move.”

Besides bills and threats of ending the Treasury Department’s longstanding position that China is not manipulating its currency, the U.S. Trade Representative is going over the legalities of slapping 25% tariffs on another $300 billion of Chinese imports.

Source: Forbes