US, China put brakes on their trade dispute with cease-fire

US President Donald Trump, US Secretary of State Mike Pompeo, US President Donald Trump’s national security adviser John Bolton and Chinese President Xi Jinping attend a working dinner after the G20 leaders summit in Buenos Aires, Argentina December 1, 2018. (Reuters)
Updated 02 December 2018
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US, China put brakes on their trade dispute with cease-fire

  • The truce buys time for the two countries to work out their differences in a dispute over Beijing’s aggressive drive to supplant US technological dominance
  • The US and China also made progress on the regulation of fentanyl, which is 50 times more powerful than heroin

BUENOS AIRES, Argentina: The United States and China reached a 90-day ceasefire in a trade dispute that has rattled financial markets and threatened world economic growth. The breakthrough came after a dinner meeting between President Donald Trump and Chinese leader Xi Jinping at the Group of 20 summit in Buenos Aires.

Trump agreed to hold off on plans to raise tariffs Jan. 1 on $200 billion in Chinese goods. The Chinese agreed to buy a “not yet agreed upon, but very substantial amount of agricultural, energy, industrial” and other products from the United States to reduce America’s huge trade deficit with China, the White House said.

The truce, reached after a dinner of more than two hours Saturday, buys time for the two countries to work out their differences in a dispute over Beijing’s aggressive drive to supplant US technological dominance.

“It’s an incredible deal,” Trump told reporters aboard Air Force One. “What I’ll be doing is holding back on tariffs. China will be opening up, China will be getting rid of tariffs. China will be buying massive amounts of products from us.”

In a long-sought concession to the US, China agreed to label fentanyl, the deadly synthetic opioid responsible for tens of thousands of American drug deaths annually, as a controlled substance. And Beijing agreed to reconsider a takeover by US chipmaker Qualcomm that it had previously blocked.

The White House announcement framed a victory for Trump and his unflinching negotiating tactics, securing a commitment from China to engage in talks on key US economic priorities, with little obvious concession by the US Notably, however, the White House appears to be reversing course on its previous threats to tie trade discussions to security concerns, like China’s attempted territorial expansion in the South China Sea.

“It’s great the two sides took advantage of this opportunity to call a truce,” said Andy Rothman, investment strategist at Matthews Asia. “The two sides appear to have had a major change of heart to move away from confrontation toward engagement. This changes the tone and direction of the bilateral conversation.”

The Trump-Xi meeting was the marquee event of Trump’s whirlwind two-day trip to Argentina for the G-20 summit after the president canceled a sit-down with Russian President Vladimir Putin over mounting tensions between Russia and Ukraine. Trump also canceled a Saturday news conference, citing respect for the Bush family following the death of former President George H.W. Bush.

Trump said Bush’s death put a “damper” on what he described as a “very important meeting” with Xi.

The United States and China are locked in a dispute over their trade imbalance and Beijing’s tech policies. Washington accuses China of deploying predatory tactics in its tech drive, including stealing trade secrets and forcing American firms to hand over technology in exchange for access to the Chinese market.

Trump has imposed import taxes on $250 billion in Chinese products — 25 percent on $50 billion worth and 10 percent on the other $200 billion. Trump had planned to raise the tariffs on the $200 billion to 25 percent if he couldn’t get a deal with Xi.

China has already slapped tariffs on $110 billion in US goods.

Under the agreement reached in Buenos Aires, the two countries have 90 days to resolve their differences over Beijing’s tech policies. If they can’t, the higher US tariffs will go into effect on the $200 billion in Chinese imports.

US officials insist that the American economy is more resilient to the tumult than China’s, but they remain anxious of the economic effects of a prolonged showdown — as Trump has made economic growth the benchmark by which he wants his administration judged.

A full-blown resolution was not expected to be reached in Buenos Aires; the issues that divide them are just too difficult.

Growing concerns that the trade war will increasingly hurt corporate earnings and the US economy are a key reason why US stock prices have been sinking this fall.

Joining other forecasters, economists at the Organization for Economic Co-operation and Development last week downgraded their outlook for global economic growth next year to 3.5 percent from a previous 3.7 percent. In doing so, they cited the trade conflict as well as political uncertainty.

The US and China also made progress on the regulation of fentanyl, which is 50 times more powerful than heroin. US officials for years have been pressing the Chinese government to take a tougher stance against fentanyl, and most US supply of the drug is manufactured in China.

White House press secretary Sarah Sanders says China’s decision to label the drug as a controlled substance means that “people selling Fentanyl to the United States will be subject to China’s maximum penalty under the law.”

The White House also said that China’s government is “open to approving” the purchase of Dutch semiconductor manufacturer NXP by American chipmaker Qualcomm.

China nixed the proposed takeover earlier this year, citing antitrust concerns, after US and European regulators approved the deal.

China’s decision earlier this year came amid a period of heightening tensions between the US and China over trade and intellectual property issues.

Qualcomm announced it was dropping plans to proceed with the deal after it failed to receive Chinese government approval. It is unclear whether the transaction could be revived even with China’s acquiescence.

In other developments, Trump announced aboard Air Force One on his return to Washington from Buenos Aires that his next meeting with North Korea’s Kim Jong Un would likely happen in January or February. He said there were three sites under consideration, but he declined to name them.

Trump also said he would shortly be providing formal notice to Congress that he will terminate the North American Free Trade Agreement, giving lawmakers six months to approve the replacement he signed Friday. He said lawmakers can choose between the replacement, the United States-Mexico-Canada Agreement, or nothing.


Gulf of Oman tanker attacks jolt oil-import dependent Asia

Updated 15 June 2019
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Gulf of Oman tanker attacks jolt oil-import dependent Asia

  • Iranian threats to close the Strait of Hormuz have alarmed Japan, China and South Korea
  • Japan’s conservative prime minister, Shinzo Abe, was in Tehran when the attack happened

SEOUL: The blasts detonated far from the bustling megacities of Asia, but the attack this week on two tankers in the strategic Strait of Hormuz hits at the heart of the region’s oil import-dependent economies.

While the violence only directly jolted two countries in the region — one of the targeted ships was operated by a Tokyo-based company, a nearby South Korean-operated vessel helped rescue sailors — it will unnerve major economies throughout Asia.

Officials, analysts and media commentators on Friday hammered home the importance of the Strait of Hormuz for Asia, calling it a crucial lifeline, and there was deep interest in more details about the still-sketchy attack and what the US and Iran would do in the aftermath.

In the end, whether Asia shrugs it off, as some analysts predict, or its economies shudder as a result, the attack highlights the widespread worries over an extreme reliance on a single strip of water for the oil that fuels much of the region’s shared progress.

Here is a look at how Asia is handling rising tensions in a faraway but economically crucial area, compiled by AP reporters from around the world:

WHY ASIA WORRIES

The oil, of course.

Japan, South Korea and China don’t have enough of it; the Middle East does, and much of it flows through the narrow Strait of Hormuz, which is the passage between the Arabian Gulf and the Gulf of Oman.

This could make Asia vulnerable to supply disruptions from US-Iran tensions or violence in the strait.

The attack comes months after Iran threatened to shut down the Strait of Hormuz to retaliate against US economic sanctions, which tightened in April when  the Trump administration decided to end sanctions exemptions for the five biggest importers of Iranian oil, which included China and US allies South Korea and Japan.

Japan is the world’s fourth-largest consumer of oil — after the US, China and India — and relies on the Middle East for 80 per cent of its crude oil supply. The 2011 Fukushima nuclear disaster led to a dramatic reduction in Japanese nuclear power generation and increased imports of natural gas, crude oil, fuel oil and coal.

In an effort to comply with Washington, Japan says it no longer imports oil from Iran. Officials also say Japanese oil companies are abiding by the embargo because they don’t want to be sanctioned. But Japan still gets oil from other Middle East nations using the Strait of Hormuz for transport.

South Korea, the world’s fifth largest importer of crude oil, also depends on the Middle East for the vast majority of its supplies.

Last month, South Korea halted its Iranian oil imports as its waivers from US sanctions on Teheran expired, and it has reportedly tried to increase oil imports from other countries.

China, the world’s largest importer of Iranian oil, “understands its growth model is vulnerable to a lack of energy sovereignty,” according to market analyst Kyle Rodda of IG, an online trading provider, and has been working over the last several years to diversify its suppliers. That includes looking to Southeast Asia and, increasingly, some oil-producing nations in Africa.

THE GEOGRAPHY AND THE POLITICS

Asia and the Middle East are linked by a flow of oil, much of it coming by sea and dependent on the Strait of Hormuz.

Iran threatened to close the strait in April. It also appears poised to break a 2015 nuclear deal with world powers, an accord that US President Donald Trump withdrew from last year. Under the deal saw Tehran agree to limit its enrichment of uranium in exchange for the lifting of crippling sanctions.

For both Japan and South Korea, there is extreme political unease to go along with the economic worries stirred by the violence in the strait.

Both nations want to nurture their relationship with Washington, a major trading partner and military protector. But they also need to keep their economies humming, which requires an easing of tension between Washington and Tehran.

Japan’s conservative prime minister, Shinzo Abe, was in Tehran, looking to do just that when the attack happened.

His limitations in settling the simmering animosity, however, were highlighted by both the timing of the attack and a comment by Iranian Supreme Leader Ayatollah Ali Khamenei, who told Abe that he had nothing to say to Trump.

In Japan, the world’s third largest economy, the tanker attack was front-page news.

The Nikkei newspaper, Japan’s major business daily, said that if mines are planted in the Strait of Hormuz, “oil trade will be paralyzed.” The Tokyo Shimbun newspaper called the Strait of Hormuz Japan’s “lifeline.”

Although the Japanese economy and industry minister has said there will be no immediate effect on stable energy supplies, the Tokyo Shimbun noted “a possibility that Japanese people’s lives will be affected.”

South Korea, worried about Middle East instability, has worked to diversify its crude sources since the energy crises of the 1970s and 1980s.

THE FUTURE

Analysts said it’s highly unlikely that Iran would follow through on its threat to close the strait. That’s because a closure could also disrupt Iran’s exports to China, which has been working with Russia to build pipelines and other infrastructure that would transport oil and gas into China.

For Japan, the attack in the Strait of Hormuz does not represent an imminent threat to Tokyo’s oil supply, said Paul Sheldon, chief geopolitical adviser at S&P Global Platts Analytics.

“Our sense is that it’s not a crisis yet,” he said of the tensions.

Seoul, meanwhile, will likely be able to withstand a modest jump in oil prices unless there’s a full-blown military confrontation, Seo Sang-young, an analyst from Seoul-based Kiwoom Securities, said.

“The rise in crude prices could hurt areas like the airlines, chemicals and shipping, but it could also actually benefit some businesses, such as energy companies (including refineries) that produce and export fuel products like gasoline,” said Seo, pointing to the diversity of South Korea’s industrial lineup. South Korea’s shipbuilding industry could also benefit as the rise in oil prices could further boost the growing demand for liquefied natural gas, or LNG, which means more orders for giant tankers that transport such gas.