US, China fire first shots in ‘largest trade war in economic history’

Investors are watching nervously as simmering trade tensions between the world's top two economies are set to erupt into a full-blown trade war. (AFP)
Updated 07 July 2018

US, China fire first shots in ‘largest trade war in economic history’

  • Tit-for-tat tarrifs launched
  • Beijing says it will take qualitative and quantitative measures

WASHINGTON: The US and China on Friday launched tit-for-tat tariffs on each other’s imports, the opening shots in what Beijing called “the largest trade war in economic history” between the world’s top two economies.

At the stroke of midnight Washington time, the US pulled the trigger on 25-percent duties on about $34 billion in Chinese machinery, electronics and high-tech equipment, including autos, computer hard drives and LEDs.

The foreign ministry in Beijing said retaliatory measures “took effect immediately” with state news agency Xinhua confirming they were also 25-percent tariffs on an equal amount of goods.

Economists have warned escalating trade frictions could throttle global growth and strike at the heart of the world trading system, causing shockwaves across the planet.
Friday’s tariffs could just be the opening skirmishes in the trade war, as US President Donald Trump has vowed to hit as much as $450 billion in Chinese goods, the vast majority of imports.

Months of dialogue between the two economic superpowers appeared to have failed, with Trump warning just hours before the tariffs came into effect that Washington was ready to impose duties on hundreds of billions of dollars more in Chinese imports.

Trump has for years slammed what he describes as Beijing’s underhand economic treatment of Washington, with the US trade deficit in goods with China ballooning to a record $375.2 billion last year.

US officials accuse China of building its emerging industrial dominance by stealing the “crown jewels” of American technological know-how through cyber-theft, forced transfers of intellectual property and state-sponsored corporate acquisitions.

And despite dire warnings about the impact on the US, Trump believes the robust American economy can outlast its rivals in the current battle.

But China also believes that its economy, with a greater focus on domestic demand and a reduced dependence on exports, can ride out the storm.
A member of China’s central bank monetary policy committee, Ma Jun, said Friday that the first punches will have a “limited impact” on the Chinese economy.

“The $50-billion trade war will slow down China’s GDP growth by 0.2 percentage points,” Ma told Xinhua, China’s official news agency.

With only $130 billion in US imports to retaliate against, Beijing has said it will take “qualitative” and “quantitative” measures against the US, triggering fears it could cripple the operations of US multinationals in China.

“A trade war is the last thing we want to see, because we said many times that no one will benefit from a trade war,” said Chinese foreign ministry spokesman Lu Kang.
Chinese stocks actually rose after the announcement, with the benchmark Shanghai Composite Index up nearly one percent and the Shenzhen index climbing more than one percent.

Stocks fell back slightly from that point, with Shanghai closing up half a percentage point.

Li Daxiao, analyst at Yingda Securities, said news of the tariffs was already priced into the market, “therefore investors are not in as much of a panic as before.”

On the streets of Beijing, there were some concerns that prices would rise due to the tariffs but also a determination to support the Beijing authorities in the trade war.
“I will try my best to support domestic products. I think products made in China are the best,” said one shopper in a Beijing grocery story, who gave his name as Yang.

Beijing has accused the US of “firing on the whole world” with the measures, pointing out that most of the Chinese exports under attack are largely made by companies with foreign investment — including from America.

Under the banner of his “America First” policy, Trump has also targeted other traditional trade partners of the US, such as the EU, Japan, Mexico and even Canada.

And signs are growing that the escalating global trade dispute is already affecting the world’s top economy, with punitive duties now in place for steel and aluminum and the White House threatening to levy duties on auto imports.

As the tariffs approached, the US central bank warned the impending trade battle was beginning to darken the otherwise blue skies of the robust American economy, now in its 10th year of recovery.

Businesses around the US told the central bank that spending plans had been scaled back or postponed and they also warned of further adverse effects from the trade conflict, according to a Federal Reserve survey.

The start of the trade war also likely confirms the widening rupture between Trump and his own Republican Party, a traditional champion of free trade and big business.


HP rejects Xerox takeover bid, says open to acquiring Xerox instead

Updated 18 November 2019

HP rejects Xerox takeover bid, says open to acquiring Xerox instead

  • In rejecting Xerox's $33.5 billion cash-and-stock acquisition offer, HP said the offer “significantly” undervalued the personal computer maker
  • Xerox made the offer for HP on Nov. 5 after resolving its dispute with its joint venture partner Fujifilm Holdings Corp.
NEW YORK: HP Inc. said on Sunday it was open to exploring a bid for US printer maker Xerox Corp. after rebuffing a $33.5 billion cash-and-stock acquisition offer from the latter as “significantly” undervaluing the personal computer maker.
Xerox made the offer for HP, a company more than three times its size, on Nov. 5, after it resolved a dispute with its joint venture partner Fujifilm Holdings Corp. that represented billions of dollars in potential liabilities.
Responding to Xerox’s offer on Sunday, HP said in a statement that it would saddle the combined company with “outsized debt” and was not in the best interest of its shareholders.
However, HP left the door open for a deal that would involve it becoming the acquirer of Xerox, stating that it recognized the potential benefits of consolidation.
“With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction,” HP said in its statement.
The move puts pressure on Xerox to open its books to HP. Xerox did not immediately respond on Sunday to a request for comment on whether it will engage with HP in negotiations as the potential acquisition target, rather than the acquirer.
HP on Sunday published Xerox CEO John Visentin’s Nov. 5 offer letter to HP, in which he stated that his company was “prepared to devote all necessary resources to finalize our due diligence on an accelerated basis.”
Activist investor Carl Icahn, who took over Xerox’s board last year together with fellow billionaire businessman Darwin Deason, said in an interview with the Wall Street Journal last week that he was not set on a particular structure for a deal with HP, as long as a combination is achieved. Icahn has also amassed a 4% stake in HP.
Xerox had offered HP shareholders $22 per share that included $17 in cash and 0.137 Xerox shares for each HP share, according to the Nov. 5 letter. The offer would have resulted in HP shareholders owning about 48% of the combined company. HP shares ended trading on Friday at $20.18.
Many analysts have said there is merit in the companies combining to better cope with a stagnating printing market, but some cited challenges to integration, given their different offerings and pricing models.
Xerox scrapped its $6.1 billion deal to merge with Fujifilm last year under pressure from Icahn and Deason.
Xerox announced earlier this month it would sell its 25% stake in the joint venture for $2.3 billion. Fujifilm also agreed to drop a lawsuit against Xerox, which it was pursuing following their failed merger.

Test for new HP CEO
In 2011 as the centerpiece of its unsuccessful pivot to software. Little over a year later, it wrote off $8.8 billion, $5 billion of which it put down to accounting improprieties, misrepresentation and disclosure failures.
More recently, HP has been struggling with its printer business segment recently, with the division’s third-quarter revenue dropping 5% on-year. It has announced a cost-saving program worth more than $1 billion that could result in its shedding about 16% of its workforce, or about 9,000 employees, over the next few years.
Xerox’s stock has rallied under Visentin, who took over last year as CEO. However, HP said on Sunday that a decline in Xerox’s revenue since June 2018 from $10.2 billion to $9.2 “raises significant questions” regarding the trajectory of Xerox’s business and future prospects.