The Impending "China Soybean Party"
BRAmble Daily: 5 news items, 2 comments from me and 1 random musing, book or quote
5 News Items
U.S.-China Trade Talks Hit Snag Over Farm Purchases
China’s Commerce Ministry says trade war should be ended by removing tariffs
China's economy grinds lower as October indicators miss forecasts
Is China gaining an edge in artificial intelligence?
Merkel to Ratchet up Huawei Restrictions in Concession to Hawks
2 Comments
The “on again, off again” nature of the phase one trade deal
Optimism that the U.S. and China are close to a limited trade deal has faded in recent days due to a combination of Trump’s Twitter comments and China’s new-found penchant for publicly stating what they will and will not accept regarding the trade talks. In some sense, we are back again to square one. Trump has said that the U.S. will substantially increase tariffs on China if the first step of a broader agreement isn’t reached by November 15, 2019.
China has also taken specific actions to signal that imports of U.S. farm goods are in jeopardy if talks sour. China restarted purchases of some agricultural products as talks progressed, it is now delaying the unloading of American soybeans at its ports, pending the phase one resolution.
This action on the part of China is serious and obviously premeditated. Currently, about 1.8 million tons of soybeans, mostly for state reserves, are being held up at China’s ports. Local buyers must pay a hefty deposit to customs before they can collect refunds on the 30% tit-for-tat tariffs China adopted earlier in the trade war. These deposits can cost as much as 60 million yuan ($8.5 million) per cargo, and unloading can take as much as 28 days. Remember the Boston Tea Party? Well this could become the China Soybean Party if a phase one deal is not reached in November.
Remember the BRICS? Well apparently they are still on each other’s Christmas card list
Brazil, Russia, India, China, and South Africa. The BRICS label was coined by Goldman Sach’s Jim O’Neill to highlight the rise of new, emerging markets. With just over 40% of the world’s population and 30% of the GDP, it sort of made sense—at least it did back then in 2009. The BRICS were originally seen as the drivers of the transformation of the global economy.
Ten years into the alliance Brazil and South America are weaker, Russia still has Putin (and its same old problems), and India and China are much, much stronger. On the whole, the alliance has had little impact on their ability as a unit to increase GDP, address education, security, workforce population changes, climate issues, and government debt. It remains to be seen if the BRICS can do anything as a bloc to protect their economies from the increasing structural disruption of the global economy, allowing for a more unified response to challenges that arise from the U.S., the E.U. and elsewhere.
“Alliances are difficult precisely because there is no 'boss' in them. They are partnership. And partners are equals, by definition. One cannot give orders to a partner. Hence the secret of a successful alliance is to manage it as a marketing relationship.” - Peter Drucker
Yes, BRICS still meet as they did this week in Brazil. But will they ever act in unison to accomplish something together? Don’t hold your breath. BRICS is a marketing alliance-no more, no less. But after ten years it’s just not clear what they are marketing and to whom?
1 Book
If you only ever read one book on Economics in your lifetime, let it be this one.
The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed. From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” - Hazlitt, Henry. Economics in One Lesson (p. 17). The Crown Publishing Group.
Chapter 11 on Tariffs is only 22 pages long and yet it explains very simply what tariffs are and what they do and don’t accomplish. If your major at university was Economics like myself, and you were actually paying attention in class, you will be nodding your head vigorously as you read. If you are politician or someone else who has never really studied the mechanism of tariffs, you will be surprised, enlightened, and gain valuable wisdom.
Thanks for reading,
James