With each passing day, China is pushed out of the global economy

Via Bloomie:

The U.S. is willing to suspend the next round of tariffs on an additional $300 billion of Chinese imports while Beijing and Washington prepare to resume trade negotiations, people familiar with the plans said.

…The U.S. won’t accept any further conditions on tariffs as part of reopening negotiations and no detailed trade deal is expected from the leaders’ summit, a senior administration official said Tuesday.

Although each side still wants to secure significant concessions from the other, both agreed to dial down the tit-for-tat responses and aim for a truce that could soothe financial markets while their sides resume negotiations, people familiar with the situation said.

The U.S. is prepared to delay the new tariffs for the moment because Beijing wouldn’t have agreed to the meeting otherwise, people familiar with the matter said.

Not exactly fireworks. And what deal is there to do? We already did it and it was rejected. That the AUD didn’t budge tells us about all we need to know about this.

Bloomie also has some very predictable trade war outcomes:

…Monthly trade data are volatile. But in numbers like China’s May import data, WTO chief economist Robert Koopman sees evidence of the Trump trade wars rippling through supply chains and dragging on the world economy.

…Production is shifting to other countries rather than coming home. Bloomberg’s new analysis found that in the first quarter of 2019, Taiwan saw sales to the U.S. of products hit by Trump’s China tariffs rise about 30% from a year earlier, while South Korea’s jumped 17%. Vietnam saw sales of China-tariffed products to the U.S. increase 27%.

“Globalization going into reverse would mean a lot of the production coming back to the domestic market,’’ Koopman says. “That’s not what we are seeing.’’

Yes we are. There are lots of stories about firms repatriating US production. But the dominant impact was always going to be a shift away from China into other cheap labour jurisdictions like Vietnam. Though, it must be said, that’s not very good risk management. I’d be looking to shift production within the US alliance network at a minimum. Trump can always shift his tariffs to Chinese proxies.

Trump has time on his side. With every passing day, China is being pushed out of the global economy.

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