Wednesday, August 21, 2019

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Lost in Trump’s China Week Was a Postcard to Europe: You’re Next

    Decision to be made within months on possible auto tariffs
    Revisiting grievances before next weekend’s G-7 summit
Donald Trump speaks during a rally in Manchester, New Hampshire, U.S., Aug. 15. 
Donald Trump speaks during a rally in Manchester, New Hampshire, U.S., Aug. 15.  Photographer: Elizabeth Frantz/Bloomberg

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President Donald Trump drew so much attention this past week on matters ranging from wanting to buy Greenland to a supporter’s weight problems, that it was easy to miss some of his more stinging remarks on trade.
While much of the focus was on his plans to divide up implementation of the next round of 10% tariffs on Chinese imports between Sept. 1 and Dec. 15, and on the stock market plunge that followed, comments he made at a rally in New England signaled no backing down from his views about imbalances elsewhere.
“The European Union is worse than China, just smaller. It treats us horribly: barriers, tariffs, taxes,” he told a crowd Thursday in Manchester, New Hampshire, a city originally modeled after its industrial namesake in England. “They treat us really badly."
It’s hardly the first time he’s gone there with the EU. But Eurostat numberson Friday didn’t help the continent’s case with Trump, who sees a ledger with more exports than imports as winning. The EU’s trade surplus with the U.S. stood at almost 75 billion euros ($83 billion) in the first half of 2019, up more than 11% from a year earlier. Germany’s surplus is by far the largest in the bloc.
Tariff tensions between the U.S. and China are catching much of the blame for recent turmoil in financial markets because it involves the world’s two largest economies. It’s hard to fathom the additional fallout if Europe gets engulfed next in Trump’s trade wars.

How Much of GDP Faces Trade Risks?

Share of GDP exposed to Brexit, the U.S.-China trade dispute and autos tariffs:

relates to Lost in Trump’s China Week Was a Postcard to Europe: You’re Next
Source: Bloomberg Economics

That Trump isn’t softening up his rhetoric on some of the biggest U.S. allies in Europe is important for a couple of reasons -- both coming up fast, and both fuel for more trade war uncertainty. Among them:
  • U.K. Prime Minister Boris Johnson has said he’s committed to delivering Britain’s exit from the EU on Oct. 31, without an agreement if necessary -- a scenario economists say would harm the economy amid disruptions in, among other things, cross-border commerce.
  • Trump is also in middle of a six-month delay in deciding whether to impose tariffs on auto imports, which would mean that decision could come in mid-November. Doing so would almost certainly spark retaliation from Brussels and likely push Germany’s near-stalled economy closer to a recession.
All this makes for an interesting gathering at the Group of Seven leaders’ summit next weekend. The venue: the seaside town of Biarritz, France. The G-7 summit in Canada last year ended amid trade fights, with White House trade adviser Peter Navarro famously concluding that there’s a “special place in hell” for Canadian Prime Minister Justin Trudeau -- comments Navarro later apologized for.
Before the Biarritz gathering, though, the U.S. Trade Representative’s office is holding a hearing Monday on France’s contentious digital tax, which targets 3% of large tech companies’ revenue from digital activities. The tax, which applies retroactively to Jan. 1, targets companies like Facebook Inc., and Alphabet Inc.’s Google, likely hitting about 30 companies overall.
Trump, while often at odds with Big Tech, disapproves of France’s move. “If anyone taxes them, it should be their home country,” he tweeted in July.
The first payment is due in November.

    China Confirms U.K. Consulate Staffer in Hong Kong Detained


    China Confirms U.K. Consulate Staffer in Hong Kong Detained

     Updated on 

      Case adds to security fears for people traveling to mainland
      Beijing warns London against interfering in former colony

    China Confirms U.K. Consulate Staffer Detained in Hong Kong

    China Confirms U.K. Consulate Staffer Detained in Hong Kong

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    China confirmed it has detained a U.K. consulate worker from Hong Kong, underscoring security fears of people traveling between the Asian financial hub and the mainland as Beijing struggles to contain weeks of unrest.
    China’s foreign ministry said Wednesday that the consulate worker, Simon Cheng, 28, was being held under in administrative detention in the adjacent city of Shenzhen on allegations of violating local laws. While the U.K. has expressed concern over Cheng’s detention and offered him consular support, Chinese Foreign Ministry spokesman Geng Shuang described the case as a domestic matter and warned London against meddling in its former colony.
    The case adds a new layer of diplomatic tension to Hong Kong’s political crisis, which has seen China sparring with the U.S. and the U.K. over their defense of the pro-democracy protests rocking the city for more than two months. Activists seized on Cheng’s detention as an example of the kind of opaque justice people were afraid of when hundreds of thousands of people began protesting now-suspended legislation that would’ve allowed extraditions to mainland China.

    Exacerbating Fears

    “The timing of this is very unfortunate because in some ways it plays up, fairly or not, a lot of the fears people have about the mainland justice system,” said Kevin Yam, a political commentator and member of Hong Kong’s pro-democracy Progressive Lawyers Group. “Beyond that, I think it’s hard to comment at this stage, because we don’t know what the details are.”
    Cheng was revealed to be missing Tuesday after failing to return from an Aug. 8 meeting in Shenzhen and hasn’t contacted his family since. The case was quickly subsumed into the broader protest movement, which in recent weeks has seized on specific incidents -- from injured demonstrators to aggressive police tactics -- to frame new rallies.
    On Wednesday evening, a small group of protesters staged a “Save Simon Cheng” rally outside the U.K. Consulate General in central Hong Kong. His case fuels concerns about the safety of diplomatic staff in China after Michael Kovrig, a Hong Kong-based security analyst on leave from Canada’s foreign service, was detained in December and later accused of espionage.

    Stern Warning

    Cheng is being held under China’s Public Security Administration Punishment Law, a broad statute that lets police jail individuals without trial for up to 15 days for a wide range of relatively minor violations, including disrupting public order. The process doesn’t trigger an agreement requiring mainland authorities to notify when Hong Kong residents are detained, the city’s police force said.
    His family posted a statement on Facebook after China’s announcement, criticizing authorities for failing to provide information about his circumstances or where he was being held. 
    The Chinese government “said only that he broke a public security law, but this law covers over 100 crimes,” the family said in the statement. “Saying this is equivalent to not saying anything. We don’t understand why they told the media, and did not tell family members anything.”
    The U.K.’s foreign office said Tuesday it was “extremely concerned” and was seeking information from authorities in Hong Kong and the southern Chinese province of Guangdong. U.K. Foreign Secretary Dominic Raab spoke with Hong Kong Chief Executive Carrie Lam on Aug. 9 to discuss “concerns about the situation in the city and the protests there,” the foreign office said in a statement at the time that made no mention of Cheng.


    The U.K. returned Hong Kong to Chinese rule in 1997 on the promise that Beijing would maintain the city’s independent courts, democratic institutions and capitalist financial system. Tensions between the two sides have simmered in recent weeks, after Beijing accused London of meddling by defending the rights of anti-government protesters.
    China has stepped up border controls near Hong Kong as authorities seek to prevent the financial hub’s unrest from spreading. Travelers into China are being asked to unlock their smartphones so Chinese agents can examine their chats and social media, Bloomberg News reported last week, citing a person familiar the procedure.
    “I’m not going to Shenzhen anymore,” said Desmond Chan, a 22-year-old student at Hong Kong Baptist University who attended the rally outside the British consulate. “They can check our phones, invade our privacy and then detain us. We have no say. It’s horrifying.”


    While Cheng is employed by the U.K. consulate and works for Scottish Development International, which encourages firms to do business with Scotland, he appeared to lack the legal protections of a full-fledged diplomat. He holds a British national overseas passport, which China recognizes as a travel document but not as proof of citizenship.
    Chinese officials invoked a similar loophole in 2016 when the U.K. government questioned the 2016 disappearance of Lee Bo, a seller of books critical of the Communist Party who later turned up in the possession of mainland police. Lee, who also held a British national overseas passport, became the poster child for people worried about the erosion of Hong Kong’s autonomy.
    Geng, the foreign ministry spokesman, told reporters that Cheng’s case was “entirely China’s internal affair,” before adding a fresh warning to the U.K.
    “Recently, the British side has made a lot of erroneous remarks on Hong Kong,” Geng said. “China has made clear our position and made stern representation to the U.K side. We urge the British side to stop inciting more trouble and waving fingers and making accusations.”
    — With assistance by Iain Marlow, Lucille Liu, Sheryl Tian Tong Lee, Dandan Li, Peter Martin, Karen Leigh, and Natalie Lung
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      China Seeks to Shape Hong Kong Narrative With Letter to Media


      China Seeks to Shape Hong Kong Narrative With Letter to Media

        Foreign Ministry sends 43-page letter to foreign media outlets
        Describes ‘violent activities’ in city amid ongoing unrest
      Demonstrators march during a protest in Hong Kong, on Aug. 18.
      Demonstrators march during a protest in Hong Kong, on Aug. 18. Photographer: Justin Chin/Bloomberg
      China is looking to reshape the global narrative over Hong Kong as months of street protests dominate news agendas around the world.
      In a letter sent to senior editors at international media outlets including the Wall Street Journal, Reuters, and Agence France-Presse, the Chinese Foreign Ministry outlined its account of the protests in the former British colony.

      You’re Next