U.S. tariffs aren’t exactly having their intended effect. On Friday, the Wall Street Journal reported that U.S. steel imports grew 7 percent in October month on month, despite the 25 percent tariff President Donald Trump’s administration imposed on the product in the spring. U.S. steel workers are still benefiting from the tariffs; a 5 percent jump in domestic production this year has led to a 3 percent increase in steel manufacturing payrolls. But since U.S. producers still don’t make enough steel to meet domestic demand, steel prices in the United States have surged as well. The benchmark price for hot-rolled coiled sheet steel, for example, has climbed 22 percent in the past year, hurting U.S. industries that rely heavily on the commodity, such as the auto manufacturing industry. The report came a day after the Department of Commerce released new figures showing that the U.S. trade deficit reached its widest point in a decade in October – the fifth consecutive month of deficit growth – at $55.5 billion.
Official figures from Beijing released Saturday, meanwhile, showed that Chinese exports to the U.S. surged by nearly 10 percent in November, hitting $35.6 billion, while imports from the U.S. dropped by around a quarter. Bloomberg reported Thursday that Chinese solar panel exports also rose 66 percent in the third quarter year on year in spite of the 30 percent U.S. tariff implemented in January, thanks primarily to cuts to utility subsidies in China. The widening bilateral deficit between the U.S. and China is the result partly of robust consumer demand in the U.S. and front-loaded orders ahead of anticipated tariff increases, and partly of a 25 percent decline in U.S. exports to China, including an $800 million drop in soybean shipments. Bottom line: The fallout from a trade war is hard to predict because countless forces – from currency fluctuations to regulatory changes to macroeconomic trends – will have their say.
The U.S.-China tech war is going to get ugly. The arrest last week in Canada of Sabrina Meng Wanzhou, chief financial officer of Chinese tech giant Huawei, on a U.S. extradition request is rattling nerves in both countries. Meng is accused of helping her firm, the world’s largest supplier of telecommunications equipment, violate U.S. sanctions on Iran. But the legal merits of the U.S. case are largely beside the point. The U.S. is starting to take dead aim at China’s tech ambitions, and as U.S. national security adviser John Bolton hinted in an interview Thursday, the arrest was meant to signal that Washington won’t fight with kid gloves. As a result, according to South China Morning Post, Chinese corporate executives fear that they, too, could get locked up. U.S. executives with operations in China, in turn, are worried about retaliation – and for good reason. It’s not hard to imagine Chinese authorities targeting, say, an executive with a U.S. arms manufacturer for helping export arms to Taiwan in violation of Chinese law. For now, China appears to be trying to defuse the situation rather than strike back. Its Foreign Ministry tried Friday to reassure foreign businesses that Beijing would not resort to Washington’s tactics, and the Chinese government also said the issue would not complicate its fragile trade truce with the U.S. (On Saturday, however, China did warn Canada of unspecified consequences if Meng isn’t released.) Beijing’s response speaks to the tricky balancing act it must undertake to manage domestic nationalist sentiment and counter U.S. pressure on the one hand while, on the other, wooing wary foreign investors and keeping the slim possibility of a lasting deal to end a trade war open.
Either way, darker days are ahead for China’s tech sector. Japan – following the lead of Australia, New Zealand and the U.K. – is reportedly mulling a ban on government purchases of products made by Huawei and ZTE Corp., another Chinese telecom firm that ran afoul of U.S. sanctions on Iran.
Israel takes matters into its own hands. Since Tuesday, the Israeli Defense Force has been working to destroy cross-border tunnels allegedly dug by Hezbollah – with backing from Iran – in preparation for a potential new war on the Lebanese militant group. Israel called on the Lebanese military and U.N. peacekeepers in the region on Thursday to destroy one such tunnel, whose existence the U.N. force confirmed, saying it held “the Lebanese government, the Lebanese Armed Forces and United Nations Interim Force in Lebanon responsible for all events transpiring in and emanating from Lebanon.” Israel’s intelligence minister said Friday that the IDF may expand its tunnel-smashing operation into Lebanon if others don’t act on its behalf. And on Saturday, Israeli Prime Minister Benjamin Netanyahu tried to win support for the effort from Russian President Vladimir Putin during a phone call. Israel is in a position where it must act pre-emptively to eliminate potential threats. Clearly, it is already laying out a casus belli against Hezbollah.
- Germany’s Christian Democratic Union elected Chancellor Angela Merkel’s protege, Annegret Kramp-Karrenbauer, to replace her as head of the German ruling party.
- Japan’s parliament passed a contentious bill paving the way for tens of thousands of foreign workers to come to the country, and its new defense plan calls for a record $240 billion in new military spending over the next five years.
- The Philippines says it will buy 16 Black Hawk helicopters from the U.S., abandoning earlier plans to buy cheaper helicopters from Russia because of U.S. sanctions on Russian military exports.
- The chief negotiator for the Iran-backed Houthi rebels in Yemen called for the country’s main port city, Hodeida, to become a neutral zone overseen by the U.N.