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Daily Memo: Trade War Updates, NATO Intrigue, Balkan Diplomacy

All the news worth knowing today.

GPF Staff |July 11, 2018

The United States has fired its biggest shot yet in the trade war with China. The U.S. had been expected to impose new tariffs targeting around $16 billion in Chinese goods this week, and China had been expected to respond in kind. But the U.S. blew up the cycle of gradual tit-for-tat escalation late on Tuesday by announcing 10 percent duties on some $200 billion in Chinese imports. (Beijing has not yet responded, largely because it doesn’t import enough from the U.S. to match that figure. It will likely resort to indirect measures, such as making life miserable for U.S. firms operating in China.) The previous rounds of U.S. tariffs selectively targeted certain products, but this round appears designed to inflict as much pain on the Chinese economy as possible, targeting a wide range of low-end manufactured products, from handbags to refrigerators to TVs, that form the backbone of the Chinese economy. The government also appears unconcerned with how the tariffs will affect U.S. consumers – even Republican lawmakers have criticized the move. Washington thinks that it can muscle China into a more advantageous deal than Beijing had previously been willing to consider. The two sides will have until late August to pull back from the precipice. It might be a good idea to order that cheap new flatscreen before then.

To ease the pressure from the U.S., Chinese leaders are looking far and wide for help from some friends. In Europe, Chinese Premier Li Keqiang portrayed China as a champion of free trade, overseeing the signing of some $23.5 billion in deals with German Chancellor Angela Merkel and meeting Central and Eastern European leaders in Bulgaria. Just hours after Li’s meeting with Merkel, Beijing also allowed Liu Xia, the widow of late Nobel Peace Prize winner Liu Xiaobo, to leave house arrest in China for Europe. It’s a nice gesture, but it will buy only so much goodwill for Beijing: Their criticisms of Trump’s trade policy aside, European states share many of Washington’s concerns about China, and European firms are already rerouting U.S.-bound supply chains to bypass China. Meanwhile, Chinese President Xi Jinping pledged more than $23 billion in loans to Arab states. He also said that China would like “to become the keeper of peace and stability in the Middle East.” Beijing apparently isn’t avoiding the region’s most intractable trouble spots, with aid earmarked for Palestine, Yemen and Syria. Be careful what you wish for.

The NATO summit takes place Wednesday. Will it mark the beginning of a Euro-American break? We’re watching for signs of division in the alliance over how to proceed. Which European countries don’t condemn Trump, who has criticized NATO for years now, will be telling. At the same time, Trump’s attention appears to be shifting to Nord Stream 2, the natural gas pipeline that runs from Russia to Germany. Ahead of the NATO summit, the president called Germany “totally controlled by Russia” because of Berlin’s support for the project.

The Philippine public is starting to lose faith in Philippine President Rodrigo Duterte. According to a prominent Philippine poll, Duterte’s approval rating is at its lowest since he took office. Though it was still at a robust 65 percent, it was conducted before Duterte provoked the highly influential Catholic Church by squaring off against the Almighty himself, calling God “stupid” and pledging to resign if anyone could prove his existence. This isn’t exactly out of character for Duterte; his disdain for political correctness helped bring him to office. But iconoclasm won’t solve his country’s economic problems, nor will it prevent him from having to implement a range of new subsidies on Wednesday to combat rising inflation. Naturally, this only amplifies questions many in the Philippines are asking: Where has all the Chinese aid and investment gone? Wasn’t that the price for backing off the South China Sea dispute?

The never-ending name dispute between Greece and Macedonia took a new twist on Wednesday. Athens expelled two Russian diplomats (and pledged to deny entry to two others), ostensibly for undermining the fragile agreement on renaming Macedonia. According to Greek daily Kathimerini, the Russian diplomats are suspected of fomenting resistance to the deal, which Macedonia ratified on Tuesday, by propagating misinformation and even bribing Greek officials. Moscow vowed to respond in kind. The fact that Russia would care at all shows just how much a seemingly esoteric dispute has become intertwined with wider strategic issues – the low-grade standoff between NATO and Moscow, in particular.

Honorable Mentions

  • Germany is blocking an agreement on the European deposit insurance scheme to protect savers throughout the EU.
  • Deadly protests in Azerbaijan erupted over the arrest of a gunman and several other suspects – who allegedly have ties to a radical Islamist group – accused of attacking the mayor of the town of Ganja.
  • The U.S. appears set to place new tariffs on Spanish olives, and the European Commission is pledging to hit back.
  • The U.S. is claiming that the patrols around Manbij are not, in fact, joint patrols but “independently coordinated.” Turkey is claiming that the People’s Protection Units, or YPG, has not been cleared from Manbij but only the areas where the patrols are taking place.
  • The youth soccer team trapped for weeks in a cave in northern Thailand has been rescued, thanks to a dramatic multinational effort. Allow yourself a smile.