War is Beautiful

US Designates China as Currency ManipulatorBy Reuters
U.S. Treasury Secretary Steve Mnuchin answers reporters after the G-7 Finance, July 18, 2019 in Chantilly, north of Paris, France.

WASHINGTON - The U.S. government has determined that China is manipulating its currency, and will engage with the International Monetary Fund to eliminate unfair competition from Beijing, U.S. Treasury Secretary Steven Mnuchin said in a statement on Monday.
China let the yuan weaken past the key 7-per-dollar level on Monday for the first time in more than a decade and later said it would stop buying U.S. agricultural products, inflaming a worsening trade war with the United States.
The sharp 1.4% drop in the yuan comes days after U.S. President Donald Trump stunned financial markets by vowing to impose 10% tariffs on the remaining $300 billion of Chinese imports from Sept. 1, abruptly breaking a brief ceasefire.

The last time the United States named China a currency manipulator was in 1994. 

The U.S. Treasury had designated Taiwan and South Korea as currency manipulators in 1988, the year that Congress enacted the currency review law. 

China was the last country to get the designation, in 1994.
The dollar fell to a two-week low against the euro after the Treasury statement.

President Donald Trump ‘perfectly happy’ to impose more tariffs on Chinese goods if talks fail to progress, Steven Mnuchin says

US Treasury Secretary puts ball back in Beijing’s court, saying Washington prepared to ‘move forward’ as long as China accepts its terms
Karen Yeung

US Treasury Secretary Steven Mnuchin with People‘s Bank of China governor Yi Gang. 

US President Donald Trump has no qualms about introducing more tariffs on Chinese imports if no progress is made on the stalled negotiations when he meets Chinese dictator Xi Jinping later this month, US Treasury Secretary Steven Mnuchin said on Sunday.
Speaking to CNBC at the end of the G20 Finance Ministers and Central Bank Governors Meeting in Fukuoka, Japan, the official suggested the ball was now firmly back in Beijing’s court.
“If China wants to move forward with the deal, we’re prepared to move forward on the terms we’ve done,” he said.
“If China does not want to move forward, then President Trump is perfectly happy to move forward with tariffs to rebalance the relationship.”
Mnuchin said earlier on Twitter that he had had a “candid” discussion about trade with China’s central bank governor Yi Gang on the sidelines of the finance summit. 

That was the first face-to-face meeting of senior officials from the US and China since trade negotiations faltered last month.
“Had constructive meeting with PBOC [People’s Bank of China] Governor Yi Gang, during which we had a candid discussion on trade issues,” he said in a tweet alongside a photograph of the two men shaking hands.

The PBOC later published a short notice on its website saying the two officials exchanged views on global financial conditions, G20 affairs and topics of mutual concern.
Mnuchin said on Saturday that his meeting with Yi would cover only routine trade issues unrelated to the stalled negotiations.

The “next important meeting” on that matter would not happen until President Trump and Xi met at the G20 leaders summit in Osaka on June 28-29, he said.
Also on Saturday, the Treasury Secretary, who together with US trade representative Robert Lighthizer has led the US side in its trade war negotiations with China, said an agreement to resolve the dispute was 90 per cent complete and that the “US is prepared to negotiate to reach a historic deal”.
If China wanted to resume the negotiations from where the two sides had left off in early May, the US was ready to engage, he said on Saturday.
In the CNBC interview, Mnuchin said he had discussed with Yi the Trump-Xi meeting, but would not be drawn on any potential outcome of the Osaka summit.
“President Trump is going to need to make sure he’s clear that we’re moving in the right direction to a deal,” Mnuchin said. 

“The president will make a decision after the meeting.
“What I would say is we look forward to them meeting, they had a very productive discussion in Buenos Aires – that’s what led to these rounds of negotiation.”
On the subject of Huawei’s blacklisting, Mnuchin said it was a national security issue.
“Now, of course, President Trump, when he has the meeting, to the extent he gets certain comfort on Huawei or other issues, obviously we can talk about national security issues, but these are separate issues, they’re not being linked to trade,” he said.

Conflict of Interest

Mnuchin’s Hollywood Ties Raise Ethical Questions in China Talks

By Alan Rappeport and Ana Swanson

The Treasury secretary, Steven Mnuchin, and Louise Linton, his wife, at the White House before a state dinner in April honoring President Emmanuel Macron of France.

WASHINGTON — “Wonder Woman,” the 2017 film that Steven Mnuchin helped produce before becoming Treasury secretary, hauled in about $90 million at the box office in China. 

It was the film’s most successful international market and a roaring success for an American superhero export. 

But because of China’s strict laws for foreign films, the studio behind the movie, Warner Bros., received just a small fraction of those revenues.
Now, as Treasury secretary and one of the lead negotiators in trade talks with China, Mnuchin has been personally pushing Beijing to give the American film industry greater access to its markets — a change that could be highly lucrative to his former industry.
While Mnuchin divested from his Hollywood film production company after joining the Trump administration, he maintains ties to the industry through his wife, the actress and filmmaker Louise Linton.
In 2017, Mnuchin sold his interest in the company, StormChaser Partners, to Linton, who at the time was his fiancée.
In his 2018 disclosure, which was obtained from the Treasury Department through a records request by The New York Times, StormChaser is listed as one of Linton’s assets.
Since they are now married, government ethics rules consider the asset to be owned by Mnuchin. And while the documents show that Mnuchin sold his stake to Linton for $1 million to $2 million, he is now owed that same amount, in addition to interest, from StormChaser in 2026, according to the 2018 form.
Mnuchin’s remaining ties to the film industry are raising questions among ethics officials and lawmakers about whether a conflict of interest exists.
At a congressional hearing on Thursday, Mnuchin was questioned by a top Senate Democrat about those continuing financial ties.
The Office of Government Ethics still has not certified his 2018 financial disclosure, which is the first since his marriage to Linton.
Access to China’s film market has not been a primary issue in the trade talks, which have focused largely on Beijing’s treatment of foreign companies, including its requirement that firms hand over valuable technology, its barriers to foreign business and its subsidies to Chinese firms.
But Mnuchin has championed more equitable treatment of American films in China, viewing existing restrictions on foreign entertainment as part of the problematic behavior the Trump administration is trying to correct.
Under the current system, foreign companies must secure Chinese partners to enter China’s market and they are restricted in how much they can earn as part of the arrangements.
China applies a strict quota for the number of Hollywood films it lets into its theaters.
For most box office showings, Chinese companies take in 75 percent of all revenue, leaving the remainder to Hollywood. 
To operate in the tightly managed Chinese entertainment sector, American companies have also had to form a vast network of complicated ties with Chinese state-owned firms.
Since the trade talks began last year, film lobbyists have met with Mnuchin’s top deputies, as well as with officials from the Commerce Department and the office of the United States Trade Representative.
Mnuchin has been especially responsive to lobbying from the film industry, according to people familiar with the discussions, given his background and understanding of the challenges that American moviemakers face in China.
At a congressional hearing last month, Robert Lighthizer, President Trump’s top trade negotiator, said increasing the revenue share earned by American film companies in China was “absolutely” a priority in the talks, and he highlighted Mnuchin’s role.
“Mnuchin has been very much involved,” Lighthizer added.
“He of course knows a great deal about that industry, a lot more than I do.”
On Thursday, Senator Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, raised concerns about Mnuchin’s financial ties to the film industry and asked the Treasury secretary whether he had, in fact, really divested himself of the StormChaser asset listed on his disclosure form.
Mr. Wyden also suggested that the transaction might have been more of a loan to Linton than a true financial separation from StormChaser.
“What we have wondered is if there has been an exchange of an asset for a loan rather than a divestment,” Mr. Wyden said.
Mnuchin declined to discuss details of the transaction, but said that his financial disclosures were certified by career ethics officials in the Treasury Department.
“I am advised by people at Treasury that I am fully in compliance and I have no ethical issues,” Mnuchin said.
When asked by reporters after the hearing why his StormChaser ties did not represent a conflict of interest, Mnuchin said that he would not discuss any specific assets.
Treasury noted separately that Mnuchin’s disclosure was certified internally on June 27, 2018, and that the department was working with the Office of Government Ethics to obtain its certification.

Gal Gadot in a scene from “Wonder Woman,” which Mnuchin helped produce.

Mnuchin and Linton, who married in 2017, brought Hollywood glitz to Washington, but their continuing links to the film industry have also brought complications.
After working for 17 years at Goldman Sachs, Mnuchin in the last decade became a big name in Hollywood as a film investor.
His companies, Dune Entertainment and later RatPac-Dune, helped produce and finance dozens of films that were box office smashes in China, including “Avatar,” “Gravity,” “Dunkirk,” “Wonder Woman” and “Ready Player One.”
Mnuchin was also a co-chairman of Relativity Media, a fledgling Hollywood studio that had a joint venture in China.
During his confirmation hearing in 2017, Mnuchin said that Relativity’s joint venture in China was “not particularly successful.”
He said that he was not aware of direct Chinese investment in the business but that, in the future, Chinese investments in Hollywood may need to be reviewed by the Committee on Foreign Investment in the United States, which the Treasury secretary oversees.
Mnuchin agreed to divest from dozens of investments in early 2017, after he was nominated by Mr. Trump.
Later that year, he sent a letter of apology to the Office of Government Ethics after appearing to promote one of his movies when he said at an event, “Send all your kids to ‘Lego Batman.’”
This month, the Center for Public Integrity reported that Mnuchin’s most recent financial disclosure, which Treasury approved last June, has yet to be certified by the ethics office.
That has raised questions about the reason for the delay.
Ethics experts have pointed to Mnuchin’s continuing ties to StormChaser Partners as a potential reason for the holdup.
“It certainly creates a significant appearance issue,” said Virginia Canter, a former senior ethics counsel at the Treasury Department.
“Not just because he previously was in the entertainment business, and may in fact go back into it at some point when he leaves Treasury, but because his spouse appears to have holdings in these films and is part of the film industry and may benefit if favorable terms are negotiated with China.”
According to a report in The Hollywood Reporter this year, Linton spends much of her time in Los Angeles, where she has been writing, directing and producing a comedy called “Me, You, Madness.”
She has also been busy reshooting “Serial Daters Anonymous,” a 2014 satire that was never released in which she had a starring role.
She told the magazine that financing for her films comes from “a variety of investors.”
While Mnuchin’s role in pressing for the film industry has raised some concerns, there is broad support in the United States to push for changes to China’s film regulations.
The film industry supports more than two million American jobs, according to industry data, and Hollywood has been a powerful force for exporting American culture around the world.
“Even if concessions are made in trade negotiations there’s a long way to go, because the business environment continues to keep Hollywood from operating on an equal plane,” said Aynne Kokas, an assistant professor of media studies at the University of Virginia and the author of “Hollywood Made in China.”
Still, the China market has been lucrative for Hollywood, offering a rapidly growing box office and a ready source of financing, at a time when the American industry faces pressure from streaming services like Netflix and Amazon Prime and a saturated film market in the United States.
Hollywood has found the lure of the China market irresistible, even though operating in China means enduring censorship and unfair treatment as well as working with state-owned companies.
Hollywood has long been a victim of rampant piracy in China, including from bootleg DVDs distributed in back alley stores and online streaming services.
But China has done a better job of policing these forms of piracy in recent years as its own industry has developed, said Stanley Rosen, a professor at the University of Southern California.
“As their films are being pirated, they are now beginning to enforce copyright protections of their own films,” Mr. Rosen said.
Despite better intellectual property protection, the playing field for foreign companies is far from even.
China still limits the number of Hollywood films that can appear in its movie theaters, the dates those films can appear and the distributors they can use to reach the theaters. 
And Chinese censors only welcome films that show their country in a positive light — censorship that has led American studios to make editorial choices like depicting North Koreans as villains rather than the Chinese, or smashing the Taj Mahal rather than the Great Wall of China.
Even for box office hits, Hollywood studios receive a quarter of ticket proceeds, with the rest going to Chinese partners. 
Increasing that to the global average, which is around 40 percent, is one of the industry’s biggest requests.
Last month, Mr. Lighthizer said that this was a “key issue” that “had not been resolved” in negotiations.
Mr. Lighthizer also described restrictions on distribution as complicated, saying: “There should be some changes there, too, but what we haven’t done is challenge control. It’s not something we want to bring into this, the idea of challenging control in China.”
In another congressional hearing this week, Mr. Lighthizer reiterated that the United States was renegotiating the amount of Chinese box office revenue shared with American firms, saying it was a “very unfair situation.”
Like many other American industries, Hollywood has grown frustrated with China’s pattern of promising to open its film market, only to fail to do so. 
As early as 2001, the World Trade Organization urged China to open up its film market.
An agreement between the two countries governing China’s rules for Hollywood films expired in February 2017, and it has not been renegotiated.
Some lawmakers hope that Mnuchin and Mr. Lighthizer will be able to finally change that.
“This is our opportunity to even the playing field here to some extent,” Representative Judy Chu, Democrat of California and a member of the Ways and Means Committee, said in an interview. “The U.S. film industry clearly has been at a disadvantage.”

Nation of Thieves

U. S. charges Chinese hackers in theft of vast trove of confidential data in 12 countries

By Ellen Nakashima and David J. Lynch

Prosecutors unsealed an indictment charging two Chinese with computer hacking attacks on a wide range of U.S. government agencies and corporations. 

The United States and four of its closest allies on Thursday blamed China for a 12-year campaign of cyberattacks that vacuumed up technology and trade secrets from corporate computers in 12 countries, affecting almost every major global industry.
The coordinated announcements in five capitals marked the Trump administration’s broadest anti-China initiative to date, yet it fell short of even stronger measures that officials had planned.
During debate, Treasury Secretary Steven Mnuchin blocked a proposal to impose financial sanctions on those implicated in the hacking, according to five sources familiar with the matter. 

Two administration officials said Mnuchin acted out of fear that sanctions would interfere with U.S.-China trade talks.
The centerpiece of Thursday’s synchronized accusations came in Washington, where the Justice Department unveiled indictments against two Chinese hackers, who it said acted “in association with” the Chinese Ministry of State Security (MSS).
Zhu Hua and Zhang Shilong, members of a hacking squad known as “Advanced Persistent Threat 10” or “Stone Panda,” were accused of conspiracy to commit computer intrusions, wire fraud and aggravated identity theft while pilfering “hundreds of gigabytes” of confidential business data, the indictment said.
“China’s goal, simply put, is to replace the U.S. as the world’s leading superpower, and they’re using illegal methods to get there,” said FBI Director Christopher A. Wray.
U.S. allies echoed the Justice Department action, signaling a growing consensus that Beijing is flouting international norms in its bid to become the world’s predominant economic and technological power.

Xi Jinping's empty promises

In the capitals of the United Kingdom, Australia, Canada and New Zealand, ministers knocked China for violating a 2015 pledge — offered by Chinese dictator Xi Jinping in the White House’s Rose Garden and repeated at international gatherings such as the Group of 20 summit — to refrain from hacking for commercial gain.
“This campaign is one of the most significant and widespread cyber intrusions against the U.K. and allies uncovered to date, targeting trade secrets and economies around the world,” British Foreign Secretary Jeremy Hunt said in a statement.
Still, some administration allies were skeptical that Thursday’s announcement would alter China’s behavior.

Deputy Attorney General Rod J. Rosenstein announces on Thursday the indictments of two Chinese for hacking attacks. 

“Just as when the Obama administration did it, indicting a handful of Chinese agents out of the tens of thousands involved in economic espionage is necessary but not important,” said Derek Scissors, a China analyst at the American Enterprise Institute. 

“International denouncements may irritate Xi, but they place no real pressure on him.”
Scissors said it would be more effective for the United States to hit high-profile Chinese companies with financial sanctions, including potential bans on their ability to do business with American companies.
The five governments that joined in the statements about China are partners in the “Five Eyes” intelligence alliance, sharing some of their most closely guarded technical and human reporting.
The foreign ministries of Denmark, Sweden and Finland tweeted statements saying they shared the concerns over rampant cyberespionage against corporations.
The united front against Chinese hacking and economic espionage stands in contrast to the “America First” president’s preference for taking a unilateral course to many of his trade goals.
“This demonstrates there’s a strong well of international support the United States can tap... Countries are fed up,” said Ely Ratner, executive vice president of the Center for a New American Security.
The hackers named in the indictment presided over a state-backed campaign of cybertheft that targeted advanced technologies with commercial and military applications. 

They also hacked into companies called “managed service providers,” which act as gatekeepers to computer networks serving scores of corporate clients.
The Chinese targeted companies in the finance, telecommunications, consumer electronics and medical industries, along with U.S. government laboratories operated by the National Aeronautics and Space Administration and the military.
Along with the United States and the United Kingdom, countries targeted by China include Canada, France, Germany, Japan, Sweden and Switzerland.
“The list of victim companies reads like a who’s who of the global economy,” said Wray.
The Stone Panda team made off with personal information, including Social Security numbers belonging to more than 100,000 U.S. Navy personnel.
The hackers employed a technique known as “spear-phishing,” tricking computer users at the business and government offices into opening malware-infected emails giving them access to log-in and password details.
They worked out of an office in Tianjin, China, and engaged in hacking operations during working hours in China.
Geoffrey Berman, the U.S. attorney for the Southern District of New York, called the Chinese ­cyber-campaign “shocking and outrageous.”
Over the past seven years, more than 90 percent of cases alleging economic espionage involved China as did more than two-thirds of trade-secret theft prosecutions, according to Deputy Attorney General Rod J. Rosenstein.
The industries targeted in the Stone Panda hacks are featured in the Chinese government’s Made in China 2025 program, which aims to supplant the United States as the global leader in 10 advanced technologies including artificial intelligence, robotics and quantum computing, Rosenstein added.

In November, in one of his last official actions, then-Attorney General Jeff Sessions announced a major initiative to combat Chinese commercial spying, building on four years of prosecutorial effort. The department vowed to aggressively pursue trade-secret theft cases and identify researchers and defense industry employees who have been “co-opted” by Chinese agents seeking to transfer technology to China.
While the show of anti-China unity was notable, the administration pulled back from plans for tougher action after warnings from the treasury secretary.
Mnuchin’s 11th-hour intervention left administration officials fearing Beijing would view the limited actions as a sign that Trump lacks the stomach for an all-out confrontation.
“We don’t comment on sanctions actions or deliberations, but it’s important to note that these issues are completely separate from trade,” said a Treasury Department spokesman asked to comment on the reports.
The administration’s action entailed statements from four Cabinet agencies — Justice, State, Energy and Homeland Security — while Treasury remained on the sidelines.
The condemnations also pose a complication as Trump and Xi seek to negotiate a trade deal. 

Over dinner in Buenos Aires earlier this month, the two leaders agreed to a truce in their months-long tariff war.
Talks between U.S. and Chinese diplomats are expected to begin early next month.
The Trump administration is seeking a deal that would involve structural changes to China’s state-led economic model, greater Chinese purchases of American farm and industrial products and a halt to what the United States says are coercive joint-venture licensing terms.
The indictments were followed by a joint statement from Secretary of State Mike Pompeo and Homeland Security Secretary Kirstjen Nielsen that assailed China for violating Xi’s landmark 2015 pledge to refrain from hacking U.S. trade secrets and intellectual property to benefit Chinese companies.
“These actions by Chinese actors to target intellectual property and sensitive business information present a very real threat to the economic competitiveness of companies in the United States and around the globe,” they said.
Thursday’s push to confront China over its cyber-aggression comes at a fraught time, as Canada has arrested a Chinese telecommunications executive at the United States’ request on a charge related to violating sanctions against Iran.

Here's How President Trump Can Formally Call China a Currency Manipulator

• U.S. hasn’t designated any country since naming China in 1994
• White House pressure builds for Mnuchin to designate China

By Saleha Mohsin
If President Donald Trump wants to follow through on his repeated threats to label China a currency manipulator, all he has to do is turn back the clock.
The Treasury Department hasn’t accused China of artificially suppressing the value of the yuan because it relies on a 2015 law that sets strict standards for the designation. 

But a 1988 law -- still in effect -- sets a looser standard. Treasury Secretary Steven Mnuchin simply has to use it, said several former department officials.
The U.S. is “looking very strongly at the formula” it uses to decide whether China and other countries are manipulating their currencies, President Trump said in an Aug. 30 interview with Bloomberg News. 

The White House is putting pressure on Mnuchin to publicly shame China and he has gotten increasingly involved in the department’s twice-yearly currency analysis, usually released in October, according to two people familiar with the matter.
Declaring China to be a currency manipulator wouldn’t trigger any sanctions or other U.S. penalties, but it would escalate trade tensions and likely cause a market reaction.
“The U.S. has a lot of issues with China, and this is another way for the administration to say: We’re not happy with the way things are going,” said Phillip Swagel, a Treasury official during the George W. Bush administration. 

“It’s more of a symbolic finding. It could support action down the road.”
President Trump’s latest threat comes as trade wars and the prospect of monetary tightening from the Federal Reserve roil emerging markets, with currencies from Turkey to India slumping to record lows against the dollar. 

China has taken action over the past month to support the yuan, including using the daily fixing to rein in declines and making it more expensive to short the currency.
The yuan has weakened 6.5 percent against the dollar over the past three months, slipping in August to its lowest value since January 2017.

The U.S. Treasury hasn’t branded any country a manipulator since Bill Clinton was in the White House. 

China was named five times from May 1992 to July 1994.
The Omnibus Trade and Competitiveness Act of 1988 gives the Treasury secretary broad discretion to use a wide range of data -- including foreign exchange reserve coverage, capital controls, monetary policy and inflation -- to make a decision. 

The law’s definition is “very elastic,” said Brad Setser, who did international economic analysis at Treasury during the Obama administration.
The Trade Facilitation and Trade Enforcement Act of 2015, however, lays out specific criteria a country must meet to be labeled a currency manipulator. 

It instructs Treasury to use three tests: A minimum $20 billion trade surplus with the United States, a current account surplus in excess of 3 percent of GDP, and repeated interventions in currency markets.
Right now, China meets only one test -- the U.S. trade deficit with China hit $375 billion last year.
But Treasury can change the threshold levels, giving Mnuchin another way to fulfill President Trump’s wish.
The Treasury Department’s most recent currency report, released in April, explicitly noted that a country might be found a currency manipulator under the standards of one law but not the other.

Mnuchin’s Prior Role
Mnuchin played a limited role in the first three reports issued since he took office, changing just a few lines in each, according to two people familiar with the matter. 

President Trump contradicted Treasury’s findings just three days after the latest report, speculating that China and Russia are gaming their currencies. 

Mnuchin has told the White House that it’s not easy to label China a currency manipulator, frustrating officials who see him as more loyal to bureaucracy than to President Trump’s agenda.

China doesn’t disclose its interventions in the foreign-exchange market. 

But Treasury’s own currency reports acknowledge that China hasn’t intervened heavily in the market since early 2017. 

Following China’s surprise one-time devaluation in August 2015, the central bank was actually intervening to prop up the currency -- not drive it down, as President Trump has accused Beijing of doing.

China’s central bank signaled last month it’s taking action to support the yuan, meaning the country is working to shore up the currency.

Trade War

President Trump Advisers Urge Raising Additional China Tariffs to 25%
By Bob Davis and Lingling Wei

A worker checks wind turbine blades at a factory in Lianyungang, China.

As Washington and Beijing struggle to break a trade impasse, administration advisers are urging President Trump to raise the stakes with a sharp increase in the level of tariffs proposed for $200 billion in Chinese imports targeted for punitive measures.
Trump administration advisers are debating measures that might bring Chinese negotiators to the table. 

They are pushing the president to apply tariffs as high as 25% on $200 billion of Chinese imports, up from an original proposal for 10%.
The White House won’t make a final decision until at least late August on those tariffs, which are likely to target consumer goods and food as well as machinery components. 

Advisers are justifying the steeper tariffs, in part, to make up for the rapid depreciation of the yuan in recent months. 

Since May 30, the yuan has fallen 6% against the dollar.
“Once you go down the road of using tariffs to disrupt the Chinese, you have to say 25% compared to 10%,” said Derek Scissors, a China expert at the American Enterprise Institute who advises the administration on trade.
The U.S. has already imposed 25% tariffs on $34 billion worth of Chinese imports and is on schedule to levy similar tariffs on an additional $16 billion of goods, probably this week or next.
The additional $200 billion would be the next step, should the U.S. make good on Mr. Trump’s threat to ratchet up pressure and, if needed, impose tariffs on all $505 billion in goods China ships to the U.S. should negotiations fail to reach a favorable outcome.
The debate over tariff levels comes as Washington has yet to make meaningful progress in settling its market-rattling trade dispute with Beijing. 

Treasury Secretary Steven Mnuchin and Chinese envoy Liu He and their staffs continue to talk about a possible meeting, said officials in both capitals, but the talks remain at a very preliminary stage.
Both sides argue that it is up to the other to make the first move after several preliminary Chinese offers, mainly involving the purchase of more U.S. goods, were rejected by Mr. Trump as inadequate.
The two sides have agreed that their initial offers weren’t a solid base for further negotiations, according to a senior member of the U.S. business community tracking the discussions. 

Those included the Chinese offering mainly to buy U.S. goods, and the U.S. demanding that China essentially scrap the industrial policy that turned it into an economic powerhouse, the senior executive said.
“They are discarding useless ideas and rhetoric,” the executive said. 

“They are figuring out what could be on an agenda and what could be a solution.”
Mr. Mnuchin said at Group of 20 meeting last week in Buenos Aires that he and members of the Chinese delegation engaged in “chitchat.”
Some pro-China hands have been urging a resumption of talks and been working with Washington and Beijing to get the discussions started. 

They include former Treasury Secretary Hank Paulson, who was Mr. Mnuchin’s boss at Goldman Sachs Group Inc., and Blackstone Group LP Chief Executive Stephen Schwarzman, said people familiar with the efforts.
The administration believes it strengthened its hand last week with a tentative trade accord with the European Union. 

The two sides agreed to use the World Trade Organization to deal with intellectual-property theft, government pressure on companies to transfer technology and the operation of state-owned industries—all code words for trade infractions by Beijing.
With the agreement, China is “in a very difficult position,” Lawrence Kudlow, director of the National Economic Council, said Sunday on CBS. 

“China is, I think, being isolated.”
Whatever gains the U.S. might have made with Europe, however, haven’t eased the trade fight with Beijing. 

China presses U.S. companies to hand over valuable technology and uses unfair trade practices to produce an enormous trade surplus with the U.S.
The Trump administration remains deeply divided over how best to deal with the Chinese, and the two main factions are moving in different directions. 

China trade realists, led by U.S. Trade Representative Robert Lighthizer, believe China will make concessions only if it feels the brunt of heavy tariffs.
Trade doves, led by Messrs. Mnuchin and Kudlow, have been looking for a solution short of massive tariffs.

Mr. Mnuchin and Liu have continued to discuss U.S. China relations, but some of those conversations have gone poorly.
In one indication of the strain between the two countries, Qualcomm Inc. last week had to scuttle its agreement to purchase Dutch company NXP Semiconductors NV after China didn’t give the deal the green light. 

Days earlier, Mr. Mnuchin called Liu to lobby for its approval, according to people familiar with the matter. 

Mr. Mnuchin didn’t believe the call had gone well, the people said.
The Chinese decision was a blow to Mr. Trump, who had worked to reduce U.S. penalties on Chinese telecomm giant ZTE Corp., which was accused of violating U.S. sanctions against Iran and North Korea. 

Some U.S. government and industry officials had naively expected the ZTE efforts would prompt China to reciprocate and approve the Qualcomm-NXP deal.
Previous negotiations have led the Chinese to be skeptical Mr. Mnuchin can deliver a trade deal. 

Liu had proposed to buy nearly $70 billion of U.S. farm, energy and other products last month, which Beijing thought went a long way to meet Mr. Trump’s demand to cut the bilateral trade deficit by $200 billion. 

But Mr. Trump rejected that proposal. 

“The two sides just keep talking past each other,” said a person familiar with the discussions.
The scale of the U.S. tariff offensive has Beijing on edge. 

The Chinese leadership is dealing with economic headwinds, including weakening investment and household consumption, as well as rising corporate defaults. 

The trade tensions threaten to put growth further at risk.
Beijing, however, has been preparing for a long fight. 

On Tuesday, Xi Jinping oversaw a high-level meeting that signaled a shift in economic priorities toward supporting growth through means such as debt control. 

The meeting laid out a range of pro-growth measures, such as greater spending on infrastructure and easier credit for banks and businesses.
Chinese officials have also been weighing how far to press the pledged retaliation against the U.S. on trade without hurting other national interests. 

Measures being rolled out so far include holding up licenses for U.S. businesses, delaying approval of mergers and acquisitions involving U.S. companies, and ramping up inspections of American products at China’s borders.
Beijing is also wary of pushing so far as to cause U.S. businesses to leave China—which could be a blow to Beijing’s effort to attract foreign capital and keep its citizens employed at a time of growing economic contraction.

President Trump Is Great Again

President Donald Trump approves tariffs on $50 billion worth of Chinese goods

By Pamela Brown and Julia Horowitz


President Donald Trump has given his approval for the United States to put tariffs on $50 billion of Chinese exports, according to a source with knowledge of the situation.
An official announcement is expected on Friday. 

The president's green light came after a meeting Thursday with top economic officials, including Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and US Trade Representative Robert Lighthizer.
The move represents a serious escalation of trade tensions between the world's two largest economies.
It was first reported by Bloomberg.
Beijing previously said it would respond to American tariffs on $50 billion worth of Chinese exports with retaliatory tariffs on $50 billion of US products such as cars, planes and soybeans.
For months, President Trump has slow-walked threats of tariffs against China as punishment for intellectual property theft.
He first announced that the United States would impose trade penalties on about $50 billion of Chinese goods in March.
"We have a tremendous intellectual property theft problem," President Trump said at the time. "It's going to make us a much stronger, much richer nation."
After China warned it would retaliate, Trump threatened tariffs on a further $100 billion of Chinese products.
In mid-May, both sides announced a ceasefire after two rounds of trade negotiations.
The countries said in a joint statement that China would "significantly increase" purchases of US agricultural and energy products to reduce the trade imbalance, a top Trump administration demand. Mnuchin subsequently declared the trade war "on hold."
Ten days later, the White House abruptly said it would proceed with the tariffs, along with new limits on Chinese investments in the United States.
The Trump administration said it would finalize the list of goods that would be subject to 25% tariffs by June 15, and that the tariffs would go into effect "shortly thereafter." 

An initial list, which including items ranging from artificial teeth to flamethrowers, was released at the beginning of April.
A further round of trade talks in Beijing earlier this month failed to yield any breakthroughs. 

And the Chinese government warned then it wouldn't honor its pledge to increase purchases of US goods if tariffs were imposed.
The Trump administration last week cut a deal with Chinese telecommunications firm ZTE to end a crippling ban that prevented the company from buying American parts. 

ZTE's fate had become entwined in the trade talks. 

But the agreement to save the company has faced resistance from lawmakers in Congress, who argue the ban should stay in place because ZTE poses a security threat.
President Trump's decision to move forward with tariffs on China follows his recent imposition of steep tariffs on steel and aluminum imports from Canada, Mexico and the European Union on national security grounds.

Insane Clown President

Bannon Condemns Mnuchin’s Trade Truce as China Giveaway

By Kevin Cirilli

Former Trump political strategist Steve Bannon condemned a weekend truce in the U.S. trade dispute with China as a capitulation, signaling dissatisfaction among Trump’s allies.
Bannon targeted Treasury Secretary Steven Mnuchin, a former Goldman Sachs Group Inc. banker, for his role in the trade talks. 

Donald Trump “changed the dynamic regarding China but in one weekend Secretary Mnuchin has given it away,” Bannon said in an interview.
The Trump administration said it would hold off on tariff threats after the two nations agreed to “substantially” reduce the U.S. merchandise trade deficit with China, which last year hit a record $375 billion. 

Beijing "promised" to “significantly” increase purchases of U.S. goods and services, but there was no dollar figure attached, despite White House assurances that China would cave to its demand for a $200 billion annual reduction in the trade gap.
Trump on Monday defended the negotiations. 

“China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products -- would be one of the best things to happen to our farmers in many years!” he said in a series of postings on Twitter. 

“On China, Barriers and Tariffs to come down for first time.”
“We’re putting the trade war on hold,” Mnuchin said Sunday after the two sides released a joint statement a day earlier. 

“Right now, we have agreed to put the tariffs on hold while we execute the framework.”
Bannon said the comment from Mnuchin, who took the lead in trade talks with Chinese vice premier Liu He, showed the Treasury secretary “misses the central point” of the economic competition.
“They’re in a trade war with us and it hasn’t stopped,” Bannon said. “Mnuchin has completely misread the geopolitical, military, and historical precedence and what Trump had done was finally put the Chinese on their back heels.”
A Treasury spokeswoman didn’t immediately answer a request for comment.
Bannon suggested Mnuchin’s views on trade were out of sync with Trump’s populist political base. He compared him to Hank Paulson, who espoused a pro-China agenda as Treasury secretary under George W. Bush.
Paulson encouraged Mnuchin to travel to Beijing for a first round to trade negotiations and Mnuchin in turn lobbied Trump to authorize the trip, said a person familiar with the matter.
“You might as well have Hank Paulson doing this,” said Bannon, who is traveling to Italy this week to meet with Matteo Salvini of the Northern League about the populist party’s electoral success.
Other Trump loyalists echoed Bannon. 

Dan DiMicco, a trade adviser for Trump’s campaign and transition, joined in the criticism.
“Chinese r laughing at us again,” he said in a tweet. 

“They have never delivered on 1 promise in the past. Appeasement is the devils friend. Now we get to export our natural resources like an island nation. Soil & Water via agriculture. Energy instead of value added Mfg products!”

Trump Seen Having Support If He Dubs China Yuan Manipulator

Graham, Shaheen cite bipartisan backing for declaration on FX

By Patrick Donahue

President Donald Trump would have the support of Congress if he declared China a currency manipulator, as he pledged during the election campaign, according to two members of the Senate Foreign Relations Committee.
Senator Lindsey Graham of South Carolina, a Republican, said on a panel at the Munich Security Conference on Sunday that the Republican-led Congress has an opportunity to unite around action against China.

Lindsey Graham

“There’s bipartisan support to declare China a currency manipulator,” said Graham, whose stance was backed by Jeanne Shaheen, a Democrat from New Hampshire. 

“I don’t want a war with China; I want a better relationship. But what they’re doing needs to be pushed back against -- and I think currency manipulation will be an issue that may unite the Congress.”
While the U.S. has long accused China of undervaluing its currency to boost exports, Beijing has actually been burning through foreign reserves to support the yuan amid an economic slowdown and capital outflows. 

The yuan gained 0.9 percent against the dollar in January, its steepest advance since March, after sinking 13 percent in the three years through 2016. 

The currency was little changed on Monday at 6.8671 per dollar.
Trump, who pilloried China on the campaign trail for its trade practices, has the power to brand the country a currency manipulator and doesn’t need Congressional support.
In spite of vowing throughout the campaign that he would do that on his first day in office, Trump has yet to act one month into his presidency.
Steven Mnuchin, who was sworn in on Feb. 13 as Treasury secretary and would play a key role in any decision about China’s foreign-exchange policies, said during his Senate confirmation process that he’s willing to label the country a manipulator if warranted.
Trump this month also recommitted the U.S. to the “One China” policy that’s underpinned U.S. relations since the 1970s, backing off a threat made before his inauguration in January to abandon a stance that acknowledges that China and Taiwan are part of the same country.
“I’m not clear yet what the policy is of this administration on China,” Shaheen said. 

“I think a One China policy is very important. I agree that it’s a currency manipulator and I think there’s probably bipartisan agreement in Congress on that.”
The U.S. last singled out China for unduly influencing its currency in 1994, when Democrat Bill Clinton was president. 

Successive U.S. leaders since then -- both Democrat and Republican -- have refrained for taking such a step, in spite of sporadic pressure from lawmakers to do so.

Trump's promises before and after the election

Schumer: If Trump wants to put America first he should label China a 'currency manipulator'
By Elena Holodny and Reuters
U.S. Senator Schumer speaks after the cloture vote on the nomination of Lynch to be Attorney General, in Washington

Senator Chuck Schumer, the top Democrat in the US Senate, urged President Donald Trump on Tuesday to implement one of his campaign promises and declare China a currency manipulator.
"Mr. President: if you really want to put America first, label China a currency manipulator," Schumer told reporters.
Trump's Treasury secretary nominee Steven Mnuchin recently told senators that he would work to combat currency manipulation but would not give a clear answer on whether he currently views China as manipulating its yuan, according to a Senate Finance Committee document seen by Reuters on Monday.
Trump previously said that he would name China a currency manipulator on his first day in office.
Notably, there are three criteria that must be met for a country to be labeled a currency manipulator by the Treasury Department:

1. The country must have a significant bilateral trade surplus with the US.
2. The country has a "material" currency account surplus.
3. The country is engaged in persistent one-sided intervention in the foreign exchange market.

In their semi-annual April report, the Treasury created a "Monitoring List" of major trading partners that "merit attention based on an analysis of the three criteria." 

China was among those added to the list.
Once a country is added to the list, it is kept on there for at least two consecutive reports.
That being said, the Treasury noted that while China met two out of the three criteria in the April report (a large bilateral trade surplus and a current account surplus above 3%), it met only one of the three criteria in the October report (the large bilateral trade surplus.)
The major trading partners included on the list as of the October 2016 report are China, Japan, Korea, Taiwan, Germany, and Switzerland.
The last time the US designated China a currency manipulator was from 1992 to 1994.