Trumpnomics: US Companies Make Less Money, People Get More Jobs?


File Photo: T-shirts made in the USA are for sale at the Walmart Supercenter in Bentonville, Arkansas June 5, 2014. REUTERS/Rick Wilking/File Photo

File Photo: T-shirts made in the USA are for sale at the Walmart Supercenter in Bentonville, Arkansas June 5, 2014. REUTERS/Rick Wilking/File Photo

Reuters describes in its report today US business’ worry about Trump’s policy of bringing jobs back from abroad that may give rise to a trade war that hurt US business’ interests abroad, especially in China.

It gives its report on the worry the sensational title of “U.S. companies have new business risk – being labeled ‘anti-American’ by Trump”.

The report begins with the description: “Some U.S. companies are reviewing potential mergers while others are rethinking job cuts or looking at their manufacturing operations in China for fear of being cast as ‘anti-American’ by President-elect Donald Trump, according to Wall Street bankers, company executives and crisis management consultants.”

It seems to me Trump will hurt US rich people’s interests to benefit poor unemployed people. Something similar to what communists in China did before the reform and opening up but failed. Depriving rich people of their wealth only lead to common poverty.

However, I believe US people choose Trump due to his wisdom instead of his stupidity. Trump must certainly be aware that America needs wealth to prosper. The US will certainly be benefited by the lot of money its firms make abroad. The problems is only Trump has to force them to bring home the wealth they have made instead of allowing them to keep their wealth away from the US with some tricks to evade tax, etc.

Comment by Chan Kai Yee on Reuters’ report, full text of which is reblogged below:

U.S. companies have new business risk – being labeled ‘anti-American’ by Trump

By Lauren Hirsch and Mike Stone | NEW YORK/WASHINGTON Tue Jan 10, 2017 | 3:10pm EST

Some U.S. companies are reviewing potential mergers while others are rethinking job cuts or looking at their manufacturing operations in China for fear of being cast as “anti-American” by President-elect Donald Trump, according to Wall Street bankers, company executives and crisis management consultants.

Having seen some of America’s largest companies, including General Motors Co (GM.N), Lockheed Martin Corp (LMT.N) and United Technologies Corp (UTX.N), bluntly and publicly rebuked by Trump on Twitter, many others are worried they may be his next target – especially if they have significant overseas manufacturing, have had U.S. job cuts or price increases for consumers.

“Any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. without retribution or consequence is WRONG!” Trump, who assumes office on Jan. 20, tweeted in December.

Trump campaigned on an “America First” anti-globalization platform that promised the return of thousands of U.S. manufacturing jobs to economically depressed areas.

That nationalist rhetoric and Trump’s willingness to use his Twitter account as a cudgel has so rattled some companies that they are putting on hold mergers and acquisitions that may involve significant job cuts or moving production or tax domicile abroad, out of fear that such deals could be seen as “unpatriotic”, several top Wall Street bankers said.

Bermuda-based White Mountains Insurance Group Ltd (WTM.N) had been in talks to sell itself in a transaction that would have been structured as an inversion – where a U.S.-based buyer would move its tax domicile overseas.

However, the deal fell apart after the November election partly because potential buyers worried that leaving the U.S. tax home would be seen as “anti-American,” three people with knowledge of the matter said. Potential buyers also found the target less attractive because of the likelihood of lower U.S. corporate taxes under the Trump administration, the people said.

Representatives of the $3.8 billion company declined to comment.

At least two other insurance deals have also fallen apart since the election for similar reasons, said the people, who declined to elaborate and asked not to be named because the matter is not public.

Trump’s aggressive anti-China rhetoric has also given some companies pause.

James Park, chief executive of wearable fitness device maker Fitbit Inc FIT.O, said he expects all companies that have significant manufacturing operations in China, including his own firm, to prepare contingency plans.

Trump has threatened to hit China and Mexico with high tariffs and named vocal China critic Peter Navarro to lead a new White House office overseeing U.S. trade policy.

“Whether it’s taking higher costs into account or operationally preparing for moving manufacturing (out of China), companies are thinking about what to do,” Park said in an interview.

WATCHING TRUMP’S TWEETS

Companies are also beefing up their Twitter monitoring for any Trump tweets that could affect them and engaging public relations firms for advice on potential lines of attack and how to respond if they were to come, several U.S. chief executives as well as half a dozen corporate advisers told Reuters.

“Back in December the board was already asking questions: ‘What’s the plan in terms of what happens if he comes after us, are we ready? The board is asking us if we have a PR firm at the ready, if we have a person monitoring his Twitter,” said a top executive at a large U.S. defense contractor.

“Our plan is to not get into a fight, and concede immediately. The reality is that we’re trying to stay below the radar,” the executive said, asking not to be named because of the sensitivity of the issue.

Since his election in November, Trump has ramped up criticism of companies from Ford Motor Co (F.N), Toyota Motor Corp (7203.T) and GM, to United Tech and Rexnord Corp (RXN.N) over manufacturing in Mexico for U.S. consumers or moving U.S. jobs abroad.

Trump also slammed Lockheed Martin and Boeing Co (BA.N) for what he called “out of control” costs on their weapons programs.

Both Lockheed and Boeing have said they will work to drive down costs of the programs, while Ford scrapped plans to build a $1.6 billion plant in Mexico, and United Tech’s Carrier unit is keeping half of the 2,100 U.S. jobs it was to shift to Mexico.

Government relations and public relations advisers say they have received a number of calls from companies wanting help in assessing if they have any red flags that could draw Trump’s ire.

Advisers say these potentially include outsourcing of manufacturing, consumer price increases and lower tax rates than peer companies.

“We have literally had about a dozen clients ask us how they should be thinking about this in the last few weeks,” said George Sard, chairman and CEO of strategic communications firm Sard Verbinnen & Co, adding that he is seeing concern from companies in a wide range of industries.

“The week after the election it was non-stop meetings and conference calls and analysis,” said Kent Jarrell, crisis and litigation communication expert at APCO Worldwide. “It’s almost like a whole new Trump practice is developing.”

Corporate leaders, say the advisers, can no longer focus only on maximizing shareholder value; they must now also weigh national interest.

“CEOs are talking to their boards saying we’ve got to be viewed pro-America. If something is more on the margin – like layoffs, or moving manufacturing, then they are not going to do it,” said one Fortune 500 CEO, who said he had spoken with other U.S. companies.

TAKING A PAGE FROM TRUMP PLAYBOOK

Sard, of Sard Verbinnen & Co, said that while companies are well advised not to get into a Twitter war with Trump, his firm is advising clients to “learn from his playbook” and be prepared to communicate directly with shareholders, employees, and customers through blogs and social media.

There is already evidence that companies are quickly adjusting to the new Trump era. Firms have been more vocal in publicizing job creation and they have sometimes let Trump claim credit.

Fiat Chrysler Automobiles (FCHA.MI) (FCAU.N), the No. 3 automaker in the United States, announced plans on Sunday to create 2,000 U.S. jobs. The timing was partly influenced by CEO Sergio Marchionne’s desire to get the news out ahead of any possible criticism from Trump for the automaker’s overseas manufacturing, a person familiar with the company’s thinking said.

Trump has in the past few weeks attacked FCA’s two Detroit rivals, as well as Japan-based Toyota, for their manufacturing operations in Mexico and threatened to impose stiff border taxes on any imports.

In December, SoftBank Group Corp (9984.T), majority owner of Sprint Corp (S.N), unveiled a $50 billion U.S. investment at the Trump Tower in Manhattan. Trump and SoftBank head Masayoshi Son made the announcement together, and Trump later tweeted: “He would never do this had we (Trump) not won the election!”

“You never want to be against the president – especially not one as vocal as (Trump),” the Fortune 500 CEO said.

Trump on Twitter: tmsnrt.rs/2jf8zG8

(Additional reporting by Olivia Oran in New York, Liana Baker in San Francisco and David Shepardson in Detroit, Editing by Soyoung Kim and Ross Colvin)


China Moves Abroad Labor-intensive Industries through One Belt One Road


Hambantota deep water port

Sri Lanka’s Hambantota deep water port for China’s One Belt, One Road

Hambantota airport for China's One Belt, One Road

Hambantota airport for China’s One Belt, One Road

There will be quite a few advantages for Chinese President Xi Jinping’s Silk Road economic belt and 21-century maritime Silk Road (One Belt, One Road) initiative.

The most important is trade security by establishment of land trade route to Europe through Russia and Central Asia and safer maritime route through Indian Ocean with ports in Bangladesh, Sri Lanka and Pakistan.

The other also very important advantages include:
Finding an outlet for China’s overcapacity in its industries of construction, construction material, energy, transport, etc.;

Exploiting investment opportunities for China’s surplus capital; and

Moving China’s labor-intensive industries through development of infrastructures in the belt to the countries in the Belt where labor and other resources are much cheaper.

Reuters says in its report “Sri Lanka launches China-led investment zone amid protests” that the zone will create 100,000 jobs, which undoubtedly will mostly be jobs in labor-intensive enterprises moved from China.

According to Reuters, China’s port, airport and investment zone make “some countries, including India and the United States, nervous with Sri Lanka’s proximity to shipping lanes through which much of the world’s trade passes en route to China and Japan.

Those are trade passes to China and Japan not US or India, why shall they be nervous?

Anyway, we see from the developments Xi’s wisdom and vision. US president-elect Trump’s threat of a trade war may create difficulties for the export of China’s labor-intensive industrial goods, but Xi has taken a step earlier in building infrastructures abroad for China to move such industries to poor countries for export to the US. Xi has been subduing the US with his wise One Belt One Road strategy before the US starts the trade war.

The best way in military conflict is to subdue the enemy with strategy, the next, with diplomacy, the next, with fighting…                                                                                                                      Sun Tzu

Comment by Chan Kai Yee on Reuters’ report, full text of which can be found at http://www.reuters.com/article/us-sri-lanka-china-investment-idUSKBN14R0JG.


China Prepared for Trade War with US


China plans to spend US$150 billion over a 10-year period on semiconductor design and manufacturing. Photo: Shutterstock

China plans to spend US$150 billion over a 10-year period on semiconductor design and manufacturing. Photo: Shutterstock

In its report “China’s chip policy poses risk to US firms and national security, White House says”, SCMP says that the US worries about China’s industrial policy targeting for leading position in semiconductor. That will give Trump justified reasons for a trade war with China.

China’s “options include subjecting well-known US companies or ones that have large Chinese operations to tax or antitrust inquiries”. “Other possible measures include the launch of anti-dumping investigations and scaling back government purchases of American products, according to the people,” says SCMP.

SCMP quotes Brian Krzanich, chief executive of Intel Corp. as saying, “Lowering the tax rates, making it easier for people to do manufacturing here, that’s what will bring manufacturing back to the US.” According to Krzarnich, US industry leaders do not want a standoff with China.

When this writer worked for a US law firm to help US companies establish joint ventures in China in 1980s, he often heard managers of US industrial firms complain the stringent product responsibilities on US industrial enterprises. That was a major reason why they had to move production to China.

Will Trump be so stupid as to start a trade war with China instead lowering tax and give other domestic incentives to US industries? That will test Trump’s wisdom.

Comment by Chan Kai Yee on SCMP’s report, full text of which can be found at http://www.scmp.com/news/china/economy/article/2060207/chinas-chip-policy-poses-risk-us-firms-and-national-security.


US Lacks Weapon, Ammunition in Trade War with China


Reuters’ report “Trump names China critic Lighthizer as U.S. trade representative” gives the impression that with Lighthizer’s track records in stemming the tide of imports from Japan in the 1980s with threats of quotas and punitive tariffs, Trump will win his trade war with China by employing him.

The China now is quite different from the Japan in the 1980s when Japan’s market was much smaller than the US and depended on export to the US for Japan’s economic prosperity.

Chinese market is now much bigger than the US and is expanding fast. China is now switching to relying its own market from its dependence on export.

Reuter says in another report titled “GM’s China vehicle sales rise 7.1 percent year-on-year in 2016” that China has been GM’s top market for five consecutive years. In last December alone, GM sold 434,799 vehicles in China.

Will Trump fight a trade war to cause US companies to lose their major market?

The US is a big market for Chinese goods, but most of Chinese exports are products of low technology that China can easily transfer the production to other Asian countries where labor and land resources are much cheaper.

Does Trump want China to drive away from China popular American soft drinks, fast food, cars, airliners, medicines, mobile phones, etc.? Does he believe that China is unable to produce similar products to fill its domestic market?

Trade war will certainly hurt China but China will enjoy long-term benefit from taking back the parts of its domestic market monopolized by the US.

Without strong weapons and ammunitions, Trump will lose his trade war with China sadly.

I do not think Trump is so stupid as to launch a trade war with China to hurt the US. I believe that Trump will gain from win-win cooperation with China as it is unthinkable that a great nation may have three stupid presidents in a row.

Comment by Chan Kai Yee on Reuters’ report, full text of which can respectively be found at http://www.reuters.com/article/us-usa-trump-trade-idUSKBN14N0YA and http://www.reuters.com/article/us-gm-china-sales-idUSKBN14P145.


China Worries about Trump’s Choice of Anti-China Scholar as Advisor


This is clearly shown in China’s official media China Daily’s editorial yesterday “Alarm bell ringing due to Trump’s new pick on trade” on Trump’s choice of Prof. Peter Navarro as his top economic advisor.

Navarro is a well-known hardline anti-China economist. He has written quite a few books to advocate his hostility against China.

The editorial says that Navarro’s appointment “is another sign of the confrontational approach the incoming Trump administration seems intent on taking in relations with China.” It expects that such confrontation will cause losses to both the US and China and warns Chinese companies to be on high alert to a more difficult business climate.

Source: China Daily “Alarm bell ringing due to Trump’s new pick on trade”, full text of which is reblogged below.

Alarm bell ringing due to Trump’s new pick on trade

China Daily | Updated: 2016-12-23 07:27

Because it is so emotionally charged, populism can be easily guided for a purpose. One example of this is the campaign rhetoric of Donald Trump about how foreigners have “raped” the United States by “stealing” many of its manufacturing jobs.

At the time, many Chinese were willing to laugh away such accusations against China as just more of the usual rhetoric-though more extreme-that has come to characterize presidential elections in the US. Now, however, there is real cause for concern as the president-elect has named economist Peter Navarro, known for his anti-China alarmism, as his trade adviser.

Trump in a statement announcing the appointment of Navarro as head of a newly created White House National Trade Council, praised the clarity of Navarro’s arguments. Which is perhaps not that surprising given the University of California-Irvine professor was the mastermind of the rhetoric Trump adopted during his campaign, and it had a similar tone to the apocalyptic language Navarro has used when accusing China of wiping out American manufacturing jobs and waging what he claims is an economic war against the US.

His appointment is another sign of the confrontational approach the incoming Trump administration seems intent on taking in relations with China.

It is an indisputable fact that China has not stolen jobs from the old manufacturing towns in the US, for those jobs were taken elsewhere by US companies who found that US consumers weren’t willing to pay the price for made-in-America products.

A point that was highlighted again on Tuesday in a Bloomberg report, which said American-made Macs have become an “albatross” for Apple since it started assembling them in the US in 2013 to “score political points” and some engineers are now pushing to move production “back to Asia”.

And the so-called economic war Navarro claims China is waging is the competition that has risen as China’s economy has moved up the value chain. Indeed the revelations of Edward Snowden showed that it is the US that has been using unfair means to gain an economic advantage.

That individuals such as Navarro who have a bias against China are being picked to work in leading positions in the next administration, is no laughing matter. The new administration should bear in mind that with economic and trade ties between the world’s two largest economies now the closest they have ever been, any move to damage the win-win relationship will only result in a loss for both sides.

Still, Chinese companies in the US should be on high alert to a more difficult business climate.


Trump picks ‘Death by China’ author for trade advisory role


U.S. Army Lieutenant General Michael Flynn looks at U.S. President-elect Donald Trump as he talks with the media at Mar-a-Lago estate where Trump attends meetings, in Palm Beach, Florida, U.S., December 21, 2016. REUTERS/Carlos Barria

U.S. Army Lieutenant General Michael Flynn looks at U.S. President-elect Donald Trump as he talks with the media at Mar-a-Lago estate where Trump attends meetings, in Palm Beach, Florida, U.S., December 21, 2016. REUTERS/Carlos Barria

By Eric Beech Wed Dec 21, 2016 | 5:41pm EST

U.S. President-elect Donald Trump named Peter Navarro, an economist who has urged a hard line on trade with China, to head a newly formed White House National Trade Council, the transition team said on Wednesday.

Navarro is an academic and one-time investment adviser who has authored a number of popular books and made a film describing China’s threat to the U.S. economy as well as Beijing’s desire to become the dominant economic and military power in Asia.

Trump’s team praised Navarro in a statement as a “visionary” economist who would “develop trade policies that shrink our trade deficit, expand our growth, and help stop the exodus of jobs from our shores.”

Trump, a Republican, made trade a centerpiece of his presidential campaign and railed against what he said were bad deals the United States had made with other countries. He has threatened to hit Mexico and China with high tariffs once he takes office on Jan. 20.

Navarro, 67, is a professor at University of California, Irvine, and advised Trump during the campaign. He has authored several books including “Death by China: How America Lost its Manufacturing Base,” which was made into a documentary film.

As well as describing what he sees as America’s losing economic war with China, Navarro has highlighted concerns over environmental issues related to Chinese imports and the theft of U.S. intellectual property.

While Trump in the statement praised the “clarity” of Navarro’s arguments and the “thoroughness of his research,” few other economists have endorsed Navarro’s ideas.

Marcus Noland, an economist at the Peterson Institute for International Economics, likened a tax and trade paper authored by Navarro and Wilbur Ross, who has been named as Trump’s commerce secretary, to “the type of magical thinking best reserved for fictional realities” for what he said was its flawed economic analysis.

‘DON’T POKE THE PANDA’

Navarro has also suggested a stepped-up engagement with Taiwan, including assistance with a submarine development program.

He argued that Washington should stop referring to the “one China” policy, but stopped short of suggesting it should recognize Taipei, saying: “There is no need to unnecessarily poke the Panda.”

China considers Taiwan a renegade province and has never renounced the use of force to bring it under its control.

After his Nov. 8 election win, Trump stoked China’s ire when he took a telephone call from Taiwanese President Tsai Ing-wen in a break with decades of precedent that cast doubt on his incoming administration’s commitment to Beijing’s “one China” policy.

In an opinion piece in Foreign Policy magazine in November, Navarro and another Trump adviser, Alexander Gray, reiterated the president-elect’s opposition to major trade deals, including the Trans-Pacific Partnership.

“Trump will never again sacrifice the U.S. economy on the altar of foreign policy by entering into bad trade deals like the North American Free Trade Agreement, allowing China into the World Trade Organization, and passing the proposed TPP,” Navarro and Gray wrote. “These deals only weaken our manufacturing base and ability to defend ourselves and our allies.”

Trump has vowed to pull the United States out of the TPP, a free-trade pact aimed at linking a dozen Pacific Rim nations that President Barack Obama signed in February. It has not been ratified by the U.S. Senate.

The president-elect has also vowed to renegotiate the NAFTA pact with Canada and Mexico, saying it had cost American jobs.

(Reporting by Eric Beech in Washington; Additional reporting by Mohammad Zargham and David Chance in Washington; Editing by Doina Chiacu and Peter Cooney)

Source: Reuters “Trump picks ‘Death by China’ author for trade advisory role”

Note: This is Reuters report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


No Trade, Even Less Real War with China as Taiwan Is But a Bargaining Chip


Reuters’ report today titled “Targeting U.S. automaker signals possible China retaliation over Trump talk” quotes a pessimistic former senior U.S. official as saying, “Trump has basically guaranteed that the first year in the China relationship will be a combative, competitive one, and the question is how bad it will get… The Chinese now are basically putting together their list on how to retaliate.”

Reuters says that the US has more than $500 billion business interests in China. That is true. If you travel in China, most likely you will ride a Boeing airliner. In China, you will find lots of US cars, fast food restaurants, soft drinks, fruits, etc.

I believe that Trump’s priority is to improve US economy. He certainly will not start a trade, even less a real war with China. He only wants concessions from China for better access to China’s vast market.

Therefore, Trump’s questioning of the one-China policy is but a posture. He will never take any real measures to help Taiwan.

China’s pressure on US firms in China is also a posture only. China certainly wants to maintain its access to its major market, the US market.

Therefore, I believe US-China ties will improve after Trump has become US president.

Confrontation with China, whether economically or militarily, will only hurt US interests. Trump, as a shrewd businessman, certainly will not do that.

Comments by Chan Kai Yee on Reuters’ report, full text of which is reblogged below:

Targeting U.S. automaker signals possible China retaliation over Trump talk

By Arshad Mohammed, Matt Spetalnick and Benjamin Kang Lim | WASHINGTON/BEIJING Thu Dec 15, 2016 | 11:02am EST

Pressure on other U.S. companies, such as Boeing Co (BA.N) and General Electric Co (GE.N), with large interests in China could be one of the most tangible tools of retaliation, together with new limits on access to the country’s huge markets. U.S. business interests in China are estimated at more than $500 billion.

Wider economic steps – such as China, America’s biggest creditor, selling a significant part of its $1.16 trillion of U.S. Treasuries, or weakening its currency – seem unlikely, the first because it would slash the value of China’s U.S. bond portfolio and the second because it could accelerate capital flight, experts said.

Beijing could speed up a military build-up that had begun to slow along with Chinese economic growth, carry out naval exercises close to Taiwan – which it regards as a renegade province – and withhold diplomatic cooperation on issues such as Iran and North Korea’s nuclear programs.

“Taiwan policy is what China considers a core interest … and it’s prepared to go to great lengths to defend it,” said Eric Altbach, senior vice president at the Albright Stonebridge Group consultancy in Washington and a former deputy assistant U.S. trade representative for China affairs.

A ROCKY FIRST YEAR?

The consensus within the Obama administration is that Trump, who irked China by taking a phone call from Taiwan’s president, was not fully aware of the potential backlash from Beijing over his questioning of the “one China” policy, a U.S. official said, speaking on condition of anonymity.

The hope is that by the time Trump takes over from President Barack Obama, he will recognize that China has advanced so far economically, diplomatically and militarily that it is unwise to pick fights with Beijing over such a bedrock principle, he added.

A former senior U.S. official took a more pessimistic view.

“Trump has basically guaranteed that the first year in the China relationship will be a combative, competitive one, and the question is how bad it will get,” he said. “The Chinese now are basically putting together their list on how to retaliate.”

There are at least three ways in which the matter could play out, U.S. China experts said. Trump could backtrack over time, much as former U.S. President George W. Bush did.

A second track would be if Trump goes on questioning the “one China” policy without taking concrete action. The third, considered unlikely by U.S. officials past and present, would be a drift toward military confrontation.

‘JUST CAUSE TO DISPATCH TROOPS’?

Asked if Trump’s “one China” stance could lead to this, a source with ties to the Chinese leadership told Reuters: “We will see what Trump says and does after he becomes president.”

A second source with leadership ties said they expected tensions with the United States over Taiwan. But the source said Chinese President Xi Jinping, who has sounded a more nationalistic line than his recent predecessors, could also use the issue to further cement his grip on power.

“If (Taiwan) is emboldened by the U.S. support and does something drastic, it could be an opportunity for us. There will be just cause to dispatch troops,” the second source said.

While the possibility of Taiwan declaring independence and hence triggering a Chinese invasion seems low, the mere softening in the U.S. commitment to the policy would likely play out in China’s defense posture.

“It will alter Chinese defense priorities. I think that’s inevitable now,” said Dennis Wilder, a former CIA China analyst. He said Xi may increase Chinese military spending for 2017 and place new emphasis, over time, on gaining the amphibious capabilities necessary to actually invade Taiwan.

“Xi Jinping has to respond to this internally, domestically, and while he doesn’t want an open fight with Trump, he will have to show … resolve,” he said, citing higher military spending, more defense exercises and tougher rhetoric on Taiwan. “We can anticipate that unless this issue is taken off the table.”

(Additional reporting by Ben Blanchard in Beijing and Patricia Zengerle in Washington; Editing by Howard Goller and Lincoln Feast)

Note: This is Reuters report I reblog here for readers’ information. It does not mean that I agree or disagree with the report’ views.